Myanmar people are rushing to withdraw their deposits from banks since the February 1, 2021 coup. Photo: AFP / Ye Aung Thu

YANGON – Myanmar’s private banks are teetering as anxious depositors rush to withdraw funds amid coup-caused political instability, concerns about the country’s underlying finances and an emerging shortage of kyat currency notes.

Long snaking queues in front of bank ATMs are now a daily sight in the commercial capital of Yangon, causing banks to hand out tokens to 25 or so depositors per day who start lining up to withdraw funds as early as 4 am.

As banks impose new restrictions and fees to deter withdrawals, many in Myanmar fear the country’s political turmoil could cause a banking crisis as the local economy seizes up and Western countries impose new sanctions on the junta’s leaders.

The run on banks started soon after the military staged its democracy-suspending coup on February 1. The anti-junta Civil Disobedience Movement (CDM) soon thereafter called on bank workers to strike in protest against the coup.  

Many answered that rebel yellow in the weeks after the coup, a banker revolt that disrupted normal operations, international payments and other financial services. Cognizant of the risks, in March the military aggressively pushed banks to reopen and restore normal services.

In a March 5 letter leaked online, the Central Bank of Myanmar (CBM) wrote banks that refused to reopen would be forced to transfer part of their accounts to the military and state-run institutions.

The letter was released two days after coup leader Senior General Min Aung Hlaing’s State Administration Council met with CBM officials. The military-controlled state media has also warned uncooperative banks of undisclosed “legal action.”

Myanmar deposit-holders queue up to withdraw funds at a C B Bank ATM in Yangon. Picture: Facebook

The CBM, which saw its top officials replaced by the military soon after the coup, wrote that banks which did not have at least 50% of their branches open by the third week of March would be subject to hefty fines.  

Myanmar’s largest banks, namely KBZ Bank, AYA Bank, C B Bank and Yoma Bank, have since reopened a majority of their branches.

KBZ is the largest bank in Myanmar serving around 3.5 million customers through over 500 branches nationwide. AYA Bank is the second largest with 1.4 million customers and 260 branches.

Around 80% of KBZ’s staff returned to work by an April 29 deadline, according to local media Frontier Myanmar. Those who did not return have been forced to resign or faced termination.

However, the CBM has since imposed new restrictions on deposit-holders, including daily caps on the number of people who can withdraw funds from a given branch and sharp limits on the amount of funds they may withdraw.

Since April, the CBM has imposed a 500,000 kyat (US$303) limit per day on ATM withdrawals. Yet most banks have independently cut their ATM withdrawal amount to 200,000 kyat ($121) or less per day with a weekly cap of 2 million kyat ($1,215) for any individual account holder.

A May 9 KBZ flier said its weekly ATM withdrawal limit was 200,000 kyat. The military-owned Innwa Bank, as of May 7, takes a fee of 800 kyat for every 100,000 kyat withdrawn from their ATMs.

People line up at an ATM outside a closed branch of KBZ Bank in Yangon on February 1, 2021. Photo: AFP / Stringer

Those hard cash limits could be motivated in part by an emerging shortage of hard currency notes, analysts say.  

Giesecke Devrient, a German company that supplies raw materials to print Myanmar’s currency notes, said in April that it would suspend the export of the materials in response to the coup. Myanmar began printing the kyat with the German company’s assistance in 1972.

What is clearer is that the Myanmar kyat has sharply depreciated since the coup. The kyat was at $1,350 against the US dollar at the end of January but has since plummeted to around $1,600.

Myanmar people are now hoarding US dollars and gold as a hedge against the depreciating kyat, though both are in short supply in the isolated and poor country.

Myanmar’s private banks were in trouble well before the coup. A pre-putsch Covid-19 outbreak hit banks’ already fragile capital positions especially hard, with the IMF warning that a “prolonged outbreak will further raise credit risks and recapitalization needs in the banking sector.”

It said in a January 2021 report that “a comprehensive strategy to address nonperforming loans should be advanced. The immediate priority should be to assess banks’ true positions through a targeted asset quality review by international auditors of systematically important banks.”

The IMF report did not provide an industry estimate of NPLs as a percentage of outstanding credits but did say “contingency arrangements should also be urgently prepared to address potential banking sector stress. These would help support liquidity provision in the system and maintain stability in the payments system, both of which are critical for ensuring financial stability and supporting bank intermediation.”

If Myanmar’s banks were laden with untold amounts of nonperforming loans before the February 1 coup, their capital positions have no doubt deteriorated significantly since, raising financial risks that analysts say are hard to gauge in the military takeover’s chaotic aftermath. 

A Myanmar man counts his money at a market in Yangon on April 19, 2017. Photo: AFP/Roberto Schmidt
A Myanmar man counts local kyat notes at a market in Yangon in a file photo. Photo: AFP / Roberto Schmidt

“From my knowledge, the CBM is not disbursing enough to private banks as they also do not have much cash,” said Ma Pearl, a manager at one of the country’s largest banks she declined to name due to fear of reprisals.

“The private banks are receiving [CBM] instructions on which branches are to accept deposits or accept withdrawals in the morning on that day…this is causing friction between many of the banks and the queuing customers as some banks will announce just before opening hours that they will not be allowing withdrawals.”

The country’s finances are delicate by any measure. Myanmar requested and received a $350 million Rapid Financing Instrument from IMF to address “urgent balance-of-payment needs” in mid-January, weeks before the coup.

It was the second emergency financial assistance grant given to Myanmar in recent months, following a $356.5 million tranche released under the same program on June 26, 2020.

Gross international reserves stood at $6.7 billion, or 4.7 months of imports, as of September 2020 – well below prudent levels. Since then, the US Treasury Department froze over $1 billion of Myanmar state funds held in US financial institutions in punitive response to the coup. 

“You can argue that [the bank runs are] due to economic fundamentals, but the reality is that people have no confidence in the legitimacy of the Myanmar government,” said a senior private businessperson in Yangon who requested anonymity.

“It’s true to a point to say the kyat is running out because we see banks trying to restrict how much money they give out. If we remember two months ago, the conversation was about the CDM and the banks, with people pushing the banks to stay closed but the military trying to open them.

“With the branches reopening, now everybody wants to take their money out…The banks don’t have enough money to pay their depositors because so many people are panicked about it,” he said.  

Ma Pearl says there has been a rise in the number of bank customers who have opened mobile banking accounts so that they can withdraw funds via agents or brokers instead of queuing up at ATMs.

A black market for advances on bank withdrawals has emerged since the coup. Photo: AFP / Thet Aung

That has resulted in a new “black market” for advances on withdrawals, where brokers with cash-on-hand command an increasingly large percentage of the amount withdrawn which is eventually paid back by customers when they eventually get the funds out of their accounts. Brokers on Facebook are asking for as much as 9-10% of the withdrawn amount.

Wave Money, a mobile financial service joint venture between Yoma Bank and Norway-based telecom operator Telenor, had around 5.4 million active users monthly in January and only charged a transfer fee.

However, since the coup and the new restrictions on withdrawals, its local agents have started charging withdrawal fees of around 1.3% per 100,000 kyats. That fee has recently been jacked up as high as 6.5% at some shops.

The amount that can be withdrawn is also being limited with some shops even in the commercial capital of Yangon only allowing 50,000 kyats per withdrawal.

Asia Times saw several customers turn away from a Wave agent when they learned that the cash-out percentage was 6.5%, with one young couple saying the fee was “ridiculous.” (In a May 21 statement, Wave warned agents who charge extra fees will face action from the company.)

Central bank officials sense a conspiracy in the rush on banks.

At a May 17 press conference, CBM deputy governor Win Thaw said the rush to withdrawal funds is “influenced by outside instigation under a change in politics” and that people “are withdrawing money not because they need it but to cause disruptions.”

Days before, the CBM ordered banks to give lists of people and businesses who have withdrawn from all bank branches and ATMs from Feb 1 to May 7, presumably in a bid to track donations or transfers made to the CDM and anti-junta National Unity Government (NUG).

Bankers protest against the coup in front of the Central Bank of Myanmar in February. Image: AFP

Earlier, the deputy governor had sought to reassure the public that banking operations are returning to normal after the CDM’s disruption and that customers will not lose their deposits – a perhaps worrying statement in a country with a history of demonetizing away people’s savings.

“I think it’s inevitable that it gets harder and harder to take out money. Some banks will become ‘zombie banks’ – alive but not alive. This will almost definitely happen,” said the private businessman.

“Over time some banks will return to strength as customers or companies make deposits, but some banks will never recover or be years away from recovering… The military’s main concern is politics and security and the economy is far down their queue.”

(Shawn W. Crispin provided reporting from Bangkok)