Wednesday, 23 July 2014

Lenders seek Myanmar banking entrée

TOKYO: Dozens of foreign banks are pushing to launch licensed operations in Myanmar, in a bid round closing on Monday that reveals both pros and cons of entering the fast-opening southeast Asian country, reports the Financial Times. 

Japan’s Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group are among a clutch of Asian financial institutions pressing to expand in the nation, as most of their US and European counterparts stay on the sidelines. 

Political uncertainty, infrastructure problems and international sanctions have limited western corporate enthusiasm for Myanmar, although Standard Chartered of the UK and Australia’s ANZ – which, unlike other western lenders, have representative offices in Myanmar – are seen as candidates to enter the banking market. 

A government official involved in the process told the Financial Times that about two-thirds of the 42 banks that have representative offices in Myanmar – a condition for bidding for a licence – had pitched for a permit ahead of the July 14 deadline. He declined to name the institutions but said the government would accept between five and 10 initially.

“We welcome foreign banks to contribute to our economic and financial development, and we also welcome them to work together with our domestic banks,” he said.

All three of Japan’s megabanks – Mitsubishi, Sumitomo and Mizuho – have applied, according to people familiar with the situation. The three lenders each declined to comment, citing the “sensitivity” of the selection process.

StanChart and ANZ also declined to comment on whether they were bidding. Other banks with operations already in Myanmar include institutions from Thailand, Singapore, South Korea and China.

Japan’s biggest banks are particularly keen to get a foot in the door as they seek to support corporate clients that have accelerated plans in Myanmar in recent years as part of a southeast Asian investment drive. Most recently, Yakult, the drinks maker, said this month that it would build a plant in the country next year as part of an expansion in markets along the Mekong river.

Ryutaro Hatanaka, commissioner of Japan’s Financial Services Agency, has twice visited Myanmar in the past year. In January, the FSA signed an agreement to help the country develop a legal and regulatory framework covering securities, insurance and microfinance.
Under the conditions of the Myanmar banking licences, which are due to be awarded later this year, foreign institutions must bring in a minimum $75m of capital and are restricted initially to a single branch offering only corporate and wholesale banking. 

Western bank officials and analysts say they are waiting to see how the financial services sector develops in a still tricky commercial environment.

US banking sanctions on Myanmar have only been suspended, rather than lifted, while measures against scores of local individuals and institutions allegedly linked to the former military junta remain in force. UK lender HSBC paid US regulators $1.9bn in 2012 to settle claims that it violated sanctions in Myanmar and several other countries, and failed to prevent money laundering in two others.

The western reticence on Myanmar is illustrated by official figures showing mainland Chinese companies have made more than $14bn of officially approved investments in the country and Singapore businesses almost $5bn, as of June 30, compared with a running total of less than $500m from France and just $244m from the US.

source: Daily Times
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