Financial Crime World

Foreign Banks Boost Myanmar’s Banking Sector

The entry of foreign banks into Myanmar’s banking sector is having a profound impact on the market, with significant changes already underway. According to data from Roland Berger research and data, the total equity available in the banking sector has almost doubled since 2014, with foreign banks committing to a substantial amount.

Benefits of Foreign Bank Entry

Foreign banks have brought much-needed capital for financing growth and best practices to the market. They are also helping to promote financial inclusion by providing access to banking services for a wider range of people.

CBM’s Approval of Foreign Banks

The Central Bank of Myanmar (CBM) has given preliminary approval to 13 foreign banks to operate in the country, with their entry being smoothly managed. This is a significant step forward from five years ago, when improvements were noticeable but there was still much work to be done.

Critical Initiatives for Banking Sector Transformation

To enable the successful transformation of Myanmar’s banking sector, critical initiatives need to be launched in the short- and medium-term. These include:

  • Steering Interbank Market Development: The interbank market allows banks with liquidity shortages to access funding or invest excess liquidity. It is also a conduit for transmitting CBM monetary policies.
  • Strengthening Credit Decision-Making: Rigorous, objective, and impartial credit decisions are needed to ensure borrowers can service their debt and promote safety for depositors’ money.
  • Ensuring Safe, Fast, and Reliable Means of Payment: This includes retail payments, provision of diversified and efficient means of payments, and establishment of reliable payment systems/infrastructure.
  • Promoting Financial Inclusion: Financial inclusion is critical for economic growth. Initiatives to achieve this include increasing access to banking services, promoting the use of digital financial products, and developing financial literacy programs.

CBM’s Progress

The CBM has made significant progress in recent years, including:

  • Development of a fully functional Real Time Gross Settlement (RTGS) System
  • Introduction of standardized T-Bill auctions
  • Dematerialization of T-Bills and government bonds held by banks
  • Registration within a Central Collateral Registry

Way Forward

In the short-term, the CBM needs to focus on launching critical initiatives to enable the successful transformation of Myanmar’s banking sector. These include:

  • Steering interbank market development
  • Strengthening credit decision-making
  • Ensuring safe, fast, and reliable means of payment
  • Promoting financial inclusion
  • Developing a robust risk management framework

Conclusion

By implementing these initiatives, Myanmar can achieve a modern and efficient banking sector that supports economic growth and promotes financial stability.