2019 06 February

Myanmar Legal Alert: The Central Bank of Myanmar Introduces Market-Based Reference Exchange Rate

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By way of recently issued Instruction No. (5 /2019), the Central Bank of Myanmar (“CBM”) has announced that on a daily basis it will begin to publish the Reference Exchange Rate (“RER”) of Myanmar Kyat (“MMK”) to the US Dollar (“USD”). The RER will be based on transactions conducted on foreign exchange markets.

The RER will be calculated by assigning weights to average rate between executed interbank foreign- exchange transactions among Authorized Dealer (AD) banks, and the average rate of transactions between AD Banks and their customers.

The calculation method also factors in spot-transactions performed by AD banks on the daily foreign- exchange market from 09:00 to 15:00. The resulting RER for USD and other currencies will be published on the CBM’s official website at 16:00 once all available data has been collated for that day.

This will help to avoid any rate misalignments as they will be made publicly available on the same day. Furthermore, for the ease of the general public, the CBM will revamp the reference rate publication form on its website.

It should be understood that the RER is merely indicative and not binding in nature. Those conducting transactions on the foreign-exchange market are not obliged to use the stipulated rate. Additionally, using the previous day’s RER will be acceptable to settle obligations related to customs, accounting, and statistical purposes.

To increase public awareness, the CBM will also publish data on Nominal Effective Exchange Rates and monthly Real Effective Exchange Rates. The CBM’s primary objective in issuing this Instruction is to counteract short-term exchange rate volatility.

The Instruction further directs that banks must report details of their interbank and customer trades at four daily intervals, ending at 10:00, 12:00, 14:00, and 15:00 respectively. Banks must submit these reports during each interval either via Electronic Reporting Software (“ERS”) or by email to the CBM’s Foreign-Exchange Management Department. They must do this no later than 30 minutes after the end of each interval.

The CBM will exclude any transactions not in line with proper market conduct from the calculation of RER. Finally, the instruction provides that “an attempt to inflate transaction volume through conducting recurring trades between two counterparties with similar terms-will be excluded.” If market manipulation by banks is suspected, or if a bank fails to comply with the aforementioned requirements, the CBM may impose penalties upon them in accordance with applicable laws, rules, regulations, and directives.

This instruction is effective as of 5 February 2019.


DFDL Contacts


William D. Greenlee, Jr.

Partner, Managing Director

DFDL Myanmar

William.greenlee@dfdl.com

Nishant Choudhary

Deputy Managing Director,

Head of Banking & Finance Practice

DFDL Myanmar

Nishant.choudhary@dfdl.com


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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