Myanmar’s central bank may allow foreign lenders to form joint ventures with local banks as early as April in a further step to overhaul the financial system, according to an official who oversees regulatory issues.
The central bank will set regulations for joint ventures in the financial year starting April 1, said Khin Saw Oo, head of the Financial Institutions Regulation and Anti-Money Laundering Department. Officials are considering a requirement that local banks own at least 20 percent of the venture, she said.
“We will allow them at least two years’ time to form the joint ventures,” Khin Saw Oo said in an interview in the central bank’s headquarters in Naypyidaw yesterday. “After that we will allow the establishment of the subsidiary.”
The rule change would allow lenders such as Standard Chartered Plc and Japan’s Mizuho Corporate Bank Ltd. to expand in the Southeast Asian nation of 64 million people as it welcomes new investment. President Thein Sein’s moves to dismantle a fixed exchange rate and modernize the banking system are starting to boost the economy, the International Monetary Fund said in a report last month.
Joint ventures for foreign banks will eventually be followed by wholly owned subsidiaries and then full branches, Khin Saw Oo said. The central bank will look for “reputable banks” to engage in partnerships, checking for financial soundness and setting capital requirements, she said.
“Those who are interested to form joint ventures, I told them that it depends on you,” she said. “This is not a forced marriage and you can try your best partners. And then you engage and after that you can get married.”
Myanmar has 19 domestic banks, which recently started building ATM networks and establishing relationships with Visa Inc. and MasterCard Inc. to ease money transfers. Co-operative Bank plans to sign a “business alliance” next month with Bank of Tokyo-Mitsubishi UFJ Ltd. for training and assistance, managing director Pe Myint said Jan. 22.
Japan, Myanmar’s largest creditor, agreed last year to settle $6.6 billion in arrears. Japanese banks are seeking assets in Vietnam and other Southeast Asian nations to diversify as falling interest rates squeeze loan profitability at home.
About 20 foreign banks have set up representative offices in Myanmar since 1992, including Oversea-Chinese Banking Corp., Sumitomo Mitsui Banking Corp. and Bangkok Bank Pcl. Most recently, Standard Chartered opened an office in Yangon.
Myanmar’s parliament is considering a law that would give the central bank greater autonomy. The regulatory and licensing structure for foreign banks remains unclear, according to Anoop Singh, who heads the IMF’s Asia and Pacific Department.
“There’s certainly no lack of interest from foreign banks coming in,” Singh said yesterday in Naypyidaw, where he was visiting government leaders to discuss recent reforms.
“In terms of the speed of the reforms, and the breadth of reforms, it really is quite remarkable,” Singh said. “Asia has quite a few frontiers, and I would hope it would be in that category, yes. They certainly have that potential.”