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Financial sector development in Myanmar

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Financial sector development in myanmar

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Financial sector development in Myanmar

  1. 1. Financial Sector Developmentin Myanmar(21-5-2013)1
  2. 2. Contents1. Structure of the Financial System2. Legal Environment3. 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 Activities2
  3. 3. 1. STRUCTURE OF FINANCIAL SYSTEMBanks- Central Bank of Myanmar- 4 State–owned Banks- 19 Local Private Banks- 32 Foreign Bank Representative OfficesNon-bank Financial Institutions- State-owned Insurance Enterprise (1)- Microfinance Institutions (173)- Private-owned Financing Company (4)- Securities Company (1)3
  4. 4. Details of the Financial SectorTypes Number BranchesBanksState-owned banks 4 503Domestic private banks 19 485Non-Bank Financial InstitutionsState-owned insurance 1 38Private-owned leasing company 4Myanmar Securities Exchange Co.Ltd. (MSEC)1(50-50 JV betweenMEB and Daiwa,Japan.)Microfinance Institutions 1734
  5. 5. Domestic Private Banks5No. Banks Branches(31.3.2013)1. Myanmar Citizens Bank 82 First Private Bank 213. Cooperative Bank 384 Yadanabon Bank 25. Myawaddy Bank 266. Yangon City Bank 27. Yoma Bank 488. Myanmar Oriental Bank 219. Asia Yangon Bank 310. Tun Foundation Bank 1411. Kanbawza Bank 10212. Small and Medium Industrial Development Bank 1113 Myanma Livestock and Fisheries Development Bank 6014. Rural Development Bank 215. Innwa Bank 3316. Asia Green Development Bank 2817. Ayeyarwady Bank 3218. United Amara Bank 1419. Myanma Apex Bank 20Total 485
  6. 6. Foreign Banks Representative offices1. 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 India6
  7. 7. Foreign Banking Business BanksState-owned Banks(1) Myanma Economic Bank(2) Myanma Foreign TradeBank(3) Myanma Investment andCommercial BankPrivate Banks (AD LicenceHolders)(1) Myanmar Citizens Bank(2) First Private Bank(3) Co-operative Bank(4) Myawaddy Bank(5) Yoma BankPrivate Banks(6) Myanmar Oriental Bank(7) Tun Foundation Bank(8) Kanbawza Bank(9) Small and Medium IndustrialDevelopment Bank(10) Myanma Livestock andFisheries Development Bank(11) Innwa Bank(12) Asia Green DevelopmentBank(13) Ayeyarwady Bank(14) United Amara Bank(15) Myanma Apex Bank 7
  8. 8. Banking Sector Dominates Financial System• Banking System is at the core of financial system and is the fulcrumof monetary policy• The basic principle of the banks is to cause the effectivemobilization and allocation of fund resources in the economy inorder to promote economic growth, safeguard stability and raise theliving standard of the people.8
  9. 9. 2. LEGAL ENVIRONMENT• The legal environment of the banking sector is outmoded and not inline with the international best practices. Therefore, these governinglaws for banking sector, namely, the Central Bank of Myanmar Law(1990), the Financial Institutions of Myanmar Law (1990) are beingrevised.• The Foreign Exchange Management Law was enacted in August2012, and the old law, the Foreign Exchange Regulation Act (1947)was repealed.9
  10. 10. 2. LEGAL ENVIRONMENT (Cont’d)• The new CBM Laws is being drafted with the IMF’s TechnicalAssistance 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 withWorld Bank’s Technical Assistance and will be enacted as new law.10
  11. 11. 3. PRIORITISING REFORMS & FUTURE PLANS:(a) Reform of the Exchange Rate Regime• In early April 2012, the CBM took the first step towards theexchange rate reform by adopting managed floating regime.• Myanmar’s currency, the Kyat, is now under a managed floatsystem.• With the help of IMF, CBM plans to complete the process ofexchange rate unification, including removing all exchangerestrictions and eliminating multiple currency practices before theirtarget date of end of 2013 when SEA Game is due to be heldMyanmar.11
  12. 12. (b)Measures to Create a Formal ForeignExchange Market• The initial steps focused on establishing a formal retail market bylicensing 17 private banks in October 2011 to operate moneychanger (MC) counters. So far 18 Private banks and 39 privatecompanies are conducting money changer business.• For buying and selling FX, these money changer are to apply anexchange rate in the margin of ±0.8 percent based on the CBMreference which is used as mid rate.12
  13. 13. (b)Measures to Create a Formal ForeignExchange market (Cont’d).• The eligible AD private banks can perform buying, selling andaccount transfer trading of FE among their customers, companies,individuals, organization, importers, exporters started from February9, 2012.• In order to activate this AD license, the private banks areestablishing correspondent banking relations, opening Nostroaccounts 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 customersand foreign banking as well;• Foreign exchange purchases for a car import program, and healthand travel expanses abroad have been allowed.13
  14. 14. Money Changer Banks with 129 Money Changer Counters (end of April, 2013)Sr. No. Banks Counters1. Co-operative Bank 302. Myawaddy Bank 43. Myanma Oriental Bank 74. Kanbawza Bank 315. Small and Medium Industries Development Bank, 76. Innwa Bank 47. Myanmar Citizens Bank 38. First Private Bank 39. Tun Foundation Bank 310. Asia Green Development Bank 1211. Ayeyarwaddy Bank 312. Rural Development Bank 313. United Amara Bank 814. Asia Yangon Bank 315. Myanma Apex Bank 416. Yoma Bank 117. Myanma Livestock and Fisheries Development Bank 218. Yangon City Bank 114
  15. 15. Authorised to Conduct Money Transfer Services• Apart from Myanma Economic Bank , 4 private banks-- Co-operative Bank, Kanbawza Bank, Asia Green DevelopmentBank, Ayeyarwaddy Bank -- are permitted to conduct moneytransfer services for overseas Myanmar workers in connectionwith banks in Malaysia, Singapore and Thailand• In addition, 7 local private banks officially launched apartnership with Western Union to provide money transferservices to Myanmar nationals living abroad.15
  16. 16. Banking Sector Liberalization Measures• Banking Sector reform and liberalization measures are taken as statedbelow;– Lifting of deposit to capital ratio and additional requirements forbranch expansion– Expansion of branch networks,– Broadening of eligible collateral to include key agricultural exportgoods– Doubling of the loan ceiling to farmers– Lifting restriction on new products such as hire purchase and ATMcards– Liberalization of deposit rate within a fixed corridor16
  17. 17. (C) Improving Payment System• Payment Systems fulfill a vital role in an economy and a CentralBank has an important role to play in this context.• Myanmar Payment Union (MPU) is the country’s only officialnational financial switching network, working with banks todevelop and launch card-based services. MPU interconnects allATM and POS systems in particular of Myanmar banks and allpayment cards in general.• MPU will continue its efforts to make international credit cardssuch as Visa, Master, American Express, CUP and JCB usable inMyanmar.17
  18. 18. (C) Improving Payment System (Cont’d)MPU Implementation PlanPhase 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 - 251No of POS - 69718
  19. 19. (C) Improving Payment System(Cont’d)• Now Master Cards has inked a licensing deal with Co-operativeBank. The bank’s cash machine will accept MasterCard, Maestroand Cirrus cards. Tourists and business travelers with aninternational card are now able to withdraw money in a localcurrency “kyat” at CB Bank’s ATMs around Myanmar.• MPU will have a great positive impact on the tourism industry ofMyanmar especially in 2013 and 2014 when Myanmar will holdSEA Games and ASEAN Summit.• E-Banking and mobile banking will be allowed in near future.19
  20. 20. (d) Permitting Foreign Banks’ Participation• The CBM adopts a Banking Sector Development Strategy with threephases as follows:• Permitting Domestic Private Banks to run joint venture bankswith foreign banks.• Permitting foreign banks to establish locally incorporated100% owned subsidiary.• Permitting foreign banks to open bank branches.20
  21. 21. (e) Capital Market Development• According to the Roadmap for the Capital Market DevelopmentCommittee, the following tasks are to be done during the secondphase: to enact the Securities and Exchange Law, to establish the Securities Exchange Commission (SEC),and to make necessary preparations for the establishment ofStock Exchange.• The Securities Exchange Bill is with the Parliament and awaits forthe passage.21
  22. 22. (e) Capital Market Development(Cont’d)• On May 29, 2012, the CBM signed the MoU with DIR and TokyoStock Exchange regarding the Technical Assistance for establishmentof securities exchange and capital market.• On August 14, 2012, the CBM signed the MoU with Policy ResearchInstitute, MOF, Japan regarding the Technical Assistance on the areasof Rules and Regulations for the Securities Exchange Law.• After enacting the SE Law, the necessary process will beimplemented:- (Phase III) to develop the credit rating agencies to upgrade the clearing and settlement system22
  23. 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 othernon-banks financial institutions for conducting microfinanceactivities in Myanmar.• The Myanmar Microfinance Supervisory Enterprise is thesupervisory and regulatory authority for the MFIs.• Form of Licence granted MFIs are Co-operatives, Company Ltdand INGO.• 173 MFIs(end of April, 2013)23
  24. 24. Conclusion We are gradually opening up and liberalizing the financial sector toavoid the risks from a rushed and uncoordinated approach toeconomic liberalization. Taking into account these risks, we will prioritize strengthening thesupervisory and regulatory framework before further financialliberalization. With the conclusion remarks, we would like to welcome theparticipation of investors in our financial industry.24
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