Myanmar’s Financial Sector Sees Regulatory Changes
Strengthening Oversight and Enhancing Transparency
The Central Bank of Myanmar (CBM) has introduced several directives and guidelines aimed at regulating the country’s financial sector, particularly in relation to foreign investments and banking practices.
Directive 3/2020: Guiding Foreign Investment in Myanmar’s Stock Market
One of the key changes is the publication of Directive 3/2020, which guides authorized dealer banks on transactions connected with trading of shares by foreign investors in companies listed on the Yangon Stock Exchange (YSX). The directive allows for the opening of three types of bank accounts for foreign investors:
- Resident Kyat Account for Securities (R-KAS)
- Non-Resident Kyat Account for Securities (N-KAS)
- Non-Resident Foreign Currency Account for Securities (N-FAS)
Foreign investors are required to apply for and obtain relevant approvals prior to opening any of these accounts, and must also inform the CBM when they bring funds into Myanmar to purchase shares. Additionally, foreign investors must submit a projected repatriation plan to the Central Bank.
Risk Management Guidelines Issued
The CBM has also issued guidelines on risk management practices for banks, effective from mid-2021. The guidelines require banks to:
- Establish adequate risk management systems
- Approve risk management policies
- Set up risk management committees
- Maintain records of risk decisions taken by the bank
- Engage internal auditors to test the functioning of the risk management system
Other Regulatory Changes
In addition to these changes, the CBM has published guidelines on risk management practices for non-banking financial institutions (NBFIs), which require NBFIs to:
- Specify loan amounts, annual interest rates, and exact repayment schedules in loan agreements
- Set out general principles that NBFI loan agreements should be clearly explained to borrowers
Furthermore, the CBM has issued a notification on capital adequacy regulation for banks, requiring them to maintain adequate capital in proportion to risk.
Sanctions for Non-Compliance
Banks and NBFIs failing to adhere to these guidelines will be subject to sanctions or corrective actions and administrative penalties under relevant provisions of Myanmar’s Financial Institutions Law.
Conclusion
The regulatory changes aim to enhance the stability and transparency of Myanmar’s financial sector, and are expected to have a positive impact on foreign investment in the country. By strengthening oversight and enhancing transparency, the CBM is promoting a more robust and sustainable financial system that benefits both local and international investors alike.