Cheah Swee Gim and Esther Claudine Lim of Kelvin Chia Yangon in Yangon look at Myanmar’s banking landscape

Following the recent conclusion of Myanmar’s historic November 8 2015 elections, the international community has kept close watch on Myanmar’s political and economic transition. After all, Myanmar is considered the last economic frontier in Southeast Asia and investors are thus raring to secure a foothold into Myanmar’s liberalising economy to tap into the many opportunities the country offers.

The country’s underdeveloped banking and financial sector however poses a significant impediment to its transition to a market economy. To accelerate Myanmar’s vast growth potential, it is apparent that an effective and sustainable legal framework has to be put in place for the implementation of effective banking and financial services.

Signficant steps have already been taken towards reform. It is expected that the new civilian government (headed by Daw Aung San Suu Kyi’s National League for Democracy) which assumed power last April 2016 will continue to press on with suitable legal and regulatory reforms for its transitioning economy by identifying priority areas for development, which will necessarily have to include the banking and financial sector.

Regulation of financial institutions

The Myanmar government has recently introduced several key pieces of legislation to further the growth of the country’s banking and financial sector, the most notable of which is the Financial Institutions Law of Myanmar passed last January 25 2016 (FIL) and which repealed the old Financial Institutions of Myanmar Law (1990).

The FIL is the main legislation applicable to financial institutions and prescribes stricter and more definitive capital, reserve, and significant ownership conditions and requirements. The FIL imposes a paid-up capital requirement of not less than approximately $20 million for banks incorporated in Myanmar, and not less than the equivalent of $75 million for branches or subsidiaries of foreign banks. Additionally, the FIL prescribes a more stringent requirement on the maintenance of reserve funds of banks, amongst others, to provide more comfort for investors and ensure the stability of financial institutions operating in the country.

Interestingly, the FIL contains a discussion on the acquisition of interests in financial institutions and contemplates not only potential acquisitions but also sanctions mergers between banks, subject to relevant regulatory consents being secured.

Expansion of access to financial services

The recent enactment of the Mobile Financial Services Regulations (on March 30 2016) (the “MFS Regulations”) (coupled with the existing Microfinance Law, enacted on November 30 2011) has expanded access to financial services in Myanmar by allowing customers to deposit, withdraw or transfer money simply by creating mobile accounts and without coursing such transactions through banks.

The MFS Regulations veer away from the previously bank-led model and allows mobile network operators (which are licensed under the Telecommunications Law) and non-bank financial institutions to provide mobile financial services by obtaining the required registration with the Central Bank of Myanmar (CBM).

As a result, 2016 has seen a proliferation of mobile financial service providers who wish to take advantage of Myanmar’s huge unbanked population and boost in mobile network usage. More entrants are expected to join the mobile banking market with the passage of the MFS regulations which has provided more definitive requirements for the conduct of mobile financial services in the country.

Compliance with international best practices

In an effort to be at par with international standards, the CBM has begun to implement reforms to combat money laundering and financing of terrorism (ML/TF) activities in the banking and financial sector. Further to the Anti-Money Laundering Law (2014) and relevant regulations, financial institutions are required to implement ML/TF risk assessment and management. Such measures are also expected to be applied to sales of shares in the newly-opened Yangon Stock Exchange (YSX) that meet stipulated thresholds. Notably, on June 24 2016, the intergovenmental Financial Action Task Force has publicly announced Myanmar’s removal from its list of monitored jurisdictions owing to its significant progress in improving its ML/TF regimes.

As for financial reporting requirements, there is generally a movement towards the adoption by local private banks of International Financial Reporting Standards (IFRS), led by Ayeyarwaddy Bank, which has published its financial reports and statements for the 2015-16 financial year in accord with IFRS.

Grant of foreign bank branch licences

Previously, foreign banks were only allowed to operate in Myanmar through representative offices. In a bid to provide access to much needed financing for both local and foreign ventures, nine foreign banks were awarded licenses by the CBM in early 2015 to establish their respective branch offices in Myanmar.

Owing to the success of the previous round of foreign bank branch licensing, on March 4 2016, the CBM had given preliminary approval to prepare for commencement of banking operations in favour of four more foreign banks. Such foreign banks are then expected to comply with the relevant requirements and procedures in order to be issued the final bank branch license.

As a result, licensed foreign banks are now able to engage in onshore wholesale banking activities, consisting mainly of foreign currency corporate lending to wholly or partly owned foreign corporates registered in Myanmar. The foreign banks will likewise be allowed to partner with local banks and offer local currency denominated services.

General outlook

There are various laws that are anticipated to be passed this year that will impact the development of the country’s banking and financial sector. These include the leasing law (for rental of equipment and vehicles), the new Myanmar Companies Law, and the new Investment Law, amongst others. Yet, there are still fundamental legal issues to be addressed, such as the establishment of an effective system for the registration of securities, the extension of loans with longer terms and the much needed liberalisation of the insurance services sector.

Overall, the transition for Myanmar’s banking and financial sector is far from complete – it is clear however, the Myanmar government is steering towards the right direction in recognition of the critical role that the banking and financial sector will play in the establishment of a full market economy.


Cheah Swee Gim
Director/Head of corporate and commercial department
Kelvin Chia Yangon/Kelvin Chia Partnership

About the author

Cheah Swee Gim, director of Kelvin Chia Yangon and head of the corporate and commercial department of Kelvin Chia Partnership, has more than 25 years of corporate legal practice in South East Asia.

Her substantial portfolio of professional work includes mergers and acquisitions, de-mergers, joint ventures, corporate reorganisations and restructurings, private equity funds, equity and capital planning, debt restructuring, financing and banking transactions, and myriad commercial contract and corporate issues. Her experience in commercial transactions includes complex agreements where intellectual property rights and information technology played critical roles. In Myanmar, she has extensive experience in advising investments in the real estate, aviation, oil and gas, mining, and agriculture sectors and the special economic zones.

She received her law degree from National University of Singapore and an LLM in intellectual property studies from New York University.

Esther Claudine Lim
Foreign consulting attorney
Kelvin Chia Yangon

About the author

Esther Claudine Lim is a foreign consulting attorney at Kelvin Chia Yangon. Her experience in providing structuring and legal advice to both local and foreign clients spans various sectors, including banking and finance, telecommunications, food and beverage business, real estate development, agriculture, and special economic zones.

She received her law degree from the Ateneo de Manila Law School, and her Bachelor of Science degree from the De La Salle University, both in the Philippines. Din is a member of the Philippine bar.