Financial sector development in myanmar

1. Financial Sector Development
in Myanmar
(21-5-2013)
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2. Contents
1. Structure of the Financial System
2. Legal Environment
3. Prioritizing Reforms & Future Plan
(a) Reforms of the Exchange Rate Regime
(b) Measure to Create a formal foreign exchange market
(c) Improving Payment System
(d) Permitting Foreign Banks Participation
(e) Capital Market Development
(f) Microfinance Activities
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3. 1. STRUCTURE OF FINANCIAL SYSTEM
Banks
- Central Bank of Myanmar
- 4 State–owned Banks
- 19 Local Private Banks
- 32 Foreign Bank Representative Offices
Non-bank Financial Institutions
- State-owned Insurance Enterprise (1)
- Microfinance Institutions (173)
- Private-owned Financing Company (4)
- Securities Company (1)
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4. Details of the Financial Sector
Types Number Branches
Banks
State-owned banks 4 503
Domestic private banks 19 485
Non-Bank Financial Institutions
State-owned insurance 1 38
Private-owned leasing company 4
Myanmar Securities Exchange Co.
Ltd. (MSEC)
1
(50-50 JV between
MEB and Daiwa,
Japan.)
Microfinance Institutions 173
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5. Domestic Private Banks
5
No. Banks Branches
(31.3.2013)
1. Myanmar Citizens Bank 8
2 First Private Bank 21
3. Cooperative Bank 38
4 Yadanabon Bank 2
5. Myawaddy Bank 26
6. Yangon City Bank 2
7. Yoma Bank 48
8. Myanmar Oriental Bank 21
9. Asia Yangon Bank 3
10. Tun Foundation Bank 14
11. Kanbawza Bank 102
12. Small and Medium Industrial Development Bank 11
13 Myanma Livestock and Fisheries Development Bank 60
14. Rural Development Bank 2
15. Innwa Bank 33
16. Asia Green Development Bank 28
17. Ayeyarwady Bank 32
18. United Amara Bank 14
19. Myanma Apex Bank 20
Total 485

6. Foreign Banks Representative offices
1. DBS Bank Ltd.,
2. United Overseas Bank Ltd.,
3. Overseas-Chinese Banking Corporation Ltd.,
4. Malayan Banking Berhad (MAYBANK) Malaysia,
5. Bangkok Bank Public Company Ltd.,
6. National Bank Ltd.,
7. Brunei Investment Bank (BIB),
8. First Overseas Bank Ltd.,
9. First Commercial Bank Singapore Branch,
10. CIMB Bank Berhad,
11. Sumitomo Mitsui Banking Corporation,
12. The Bank of Tokyo-Mitsubishi-UFJ Ltd.,
13. Bank for Investment and Development of Vietnam,
14. AB Bank Ltd,
15. Industrial and Commercial Bank of China Ltd.,
16. Mizuho Corporate Bank Ltd.,
17. Siam Commercial Bank Public Co., Ltd,
18. Maruhan Japan Bank Plc,
19. Krung Thai Bank Public Co., Ltd,
20. United Bank of India,
21. Kasikorn Bank Public Co., Ltd,
22. AEON Credit Service Company,
23. Hana Bank,
24. Woori Bank,
25. ANZ Bank,
26. Vietin Bank,
27. Korea Development Bank,
28. Standard Chartered Bank,
29. Shinhan Bank Ltd,
30. Industrial Bank of Korea,
31. E.SUN Commercial Bank,
32. Bank of India
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7. Foreign Banking Business Banks
State-owned Banks
(1) Myanma Economic Bank
(2) Myanma Foreign Trade
Bank
(3) Myanma Investment and
Commercial Bank
Private Banks (AD Licence
Holders)
(1) Myanmar Citizens Bank
(2) First Private Bank
(3) Co-operative Bank
(4) Myawaddy Bank
(5) Yoma Bank
Private Banks
(6) Myanmar Oriental Bank
(7) Tun Foundation Bank
(8) Kanbawza Bank
(9) Small and Medium Industrial
Development Bank
(10) Myanma Livestock and
Fisheries Development Bank
(11) Innwa Bank
(12) Asia Green Development
Bank
(13) Ayeyarwady Bank
(14) United Amara Bank
(15) Myanma Apex Bank 7

8. Banking Sector Dominates Financial System
• Banking System is at the core of financial system and is the fulcrum
of monetary policy
• The basic principle of the banks is to cause the effective
mobilization and allocation of fund resources in the economy in
order to promote economic growth, safeguard stability and raise the
living standard of the people.
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9. 2. LEGAL ENVIRONMENT
• The legal environment of the banking sector is outmoded and not in
line with the international best practices. Therefore, these governing
laws for banking sector, namely, the Central Bank of Myanmar Law
(1990), the Financial Institutions of Myanmar Law (1990) are being
revised.
• The Foreign Exchange Management Law was enacted in August
2012, and the old law, the Foreign Exchange Regulation Act (1947)
was repealed.
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10. 2. LEGAL ENVIRONMENT (Cont’d)
• The new CBM Laws is being drafted with the IMF’s Technical
Assistance and the bill is approved by the Pyi Htaung Su Hluttaw,
and waiting for the signing of the President.
• The Financial Institutions of Myanmar Law is being redrafted with
World Bank’s Technical Assistance and will be enacted as new law.
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11. 3. PRIORITISING REFORMS & FUTURE PLANS:
(a) Reform of the Exchange Rate Regime
• In early April 2012, the CBM took the first step towards the
exchange rate reform by adopting managed floating regime.
• Myanmar’s currency, the Kyat, is now under a managed float
system.
• With the help of IMF, CBM plans to complete the process of
exchange rate unification, including removing all exchange
restrictions and eliminating multiple currency practices before their
target date of end of 2013 when SEA Game is due to be held
Myanmar.
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12. (b)Measures to Create a Formal Foreign
Exchange Market
• The initial steps focused on establishing a formal retail market by
licensing 17 private banks in October 2011 to operate money
changer (MC) counters. So far 18 Private banks and 39 private
companies are conducting money changer business.
• For buying and selling FX, these money changer are to apply an
exchange rate in the margin of ±0.8 percent based on the CBM
reference which is used as mid rate.
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13. (b)Measures to Create a Formal Foreign
Exchange market (Cont’d).
• The eligible AD private banks can perform buying, selling and
account transfer trading of FE among their customers, companies,
individuals, organization, importers, exporters started from February
9, 2012.
• In order to activate this AD license, the private banks are
establishing correspondent banking relations, opening Nostro
accounts and installing SWIFT facilities.
• To date, 15 private banks were licensed as authorized dealers (AD)
to conduct the FX trading with each other and domestic customers
and foreign banking as well;
• Foreign exchange purchases for a car import program, and health
and travel expanses abroad have been allowed.
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14. Money Changer Banks with 129 Money Changer Counters (end of April, 2013)
Sr. No. Banks Counters
1. Co-operative Bank 30
2. Myawaddy Bank 4
3. Myanma Oriental Bank 7
4. Kanbawza Bank 31
5. Small and Medium Industries Development Bank, 7
6. Innwa Bank 4
7. Myanmar Citizens Bank 3
8. First Private Bank 3
9. Tun Foundation Bank 3
10. Asia Green Development Bank 12
11. Ayeyarwaddy Bank 3
12. Rural Development Bank 3
13. United Amara Bank 8
14. Asia Yangon Bank 3
15. Myanma Apex Bank 4
16. Yoma Bank 1
17. Myanma Livestock and Fisheries Development Bank 2
18. Yangon City Bank 1
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15. Authorised to Conduct Money Transfer Services
• Apart from Myanma Economic Bank , 4 private banks-- Co-
operative Bank, Kanbawza Bank, Asia Green Development
Bank, Ayeyarwaddy Bank -- are permitted to conduct money
transfer services for overseas Myanmar workers in connection
with banks in Malaysia, Singapore and Thailand
• In addition, 7 local private banks officially launched a
partnership with Western Union to provide money transfer
services to Myanmar nationals living abroad.
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16. Banking Sector Liberalization Measures
• Banking Sector reform and liberalization measures are taken as stated
below;
– Lifting of deposit to capital ratio and additional requirements for
branch expansion
– Expansion of branch networks,
– Broadening of eligible collateral to include key agricultural export
goods
– Doubling of the loan ceiling to farmers
– Lifting restriction on new products such as hire purchase and ATM
cards
– Liberalization of deposit rate within a fixed corridor
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17. (C) Improving Payment System
• Payment Systems fulfill a vital role in an economy and a Central
Bank has an important role to play in this context.
• Myanmar Payment Union (MPU) is the country’s only official
national financial switching network, working with banks to
develop and launch card-based services. MPU interconnects all
ATM and POS systems in particular of Myanmar banks and all
payment cards in general.
• MPU will continue its efforts to make international credit cards
such as Visa, Master, American Express, CUP and JCB usable in
Myanmar.
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18. (C) Improving Payment System (Cont’d)
MPU Implementation Plan
Phase I - 2011-12 (Intra- bank and Inter- bank Step)
 Using MPU Cards in ATM for Cash Dispensing, Balance Inquiry,
Account Transfer and Mini- Statement.
 Using MPU Cards in POS for online and offline Payment.
Phase II - 2012-13 ( Acquiring Step)
 Accept CUP, JCB, Visa and Master Cards on MPU Network.
Phase III - 2014-15 ( Issuing Step)
 Use MPU Cards over International Network.
MPU Card issued - 195,000 ( as of 30.4.2013)
No of ATM - 251
No of POS - 697
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19. (C) Improving Payment System(Cont’d)
• Now Master Cards has inked a licensing deal with Co-operative
Bank. The bank’s cash machine will accept MasterCard, Maestro
and Cirrus cards. Tourists and business travelers with an
international card are now able to withdraw money in a local
currency “kyat” at CB Bank’s ATMs around Myanmar.
• MPU will have a great positive impact on the tourism industry of
Myanmar especially in 2013 and 2014 when Myanmar will hold
SEA Games and ASEAN Summit.
• E-Banking and mobile banking will be allowed in near future.
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20. (d) Permitting Foreign Banks’ Participation
• The CBM adopts a Banking Sector Development Strategy with three
phases as follows:
• Permitting Domestic Private Banks to run joint venture banks
with foreign banks.
• Permitting foreign banks to establish locally incorporated
100% owned subsidiary.
• Permitting foreign banks to open bank branches.
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21. (e) Capital Market Development
• According to the Roadmap for the Capital Market Development
Committee, the following tasks are to be done during the second
phase:
 to enact the Securities and Exchange Law,
 to establish the Securities Exchange Commission (SEC),
and
 to make necessary preparations for the establishment of
Stock Exchange.
• The Securities Exchange Bill is with the Parliament and awaits for
the passage.
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22. (e) Capital Market Development(Cont’d)
• On May 29, 2012, the CBM signed the MoU with DIR and Tokyo
Stock Exchange regarding the Technical Assistance for establishment
of securities exchange and capital market.
• On August 14, 2012, the CBM signed the MoU with Policy Research
Institute, MOF, Japan regarding the Technical Assistance on the areas
of Rules and Regulations for the Securities Exchange Law.
• After enacting the SE Law, the necessary process will be
implemented:- (Phase III)
 to develop the credit rating agencies
 to upgrade the clearing and settlement system
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23. (f) Microfinance Activities
• The Microfinance Business Law was enacted on November 30,2011.
• Main objectives of this law are to reduce the poverty of the grass-
root people and to promote their socio-economic life.
• The Law allows granting licence to local and foreign institutions,
partnership firms, companies, cooperative societies, banks and other
non-banks financial institutions for conducting microfinance
activities in Myanmar.
• The Myanmar Microfinance Supervisory Enterprise is the
supervisory and regulatory authority for the MFIs.
• Form of Licence granted MFIs are Co-operatives, Company Ltd
and INGO.
• 173 MFIs(end of April, 2013)
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24. Conclusion
 We are gradually opening up and liberalizing the financial sector to
avoid the risks from a rushed and uncoordinated approach to
economic liberalization.
 Taking into account these risks, we will prioritize strengthening the
supervisory and regulatory framework before further financial
liberalization.
 With the conclusion remarks, we would like to welcome the
participation of investors in our financial industry.
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