Myanmar central bank intervenes in effort to halt bank crisis

  • Business
  • Friday, 21 Feb 2003

YANGON, Myanmar (AP) - Myanmar's central bank has injected huge amounts of local currency notes into three major private financial institutions in an attempt to halt a crisis that has led to runs on the country's 20 private banks. 

The central bank has loaned 25 billion kyat in credit to the Asia Wealth Bank, the Kanbawza Bank and the Yoma Bank, and "loans to other banks will follow,'' a bank official said on condition of anonymity. 

The amount is worth about US$4.16 billion at the official exchange rate or US$22.7 billion at the widely used black market rate. 

A spate of panic withdrawals started last week amid rumors that banks were on the brink of bankruptcy. 

The collapse of about a dozen companies that had illegally sold shares to the public, offering greater returns than the interest given by banks, is generally believed to be one of the factors that sparked the panic. 

A media blackout has been imposed on coverage of the crisis. 

Private bank officials have told customers that the bank runs were "due to sudden and simultaneous withdrawals surpassing deposits,'' and gave assurances that it was a temporary problem. 

Customers who have received worn notes from the banks in recent days said they were given crisp new 1,000 kyat notes on Friday. 

On Feb. 10, Central Bank Chairman Kyaw Kyaw Maung attempted to quash rumors that several banks were heading into bankruptcy. Crowds have been gathering at banks since then, and withdrawals have risen. 

On Monday, the central bank ordered a ban on money transfers and limits on withdrawals from the 20 private banks. Local businesses have said the restrictions have made it difficult to carry out trade. - AP

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