MYAN­MAR VETS BANKS

Govt seeks World Bank’s help to overhaul 4 state lenders

New Straits Times - - Business -

MYAN­MAR is em­bark­ing on the first com­pre­hen­sive au­dit of state-owned banks in decades, part of a push to mod­ernise the fi­nan­cial sys­tem and tackle risks to the na­tion’s rapid eco­nomic growth.

The World Bank was work­ing with Aung San Suu Kyi’s govern­ment on the project and the re­sults would help to clar­ify op­tions for re­struc­tur­ing the sec­tor, ac­cord­ing to Na­gavalli An­na­malai, a lead coun­sel at the mul­ti­lat­eral lender who had spe­cialised in bank­ing sec­tor de­vel­op­ment for al­most two decades.

“These banks are un­der-cap­i­talised,” said Wash­ing­ton, D.C.based Na­gavalli. “So we need to come up with a re­al­is­tic plan for re­struc­tur­ing, which may in­clude re­cap­i­tal­i­sa­tion that doesn’t put too much strain on the fis­cal side of the govern­ment.”

Over­haul­ing Myan­mar’s four state banks, which have as­sets equiv­a­lent to about a fifth of the coun­try’s US$63 bil­lion (RM288.10 bil­lion) gross do­mes­tic prod­uct, is a key task for Suu Kyi as she seeks to ex­pand the fi­nan­cial sec­tor.

With­out re­forms, the govern­ment lenders could spi­ral into a “dire” state as rapidly grow­ing pri­vate-sec­tor banks snare a big­ger share of de­posits and lend­ing, said the World Bank in a re­cent re­port.

“What we don’t want is one day we wake up and they say, among other things, there’s a large short­fall in cap­i­tal,” said Na­gavalli.

State lenders dom­i­nated the bank­ing sys­tem for half a cen­tury un­til Myan­mar be­gan demo­cratic re­forms in 2011 and started open­ing up the econ­omy. Aus­tralia & New Zealand Bank­ing Group Ltd and In­dus­trial & Com­mer­cial Bank of China Ltd are among 13 for­eign banks to have won li­cences since 2014. There are some two dozen do­mes­tic pri­vate-sec­tor banks.

The largest govern­ment-run lender is the Myanma Agri­cul­ture and De­vel­op­ment Bank, which traces its roots back to the 1950s and pro­vides credit to more than two mil­lion farm­ers in the largely agrar­ian South­east Asian na­tion. The other three are the Myanma Eco­nomic Bank, the Myanma For­eign Trade Bank and the Myanma In­vest­ment and Com­mer­cial Bank.

As­sets at pri­vate-sec­tor banks climbed 27 per cent to 23.3 tril­lion kyat (RM76.14 bil­lion) at the end of June last year from the same month a year ear­lier, ac­cord­ing to data col­lated by the World Bank. In con­trast, they slid 14 per cent to 16.5 tril­lion kyat at state-owned lenders in the same pe­riod.

BLOOMBERG PIC

The World Bank says state-owned lenders’ as­sets slid 14 per cent to 16.5 tril­lion kyat while pri­vate­sec­tor banks climbed 27 per cent to 23.3 tril­lion kyat at the end of June last year.

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