2003 Myanmar banking crisis
[4] Only with the adoption of the Financial Institutions of Myanmar law by the State Peace and Development Council in 1990 were private banks allowed to form and operate in the country.
[10] For the majority of the population, keeping wealth in form tangibles (such as gold or other precious metals) and borrowing from private moneylenders were still the norm.
[13] While these high rates, regularly reaching 3-4% per month,[12] seemed hardly possible to return on a sustainable basis, large amount of investors used these entities nevertheless.
[2] Another source of rumors and distrust that laid at the origins of the 2003 crises were allegations of money laundering against Myanmar banks.
This law addressed many concerns of the US State Department and initially lead to a flight of funds from banks in Myanmar.
These rumors furthermore undermined the trust to the financial system and brought about fears regarding liquidity of the banks in the face of withdrawn funds.
[15] Finally, on 1 February 2003, Finance and Revenue Minister Khin Maung Thein was permitted to retire without any additional explanation from the government.
The Yangon-based business magazine Living Color also ran a report in its February edition that private banks are also giving out loans well beyond their existing capital.
[16] Similarly, a rumor indicating that Asia Wealth Bank lost a significant amount of its investments in deals with a Chinese company also started circulating.
[17] The state-owned Kyemon newspaper ran a story that blamed the destructive elements abroad, such as the exiles, for the banking crises.
By February 17, all private banks started to impose a withdrawal limit of 500,000 kyat ($500) per customer per week in order to tackle the liquidity problem.
Soon, Asia Wealth Bank posted signs saying their branches are working in normal conditions, even though the restrictions were still in place.
[18] This led to further hardship for customers, where, in one geographic division, people who borrowed for purchasing homes were asked to return 25% of their loans back.
[7] Though there is no exact data on what followed, there is contemporary reporting that suggests people had to "sell assets or downgrade their business and lifestyles” in order to meet these loan calls.
Yet, on February 24, Zaw Win Naing, the managing director of Kanbawza Bank said: “the problem we face can be worked out soon, and it is a temporary problem.”[16] Yet, even by May 2003, the crises did not seem to dwindle and depositors had no greater ability to access their accounts.
[18] With the withdrawal limits in place, and the other means of exchange used by banks such as cheques, remittance facilities, credit cards and electronic transfers of funds severely disrupted, the crisis had harmful effects on the real economy.
From the outset of the crisis, many workers and employers in Myanmar in market-related activities such as factories, fisheries and construction faced severe cuts in payments.
On February 28, some traders were saying they were unable to make due payments to other merchants since their money remained tied in bank accounts.
[16] The Mizzima News Service reported on March 2 that bank closures in Tamu, close to the India-Burma border, had resulted in losses for the traders and the failure of payments in the area.
