Central Bank Removes Lending Restrictions on Foreign Bank Branches

By The Irrawadddy 9 November 2018

YANGON—The Central Bank of Myanmar on Thursday announced that the Myanmar branches of international banks are now permitted to extend loans to local companies and provide other banking services, opening up a new source of funding to local corporates.

Currently, branches of 13 international banks from China, Japan, Singapore, India, Malaysia and Vietnam are listed with the Central Bank, while 49 other banks have representative offices here.

Previously, the international branches were only allowed to finance foreign companies operating in Myanmar. 

U Saw Bo Bo, an ex-Citi banker, said the central bank’s move would facilitate the circulation of both local and foreign currencies through the national economy.

“If there is more currency in circulation, businesses will be more active. This may help reduce exchange rate fluctuations caused by poor circulation of foreign currencies,” he said.  

At the same time, he said, the central bank’s green light for foreign banks to provide a full range of banking services to local corporations will pose a challenge to the local banking industry, which is ill equipped to compete with foreign banks in terms of the U.S. dollar interest rate, and providing long-term collateral-free loans.

“Foreign banks have much better technology and their service fees are lower. Therefore, big corporations, especially multinational ones, may gradually seek services from foreign banks,” he explained.

Despite the challenges, local banks have their own strengths.

“There may be a lot of inconveniences for local businessmen engaging with foreign banks. There is a saying among international businessmen that domestic banks are the best to partner with. And foreign banks will in no way be able to compete with local banks in terms of their branch networks,” U Saw Bo Bo said.