Myanmar’s Central Bank Issues New Directive on Non-Banking Financial Institutions’ Operations

Enhancing Regulatory Framework for Non-Banking Financial Institutions in Myanmar

The Central Bank of Myanmar (CBM) has issued Directive 1/2021, effective from January 26, 2021, to enhance the regulatory framework for non-banking financial institutions (NBFIs) in Myanmar. This directive outlines the requirements for establishing, operating, and conducting business by NBFIs, emphasizing the need for compliance training for non-financial professionals.

Requirements for Establishing and Operating NBFIs

To engage in NBFI activities, companies must:

• Obtain a registration certificate (RC) from the CBM
• Submit an application along with required documents, including:
  • Feasibility study
  • Three-year business plan with budget forecast
• Meet conditions outlined in the directive

The CBM will issue the RC upon satisfaction that all conditions have been met. Failure to comply may result in:

• Refusal of the application
• Revocation of the RC if the NBFI fails to commence activities within 12 months, conducts out-of-scope activities, or violates applicable laws.

Permissible and Prohibited Activities for NBFIs

NBFIs are allowed to provide services approved by the CBM but are prohibited from accepting deposits. Interest rates and fees will be set by the CBM.

Communication with the Central Bank

Registered NBFIs must:

• Notify the CBM of specific events, such as changes in board directors or addresses
• Seek prior approval for significant transactions, including:
  • Share transfers
  • Changes to capital structure

Requirements for Directors and Senior Management

Every NBFI must be a company incorporated under the Myanmar Companies Law with a minimum of three directors on its board. Directors, senior management, and substantial shareholders must meet fit-and-proper requirements set out in the directive.

Importance of Compliance Training for Non-Financial Professionals

The implementation of Directive 1/2021 underscores the importance of compliance training for non-financial professionals working in NBFIs in Myanmar. As the regulatory landscape evolves, it is essential that these individuals understand the new requirements and adhere to best practices to ensure the success and stability of their organizations.

By understanding the new directive and its requirements, non-financial professionals can help their organizations navigate the evolving regulatory environment and maintain a strong reputation in the market.