Myanmar deposits hope in overhaul of battered, distrusted bank system

Legislation handing independence to the Central Bank of Myanmar is set to be scrutinized by lawmakers over the coming weeks, in the latest reform of an economy which was for decades shambolically mismanaged by the former junta.

The measure will be “a first step in a broader financial sector reform” geared at “strengthening and liberalizing” Myanmar's enfeebled banking sector, according to Rajiv Biswas, economist at research group IHS Global Insight.

It is also likely to prove complex, in a country where savings are often hoarded in gold and banks are viewed with deep suspicion after a number of scandals and currency collapses.

Myanmar currently has 19 private banks, as well as four state lenders, but these are “relatively weak in term of capitalization,” according to Romain Caillaud, Myanmar director of business advisory firm Vriens & Partners.

Strict regulations from the central bank — including a ban on loan terms of more than one year and the imposition of fixed interest rates — have also strangled competition among private lenders, he added.

State banks are not subject to the same rules, but they effectively repel borrowers with prohibitively high risk valuations for loans.

Nationalized by the military regime which came to power in 1962, banking disintegrated with the economy during the bungled implementation of socialist-style policies which were laced with superstition — the kyat currency was at one point issued in denominations of nine, an auspicious number.

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