Sunday, August 20, 2017

Lenders hope to start US transactions next year

Anyone hoping that relationships between Myanmar and US banks would instantly blossom following a lifting of US sanctions will be disappointed. But several local lenders say they have started negotiations with US peers, and are hoping to see direct US-Myanmar transactions start in 2017.

Police officers stand guard on Wall Street in New York City. Photo: AFPPolice officers stand guard on Wall Street in New York City. Photo: AFP

The US eliminated many of its sanctions against Myanmar in October, including a Myanmar sanctions-specific list of blacklisted individuals, and prohibitions on new investment and financial services.

Myanmar bankers at the time said they were hopeful that this would end US lenders’ reluctance to deal directly with Myanmar firms or financial institutions. Two months later and Myanmar banks are still only in the earliest stages of building relationships, but remain optimistic on the outlook.

“The US sanctions against Myanmar have been removed, so direct transfers between banks in the two countries will happen soon,” said U Moe Lin Thu, deputy general manager of KBZ, the largest private bank in terms of assets.

He said that his firm is planning to form relationships with US lenders, and that several others local banks are either seeking US banks willing to work with them or in the negotiating process. But he declined to comment on which US banks KBZ had reached out to, partly because competition among Myanmar lenders is stiff.

“It will take time,” he said. “But we hope to start this service in 2017. Like KBZ, I think other banks are preparing for it.”

The Central Bank allows any local lender with a foreign exchange dealer licence to engage in overseas foreign currency transactions or transfers, said U Win Thaw, director general of the Central Bank’s Foreign Exchange Management Department.

Commercial banks, however, are finding the administrative and documentation requirements are not straightforward.

The Central Bank is aware that several local banks starting to establish connections with US banks, he said. “But despite the fact that the sanctions have been lifted the documentation procedures are a little complicated – it will happen soon though,” he added.

U Hla Nyunt, deputy managing director of Global Treasure Bank, said his firm also planned to form relationships with US banks, but declined to go into details.

U Zay Yar Kyaw, general manager of CB Bank – the third largest private bank by asset volume – said the lender was considering forming relationships, but that the process would be “costly”.

If American trade and investment picks up then the bank will look into how to facilitate direct transactions and transfers, he added.

“Trade between Myanmar and the United States is relatively small at present,” he said. “When it’s necessary, we’ve provided money transfers for traders to the US indirectly through markets like Singapore, which is convenient at the present.”

In addition to lifting many of its sanctions, the US has also granted some 5000 potential Myanmar export products preferential tariffs under the Generalised System of Preferences scheme.

U Aung Naing Oo, director general from Directorate of Investment and Companies Administration, said at a press conference on December 6 that this would help bring more US investors to Myanmar and help boost trade. But that the banking sector would have to make sure it was up to the task of facilitating transactions and transfers.

Analysts, however, note that there are still several Myanmar individuals on a separate US blacklist for narcotics. The fact that the risk of a US firm or bank inadvertently doing business with such an individual – and facing heavy penalties as a result – still exists, will mean US banks and firms stay cautious, they said.

Translation by Zar Zar Soe