In a recent order of the Central Bank of Myanmar (“CBM”), it was announced that foreign banks and financial institutions would be allowed to have 35% equity investment in local private banks. As a corollary, local banks having a foreign equity injection up to the above mentioned limit would now be allowed to operate in Myanmar. However, necessary reporting regarding the investment and equity injection needs to be made to the CBM.
Pursuant to this order, local banks must submit a copy of the agreement entered into with the foreign bank/financial institution together with the local-foreign equity ratio post the investment. Other necessary documents as informed from time to time by the CBM will also need to be submitted.
Additionally, in the event foreign bank branches or subsidiaries that are permitted to conduct banking activities in Myanmar are investing in the local banks, the local banks are required to comply with ensuing requirements of the Financial Institution Law (“FIL”). Particularly, the restrictions which apply to cross-holding as provisioned in the FIL must be obeyed.
Previously, in the financial sector, foreign shareholder participation (applicable to banks) was legally permissible under the Myanmar Companies Law (“MCL”), but not permissible in practice. Finally, through this order, the CBM has made it permissible for foreign banks to inject equity in a local bank which has further liberalized entailing restrictions in the banking sector.
This is a significant development in the Myanmar banking sector, allowing local banks to expand their services and operations, bolstering competitiveness across the market. Foreign shareholding in local banks would also boost the efficiency and quality of services provided by these local banks and thus make the banking sector in Myanmar a lot more progressive and akin to international standards.
This article is written by DFDL Lawyers.
This article was first published on the DFDL website.
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