Central Bank to ease branch restrictions

The Central Bank of Myanmar is planning to make it easier to open bank branches, according to sources in the industry.

Currently banks need total paid-in capital of K100 billion (US$102 million) as well as K700 million for each branch to expand, though with the country thought to be underbanked, insiders say they advocate easing the process of opening branches.

The Central Bank is discussing allowing banks to open based on an assessment of their capital adequacy ratio, a formula essentially comparing capital with risk. With possible scores between 0 and 100 percent, banks will likely be allowed to add branches if their scores are above 10pc, which is near most international standards, said a central bank official requesting anonymity.

“The policy is to save banks and customers in cases of [sudden] cash withdrawal,” he said.

The previous policy had been put in place in the wake of the 2003 banking crisis, he added.

Kanbawza Bank vice president U Than Lwin said removing capital requirements for opening banks will particularly assist smaller banks, which can have trouble meeting the expenses when expanding branch networks, such as the cost of the building.

Expanding branch networks in remote areas will be particularly useful for banks servicing remittances, he said, but added it must not come at the cost of the banks’ soundness.

“Reducing the capital requirements is proper, but entirely removing the capital requirements is risky as some smaller banks may simply not have enough capital,” U Than Lwin said.

Kanbawza has the most branches of Myanmar’s private banks, boasting about 200, with goals to open about 100 more in a few years, he said.


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