The Central Bank of Myanmar Issues New Directive on Non-Banking Financial Institutions

The Central Bank of Myanmar (“CBM”) published Directive 1/2021 that came into effect from 26 January 2021. This directive pertains to the establishment, operation and conduct of business by Non-Banking Financial Institutions (the “NBFIs”).

In this article we have covered some of the important aspects of this directive.

NBFI Registration Certificate

Companies willing to engage in NBFI business must obtain an NBFI Registration Certificate.

Applicants are required to submit an application to the CBM in the form provided in the directive. The application should also be accompanied by certain documents listed in the directive. This list is not exhaustive and the CBM may call for additional documents.

Among other things, the applicant shall submit a feasibility study and a business plan including a budget forecast for three financial years.

Issue / revocation of Registration Certificate

Issue

The CBM will issue the registration certificate (“RC”) upon its satisfaction that the applicant has complied with all conditions laid down in the directive. CBM may refuse to issue such RC and provide reasons for such refusal in writing. The timeline for issue/refusal to issue the RC is six (6) months from the date that CBM receives the complete application or such other date when it receives additional information from the applicant.

Revocation

The CBM may, by written notice to the NBFI, revoke the RC, on the grounds listed in the directive.   The grounds include failure to commence activities within 12 months from the date of RC, conducting out-of-scope activities, non-compliance with applicable laws and certain others.

Permissible and Prohibited Activities

The NBFI is allowed to provide only those services that have been approved by the CBM and listed in the RC. Further, an NBFI that has been issued an RC is prohibited from accepting deposits.

The CBM will prescribe the rate of interest and fees charged by NBFIs.

Communications with the CBM

Notifications to CBM

The directive lists the situations when a registered NBFI is required to notify or seek approval of the CBM.

For situations such as change in the board of directors or change of address/branch office in same township etc. the registered NBFI is required to only notify the CBM.

Prior Approvals from CBM

An NBFI would require to apply for and seek the approval of the CBM prior to, among other the following

1. transfer / sale of 10% or more than 10% voting shares in the NBFI or
2. change in its capital structure or
3. change in status of the company from domestic to foreign company, or termination of status of foreign company. The latter appears to be an indirect indication of potential change in the practice to date, and that foreign investment into Myanmar NBFIs could potentially be permitted going forward.

Corporate Governance

Every NBFI must be a company that is incorporated under the Myanmar Companies Law. The board of directors (“BoD”) of such NBFI must consist of a minimum of three (3) directors.

The directors, other senior management, and substantial shareholders of the company must comply with the fit and proper requirements set out in the directive.