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(Sep 03, 2010) The Central Bank of Burma (Myanmar) is reported to have issued a number of directives in recent months on newly privatized banks, as the government continues its large-scale privatization of state-owned businesses. One new set of regulations stipulates that the new private banks, all of which are commercial banks only, must have a capital base of at least Kyat (MMK) 10 billion (about US$1.6 billion) as subscribed capital. Formerly, under the 1990 banking law, the capitalization requirement was set at a minimum MMK30 million (about US$4.8 million) for private commercial banks and a minimum MMK60 million for a private investment bank. (Burma: Report on Regulations Governing Newly Established Private Banks, WEEKLY ELEVEN NEWS (Rangoon) [in Burmese] (July 21, 2010), at 1-2, Open Source Center online subscription database No. SEP20100809021003; Burma Relaxes Banking Regulations, THE IRRAWADDY (June 14, 2010), http://www.irrawaddy.org/article.php?art_id=18716; Joseph Allchin, Private Banks Banned from Self-Loaning, DEMOCRATIC VOICE OF BURMA (July 21, 2010), http://www.d
vb.no/news/private-banks-banned-from-%e2%80%98self-loaning%e2%80%99/10846; The Financial Institutions of Myanmar Law, No. 16 of 1990 (July 4, 1990), Burma Lawyers' Council website, http://www.blc-burma.org/html/Myanmar%20Law/lr_e_ml90_16.html.)
Permits to operate private banks beginning in September were issued to four businessmen "close to Burma's military regime," all four of whom are on the sanctions list of the United States, in late May 2010. This brings to 18 the total number of private banks in Burma. The junta is said to tightly control the banking system, towards which "there is a fundamental distrust" in the country, observers have commented. (THE IRRAWADDY, supra.) The new regulations also stipulate that bank owners may not offer loans from their banks to their other businesses, and that bank loans can be extended only on the basis of immovable assets as security. Under Central Bank rules and regulations on private banks, each bank may accept deposits of up to ten times the subscribed capital, i.e., up to MMK100 billion for each of the new banks. (Id.)
Although the interest rates fixed by the Central Bank at 17% for loans and 12% for deposits have not been altered, private banks are permitted to add six percent to those rates, and the rates charged by private banks can differ from each other. (Allchin, supra.) Under the Central Bank of Myanmar Law, banks and financial institutions must observe a reserve ratio, "in such proportion as the Central Bank may from time to time determine." (Art. 58(a), Central Bank of Myanmar Law, No. 15 of 1990 (July 2, 1990), http://www.b
lc-burma.org/html/Myanmar%20Law/lr_e_ml90_15.html.) According to the Democratic Voice of Burma, however, the above-mentioned interest rates "are well below the rate of inflation, making investment in Burmese banks economically nonsensical." (Allchin, supra.)
It was reported in June 2010 that new regulations on foreign exchange have also been introduced, following the issuance of the new private banking permits. The government has designated money in foreign currency that has been earned in domestic business transactions as legal earnings that can be used to import goods. Such earnings include foreign currency obtained from the sale of handicrafts and art objects, the lease of buildings and compounds, and salaries. Under the new rules, foreign exchange currency accounts may reportedly be opened that would allow free transfers to other accounts in the Central Bank. (THE IRRAWADDY, supra.)
Foreign Exchange Certificates (FEC), circulated in place of U.S. dollars in Burma, may also be transferred as U.S. dollars to bank accounts; after being made subject to a ten-percent surcharge, wages paid in FEC are also transferable. It was further reported that purchases of phone cards, petrol, and diesel can also be made with FEC instead of U.S. dollars, and the payment of charges for phone calls made to foreign countries must be in FEC. (Id.) According to the U.S. State Department, in Burma, "[f]oreigners are required to use U.S. dollars, other hard currency, or Foreign Exchange Certificates (FEC) for the payment of plane tickets, train tickets and most hotels bills. Burmese kyats are accepted for nearly all other transactions." (U.S. Department of State, Burma (Myanmar) Country Specific Information, http://travel.state.gov/travel/cis_pa_tw
/cis/cis_1077.html (last visited Sept. 2, 2010).)
- Author: Wendy Zeldin More by this author
- Topic: Banks and financial institutions More on this topic
- Jurisdiction: Burma More about this jurisdiction
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Last updated: 09/03/2010