2018 06 December

Myanmar Legal Alert: Myanmar Branches of Foreign Banks Now Permitted to Set their Own Interest Rates for Foreign Currency Loans


In another recent development, the Central Bank of Myanmar (“CBM”) has taken a further step in liberalizing the business operations of branches of foreign banks operating in Myanmar.

In line with the latest CBM announcement, branches of foreign banks operating in Myanmar are now permitted to provide financing in both local and foreign currency. Foreign bank branches are also permitted to set their own interest rates for foreign currency loans. While there has been no explicit cap on interest rates imposed by the CBM in relation to borrowing from overseas financial institutions, it is assumed that the CBM is now creating a level playing field between foreign banks with branches in Myanmar and those without.

CBM officials have stated that now there are no restrictions on branches of foreign banks from setting their foreign currency interest rates, but that these should be in line with market rates. For local currency loans, the interest rate would be subject to a maximum limit of 13% per annum. Additionally, the CBM also indicated that foreign bank branches will be allowed to expand in the coming years.

The announcement serves as a welcome boost to this emerging market and the CBM’s decision to further ease restrictions is expected to facilitate heightened economic growth. Additionally, if such financing is offered at international market rates, many local businesses will be able to secure short term financial assistance, thus providing greater access to trade financing.

Furthermore, the preceding CBM directive has already allowed branches of foreign banks to provide banking services, including financing and all other related banking services to local companies. However, certain potential issues despite the liberalized policies of the CBM remain. Myanmar at present does not have a credit bureau and the perfection of immovable securities still presents significant challenges. Doubts continue to persist as to the perfection securities and/or collateral to secure such financing. Under the Transfer of Immovable Property (Restrictions) Act, a person is restricted from transferring immovable property to a ‘foreign-owned company’. Additionally, the Office of the Registration of Deeds has been unwilling to register securities over immovable property created in favor of foreign lenders.

In summary, it is our concerted view that the announcement coupled with the latest CBM policies represent a positive development overall in terms of allowing foreign banks branches to conduct business in Myanmar and easing restrictions on their business operations. However, until further policies on liberalization are released and/or amendments are made to the current legal framework, the potential issues touched upon above remain unresolved; in particular, the issues concerning the perfection of security interests in favor of the local branches of foreign companies and their enforcement.

DFDL Contacts

William D. Greenlee, Jr.

Partner, Managing Director

DFDL Myanmar


Nishant Choudhary

Deputy Managing Director,

Head of Banking & Finance Practice

DFDL Myanmar


The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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