Banks and Financial Institutions Law of Myanmar

Banks and Financial Institutions Law of Myanmar

(Pyidaungsu Hluttaw Law No. , 2014)

______of ______

(______, ______, 2014)

Pyidaungsu Hluttaw hereby enacts this Law.

CHAPTER I

TITLE AND DEFINITION

Title

1. This Law shall be called the Banks and Financial Institutions Law of Myanmar.

Definition

2. The following expression contained in this Law shall have the meanings given hereunder:-

(a) Bank means a company licensed under this law to carry on commercial banking or development banking business in Myanmar and includes a foreign bank branch licensed under this law;

(b) Banking business means the business of-

(1) accepting or receiving various kinds of deposits from general public payable on demand or at a period of time;

(2) paying and collecting cheques drawn by or paid in by customers;

(3) providing credit facilities; and

(4) such other business as the Central Bank may prescribe.

(c) Holding company means a company that owns 51% or more of the shares of a bank licensed institution and has the power to elect a majority of the directors of the bank licensed institution or exercises a significant influence over the management, operations or policies of the bank licensed institution;

(d) Board of Directors means the Board of Directors of a financial institution;

(e) Branch, in relation to a financial institution, includes the principal place of business, a branch , a pay office or sub-pay office, an agency, a mobile place of business and a place of business set up and maintained for a limited period only;

(f) Business day means any calendar day other than a Saturday, Sunday, public holiday or bank holiday;

(g) Capital funds means-

(1) in the case of a bank licensed institution established in Myanmar -

(aa) its capital used for the purposes of calculating its capital adequacy ratio prescribed by the Central Bank; and

(bb) the aggregate of its paid-up capital and its published reserves, deduction having been made for any loss appearing in the accounts of the bank licensed institution and

(2) in the case of a bank licensed institution bank outside Myanmar, capital amount as prescribed by the Central Bank ;

(h) Central Bank means the Central Bank of Myanmar established under the Central Bank of Myanmar Law;

(i) Chief Executive, in relation to a financial institution, means a person who is principally responsible for the management and conduct of the business of the financial institutions, in which in the direct employment of, or acting for or by arrangement with, the financial institution also included.

(j) Company has the same meaning the prevailing Companies Law of Myanmar;

(k) Credit facility –

(1) the granting by a financial institution of advances, loans and other facilities whereby a customer of the financial institution has access to funds or financial guarantees; or

(2) the incurring by a financial institution of other liabilities on behalf of a customer;

(l) Credit societies business means the business of engaging primarily in financing to individuals who are members for consumption, production or commerce, using funds collected in member’s accounts;

(m) Credit token business means the activity of issuing a token being a credit card, debit card, charge card or stored value card and such other card or device prescribed by the Central Bank.

(n) Credit bureau means an entity specialized in the collection and sale of credit performance information for individuals and companies;

(o) Deposit means a sum of money paid on terms under which it will be repaid or it is repayable , either wholly or in part, with any consideration in money or money’s worth and such repayment being either, on demand or at a time or in circumstances agreed by the person making the payment and the person receiving it.–

(p) Development Bank means a bank licensed by the Central Bank, which accept the deposits with terms exceeding one year and financing of specific economic sectors at terms consistent with the terms of the resources collected by such banks or funds provided by the Government;.

(q) Document includes –

(1) any matter or information expressed or described on any material in any form; and

(2) any visual or sound recording, electronic, magnetic or mechanical .;

(r) Employee means an employee of the financial institution and includes an individual seconded or temporarily transferred from another employer.

(s) Factoring business means the business of financing accounts receivables;

(t) Fit and proper means probity, integrity, diligence, competence, and business experience of a person and set of criteria prescribed by the Central bank for the purposes of this Law.

(u) Financial Institution means commercial banks, development finance banks, non-bank financial institutions and scheduled institutions;

(v) Finance Company business means engaging primarily in financing the purchase of goods or services with funding other than deposits from the public;

(w) Foreign bank branch means a branch of a foreign bank licensed by the Central Bank to carry out banking business in Myanmar;

(x) Government means the Union Government of the Republic of the Union of Myanmar;

(y) Leasing business means the business of letting or sub-letting movable property on hire, regardless whether the letting is with or without an option to purchase the property.

(z) Bank licensed institution means a bank licensed under section 7 of this Law;

(aa) Ministry means the Union Ministry of Finance;

(bb) Money services business means the business of -

(1) money transmission;

(2) issuance and management of payment instrument;

(3) cashing of cheques; and

(4) issuing and selling of traveler’s checks or money orders;

(cc) Non-Bank Financial Institution (hereinafter referred to as “NBFI”)means an institution that is registered under Section 16 to carry on one or more of the following businesses-

(1) finance company;

(2) leasing;

(3) factoring;

(4) credit token;

(5) money services;

(6) any other credit services the Central Bank may prescribe;

(dd) Officer in relation to a financial institution, includes–

(1) the chief executive of the financial institution, or his deputies;

(2) the chief financial officer; and

(3) such other person performing executive functions at the financial institution;

(ee) Payment system means any system or arrangement for the transfer, clearing or settlement of funds or securities, but excludes—

(1) an in-house payment system operated by a person solely for own administrative purposes.; and

(2) such other systems or arrangements as may be prescribed by the Central Bank.

(ff) Payment instrument means any instrument, whether tangible or intangible, that enables a person to obtain money, goods or services or to otherwise make payment;

(gg) Person means an individual, or incorporated organization formed under the law;

(hh) Place of business means a branch or office of a financial institution including a mobile office opens to the public;

(ii) Prescribed means prescribed by regulation under this Law;

(jj) Relative in relation to a person means his spouse, brother or sister of the individual, brother or sister of the spouse of the individual, any lineal ascendant and descendant of the individual or spouse of the individual and his dependents; and any such relationship created through adoption;

(kk) Related party in relation to a financial institution means-

(1) a person who has substantial interest in the financial institution or the financial institution has significant interest in the person;

(2) a director or officer of the financial institution or of a body corporate that controls the financial institution;

(3) a relative of a natural person covered in paragraphs (a) and (b);

(4) an entity that is controlled by a person described in paragraphs (a), (b) and (c); or

(5) a person or class of persons who has been designated by the Central bank as a related party because of its past or present interest in or relationship with the financial institution.;

(ll) Scheduled Institutions means institutions established by the separate law, not applicable under this law, that provide financial services for a specific group and a community that include;

(1) Rural Development Bank;

(2) Agricultural Bank;

(3) micro finance institutions licensed under the Microfinance Law 2011;

(4) credit societies; and

(5) Postal Savings Bank

(mm) Securities include securities as defined in the prevailing Securities Exchange Law of Myanmar;

(nn) Subsidiary company has the same meaning as in the prevailing Companies Law of Myanmar;

(oo) Substantial interest means owning, directly or indirectly, ten percent or more of the capital or of the voting rights +of a financial institution or, directly or indirectly, exercising control over the management of the financial institution, as the Central Bank may determine;

CHAPTER II

Application of Companies Law

3. (a) The financial institutions shall be established as limited liability company in accordance with the Myanmar Company Act as well as with the Special Company Act, 1950.

(b) The provisions of the Companies Law shall apply to financial institutions under this Law, in so far as it does not conflict with the provisions of this Law.

CHAPTER III

OBJECTIVES, GENERAL POWERS CO-OPERATION AND LEGAL PROTECTION

Objective and General Powers of the Central Bank

4. (a) The power to regulate and supervise all bank licensed institution and NBFIs that are subject to this Law, is vested in the Central Bank.

(b) The objective of the Central Bank to regulate and supervise financial institutions under this law is to maintain the stability, safety and soundness of the financial system and to reduce the risk of loss to depositors.

(c) The Central Bank, shall have power to -

(1) grant licenses;

(2) provide registration, approval and authorization;

(3) carry out inspections of bank licensed institution and NBFIs in accordance with the provisions of this Law;

(4) require bank licensed institution and NBFI to comply with any order, regulation, directive and guidelines issued under this Law;

(5) require any bank licensed institution or NBFI to provide any information and periodical written reports as may be prescribed by the Central Bank;

(6) promote, implement and enforce consumer protection in the banking and payment system and

(7) such other power conferred on it under this Law.

(d) The Central Bank shall discharge its functions in line with the regulatory and supervisory objectives and which it considers most appropriate for the meeting those objectives. It may also authorise or instruct its officer or employee to perform any functions, exercise any powers, or discharge any duties, of the Bank under this Law.

(e) The Central Bank may appoint any person who is not its officer or employee to perform any functions, exercise any powers, or discharge any duties, of the Central Bank under this Law as determined by Board of Directors.

Cooperation with other Regulators

5. (a) The Central Bank shall cooperate with regulators of financial institutions not governed under this law (hereinafter referred to as “other financial regulators”) and relevant domestic and international authorities and exchange information relating to any bank licensed institution or NBFI.

(b) The Central Bank may enter into memorandum of understanding and other suitable arrangements with other financial regulators and relevant domestic and international authorities to ensure the safety and soundness of the financial system.

(c) In regulating and supervising representative offices of foreign banks, and bank licensed institution and NBFIs, in which foreign banks or foreign investor has a substantial Interest, the Central Bank shall cooperate with the foreign regulators concerned, on the basis of reciprocity and ensuring timely exchanges of information adequate to discharge its regulatory and supervisory responsibilities.

(d) The Central Bank has the power to enter into cooperative arrangements with foreign bank regulators and to provide information to foreign bank regulators.

(e) Such cooperative arrangements shall provide for the confidential treatment of the information received pursuant to the memorandum of understanding and other arrangements.

Legal Protection for Action taken under this Law

6. (a) No action shall be brought, instituted, or maintained in any court or before any other authority against, the Central Bank, any Member of the Board, any officer or employee of the of the Central Bank, either personally or in his official capacity; or any person lawfully acting on behalf of the Central Bank, for anything done (including any statement made) or omitted to be done in good faith in the course of or in connection with-

(1) the exercise or purported exercise of any power under this Law or any other written law;

(2) the performance or purported performance of any function or duty under this Law or any other written law; or

(3) the compliance or purported compliance with this Law or any other written law.Provided that such act or such statement was done or made, or was omitted to be done or made, in good faith.

(b) The Central Bank shall indemnify the persons listed in subsection (a), for any liability that arises from the exercise or purported exercise of, or omission to exercise, any power conferred by this Law unless it is shown that the exercise or purported exercise of, or omission to exercise the power was in bad faith.

(c) The protection conferred by subsection (a) extends to legal costs incurred in defending a proceeding.

CHAPTER IV

LICENSING, LICENSING REQUIREMENTS AND CANCELLATION OF LICENSE

Carrying on banking and development banking business require license

7. (a) No person shall carry on banking business or development finance bank business, unless-

(1) such person is a company incorporated in Myanmar and has a valid license issued by the Central Bank; or

(2) such person is a foreign bank subsidiary or branch with a valid license issued by the Central Bank; or

(3) such person is exempted under Section 8.

(b) Any person who carries on banking or development finance bank business, in contravention of subsection (a) shall be guilty of an offence under this Law.

(c) Every owner, director and officer of a company, which knowingly authorizes the carrying on of banking or development finance bank business by that company, in contravention of subsection (a) shall be guilty of an offence under this Act and shall be liable for all obligations of the company related to that business.

Exemption of Scheduled Institutions

8. (a) This law shall not apply to Scheduled institutions.

(b) Notwithstanding subsection (a), scheduled institutions shall be subject to the whole or any part of this Law, if the Ministry upon the recommendation of the Central Bank decides that-