Myanmar: Foreign investments in local banks to be reviewed by CBM
Foreign investors planning to invest in domestic banks will still be required to seek approval from the Central Bank of Myanmar (CBM) to do so, U Soe Thien, vice governor of the central bank, told The Myanmar Timesyesterday.
“According to the law, all firms are included under the 35 percent threshold. But, being financial institutions, local banks will need to submit the amount of foreign investment received and other terms to the CBM,” U Soe Thein said.
“Each investment will be reviewed on a case-by-case basis and approved only if appropriate,” he said.
This is despite a new regulation in the Myanmar Companies Law permitting foreigners to take stakes of up to 35pc in all local companies. The law will be enforced on August 1 after receiving presidential approval in December.
The new law is expected to yield promising opportunities for local banks, which lack capital investments and reserves when compared to foreign banks.
“Backed by foreign investments allowable under the law, local banks will be able to expand their services and grow further in the country,” said banking services expert U Than Lwin.
“If foreigners are allowed to invest, the weaker banks can reposition themselves into stronger entities,” he said. “But the banks inviting foreign investments must also ensure that their capital reserves are well supported.”
Nevertheless, as the banking sector is an important part of the national financial system, having the CBM regulating and overseeing all foreign investments in the sector is appropriate, U Than Lwin said.
Excluding the state-owned banks, the CBM has to date permitted a total of 29 private local banks to operate in Myanmar. Of the 29, five were given approval in May. Among the banks are First Private Bank and Myanmar Citizens Bank, which are listed on the Yangon Stock Exchange.
“The Companies Law is advantageous for everyone. But with the CBM reviewing each investment individually, we will have to observe the situation when the law comes into effect,” said U Myint Zaw, Senior General Manager of First Private Bank.