MYANMAR VETS BANKS
Govt seeks World Bank’s help to overhaul 4 state lenders
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.