Financial Crime World

Myanmar’s Central Bank Issues New Regulations for Non-Bank Financial Institutions

Yangon, March 2021 - The Central Bank of Myanmar (CBM) has issued a new notification, known as the NBFI Directive, which outlines regulations for non-bank financial institutions (NBFIs) operating in the country.

Key Requirements for NBFIs

Registration Certificate

  • Any entity seeking to engage in NBFIs such as finance company, leasing and factoring business must apply for a registration certificate from the CBM.
  • The bank has six months to respond to the application, and if refused, must provide written reasons for the decision.

Requirements for Registration Certificate

  • Corporate documents
  • Descriptions of services
  • Feasibility studies
  • Business plans
  • Details of shareholders and directors
  • Organisational structure

Prohibition on Accepting Deposits

NBFIs are prohibited from accepting deposits in accordance with the Financial Institution Law of Myanmar 2016. Deposits have been defined as:

  • Sums of money paid on terms under which it will be repaid or it is repayable, either wholly or in part, with any consideration in money or money’s worth
  • Such repayment being either on demand or at a time or in circumstances agreed by the person or entity making the payment and the person receiving it

Changes to NBFIs

Notification Requirements

  • Changes to address
  • Board of directors
  • Constitutional documents
  • Business operations

Prior Approval Requirements

  • Failure to comply with these regulations may result in administrative penalties, including:
    • Fines
    • Restrictions on operation
    • Suspension or permanent termination

Compliance Requirements

Periodic Reports on Lending Rates

  • Submission of periodic reports on lending rates to the CBM

Accounting and Financial Reporting

  • Compliance with International Accounting Standard and International Financial Reporting Standards
  • Submission of audited financial statements within three months from the end of the financial year

Experience and Qualification Requirements for Senior Management

  • Experience and qualification requirements for senior management
  • Restrictions on appointments and continuance of membership

Note on Foreign Ownership

While there is no express prohibition under the current Financial Institution Law 2016 against foreign companies operating NBFIs, in practice only local entities have been issued registration certificates. However, the directive states that changes to ownership interest or status of a company from local to foreign may require prior approval from the CBM.

Conclusion

The issuance of the NBFI Directive is seen as a step towards regulating new and existing NBFIs, potentially signaling the gradual opening of the sector to foreign players, consistent with the liberalization of other financial services in Myanmar.