29 April 2019

On 25 March 2019, the Central Bank of Myanmar issued Directives relating to banking governance. The Directives expound on provisions of the Financial Institutions Law (“FIL”), which was introduced in January 2016, to provide more guidance on the implementation of those provisions.

A brief overview of the Directives is set out below.

  • Directive on Fit and Proper Criteria: This Directive applies to all banks, including their substantial shareholders, directors, officers and external auditors. It covers, amongst others, background checks, minimum qualifications, conduct of assessments, and determining the elements of fit and proper criteria (competence and capability, financial soundness, and honesty, integrity and reputation). 
  • Directive on Directors of Bank: This Directive applies to all banks, their directors and board of directors. It covers, amongst others, the election of the board of directors, the term of a director on the board, composition of the board, meetings and minutes, and the duties, powers and responsibilities of the board. 
  • Directive on External Auditors of Banks: This Directive applies to all banks and their external auditors (“EA”). The stated purpose of this Directive is as follows: 
    • to ensure that EA of banks have acceptable standards of competence and independence; 
    • to require EA of banks to discharge their responsibilities effectively;
    • to enforce international best practices in carrying out audits of banks;
    • to assist in promoting confidence in the financial system by ensuring that qualified auditors prepare audit reports;
    • to promote transparency and accuracy in financial reporting to enhance market discipline; and
    • to help safeguard depositors’ funds by requiring banks to be subjected to an effective external audit
  • Directive on Related Parties: This Directive applies to all banks and sets out the framework for a bank in relation to related party transactions. The Directive, amongst others, defines a related party, sets out how a bank should deal with related party transactions as well as documentation and reporting requirements. 
  • Directive on Acquisition of Substantial Interest: This Directive applies to all banks. The Directive includes provisions relating to the acquisition of a substantial interest, approval to continue to be a substantial shareholder and exercise of influence.

 

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