As recent as two and half years ago, Myanmar banking sector was in dire straights with the country’s banks going through bank runs and depositors unable to take out their savings. The economy was about to implode and the government was running out of foreign currencies fast.
Fast forward two years from then, no bank has collapsed so far. Economy is recovering, notwithstanding at snail pace. Terrorists are on retreat. We should acknowledge the competency of the CBM and Ministry of Finance, in taking control of the banking crisis and turning the financial services sector and economy around.
So is the worst over for the local banks? No, not for every bank.
At the macro levels, structural issues still exists. First, there are just too many banks in an economy 1/6 the size of Singapore, which has just three domestic banks. The whole country economy can be serviced by 3-4 large banks. We do not need small little banks, servicing each and every segment of the industry. Most of the banks cannot even afford a basic core banking system.
Secondly, there is the issues of bad loans. The banking sector is so embedded with the bad loans that government even envisaged to set up one asset management entity to take over these bad loans from the banks, probably at a discount and enhancing the sector liquidity at the same time. Even the Chairwoman of MBA (Myanmar Bankers Association), asked SG Min Aung Hlaing to get the government to ask the customers to pay back the loans, on her bank’s behalf, during a recent UMFCCI meeting with some heads of government. What an irony, hearing from someone who herself, refused to appear on national TV to address the banking sector issues, yet asked privately for her own bank benefits, at a meeting held to benefit the country moving forward.
Thirdly, there is the issue of building the confidence back. Savers and depositors have been stung by the bank’s refusal to let them take out their own money, while their managers engage in skulduggery to take additional percentage as cuts/bribes from customers for allowing them to take their own money out, ahead of many others.
Fourth, quite a number of banks are restricting customers withdrawal of most kind, still. Some only allow accrued interest to be withdrawn. Some keep on renewing fixed deposits without customer’s consent. Some are limiting withdrawals to a maximum of two million Kyats per week. All of them are facing liquidity crisis. Imagine an elderly depositor with 200 million Kyats in deposits. It would take him 100 weeks (~2 years), to withdraw all his savings, assuming he does not miss a week. These banks need to be investigated and be forced to merge with larger stronger banks. The status quo simply should not be allowed to go on.
At the individual bank levels, most of them have bad loans issues. Some of them charging customers 3-15% penalties fees for late or non-payment of loans, something unheard of at international level, thereby compounding the NPLs. Some have potential fraud cases stemming from JAICA loans.
At the government level, there are still unpaid covid loans. Out of 200 billion Kyats of Covid loans issued, more than 166 billion Kyats are still left to be repaid. Some are trying hard to settle at least the interest component and what little they can afford for the principal. Some have run away or become uncontactable of sort. The NNCP terrorists at the same time are encouraging borrowers not to repay at all.
The government is grappling with issues ranging from security, development, EAOs, elections, etc., to focus on, that the banking issues may take a backseat. In a country short on competent and qualified civil servants, and long on people just wanting to hang onto a position of power, there are still those collecting pay and benefits without having to do any productive work! The government at this moment may not have the capacity to tackle all four or five issues listed above at the same time.
Adding fuel to the fire, there was closure of bank accounts held by Myanmar citizens or those doing business in Myanmar by Singapore banks, especially UOB. Myanmar National Airlines, one long time client of the bank, has been treated unfairly, getting their corporate accounts closed down all of a sudden (probably at the request of its government and/or the US). One Singapore businessman who has been doing business in Myanmar for more than 20 years, also has his account closed off. Some Myanmar nationals having savings or current accounts with UOB are also getting their accounts closed without reasons. Knowing that UOB is holding a foreign bank license in Myanmar, it would not be equitable for the bank to be able to take unilateral actions, without Myanmar government taking any counter measures to reciprocate that.
