In an exciting development, the Central Bank of Myanmar (the “CBM”) on 8 November 2018 issued Directive No. 6/2018 (the “Directive”) which grants permission to foreign bank branches to extend banking services to local companies wholly owned by Myanmar nationals.
As the reader may already be aware, there are 13 foreign bank branches operating in Myanmar. Prior to the Directive being issued, foreign bank branches were permitted to extend financing and other banking services only to foreign companies and not local companies. Previously, branches are already allowed to finance either in United States dollars or Myanmar Kyat.
The CBM, however, carved out exceptions to the above by permitting foreign bank branches to extend wholesale banking and export financing services.
Now, in an unprecedented and groundbreaking move, the CBM has thrown the floodgates wide open by issuing the Directive, permitting foreign bank branches to extend any form of financing and other banking services permitted by law to local companies, at par with local banks.
The stated aim of the CBM for issuing the Directive is to provide local companies greater access to financing and other banking services, and indeed, both foreign bank branches and local companies are expressing equal interest in doing business with each other. This will also mean a change in the competitive landscape for local banks.
The Directive has far-reaching implications for the banking industry and stakeholders can expect a flurry of activity in the near future.