Seven major foreign banks’ entry to boost FDI inflow in Myanmar

YANGON — Seven foreign banks, including Siam Commercial Bank, a top-three bank in Thailand, and Bank of China Hong Kong, will soon enter Myanmar, raising the prospect that more active foreign financial institutions might encourage foreign industries to venture into the country.

The banks’ entry was approved late last week by the Central Bank of Myanmar, part of efforts to open up the banking industry by the administration led by State Counselor Aung San Suu Kyi. The banks are expected to start their Myanmar operations by early 2021, after going through a licensing procedure.

“In the early phase, SCB will focus on catering to Thai corporate clients with existing investments in the country and others who want to expand their trade and investment in Myanmar,” said Arthid Nanthawithaya, CEO and chairman of the executive committee. “We are ready to serve clients with a full range of financial solutions like loans, foreign exchange, trade finance, supply chain management and cash management.”

Arthid’s comments were carried in a statement.

The other banks are South Korea’s Industrial Bank of Korea, KB Kookmin Bank and Korea Development Bank; Taiwan’s Cathay United Bank and Mega International Commercial Bank; and Bank of China Hong Kong, a leading Hong Kong lender affiliated with Chinese government-owned Bank of China.

Currently, 13 foreign banks operate branches in Myanmar. They include Japan’s megabanks. With the addition of the seven, this developing Southeast Asian country will have 20 foreign banks operating within the next 9 months.

In a statement, the central bank’s licensing committee said it “looks forward to all applicants’ continuous involvement in the development” of Myanmar.

Myanmar’s government has relaxed regulations on foreign financial companies in phases since 2018.

In November 2019, it introduced a “subsidiary license” system in which it gives banking licenses to local subsidiaries of foreign banks, allowing them to offer financial services targeting retail customers. The licenses allow such subsidiaries to offer a range of services — from accepting deposits to providing loans — similar to domestic banks.

Before 2019, Myanmar had a “branch license” system for foreign banks that limited holders to operate only services targeted at corporate customers. In that year, the country shifted from a policy to protect domestic banks from international rivals to a policy of encouraging competition. The Myanmar authority also abolished a 35% limit on foreign banks’ ownership in local banks, paving the way for their acquisition by foreign banks.

Of the seven banks, Industrial Bank of Korea, KB Kookmin Bank and SCB were granted subsidiary licenses; the rest obtained branch licenses.

The Myanmar central bank also approved a plan by Kasikornbank, a major Thai lender, to acquire a stake in Ayeyarwaddy Farmers Development Bank, a domestic player. The Myanmar Times had reported earlier this year that Kasikornbank was planning to acquire a 35% stake in Ayeyarwaddy.

The entry of more foreign banks will mean more options for depositing money for Myanmar’s emerging industrialists and middle-income earners, the numbers of whom are growing as the country’s economy expands. According to central bank statistics, people’s cumulative savings came to 37.5 trillion kyat ($26.5 billion) at the end of 2018, 2.5 times more than four years earlier.

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