IN a show of its confidence in the future, First Private Bank Ltd will pursue plans to double its authorised capital from K5 billion to K10 billion after gaining unanimous approval from shareholders at its 16th annual general meeting on November 24.

“Currently, our bank’s authorised capital is K5 billion comprising 500,000 shares which are fully paid up from last August,” Dr Sein Maung, president of First Private Bank, said at the meeting in Yangon.

“In order to receive more deposits from the general public and hence to expand our capacity to extend loans, the members of the Board of Directors and shareholders have decided to raise the authorised capital of the bank,” he said.

“Presently, we are able to receive deposits up to 10 times our paid up capital in accordance with regulations prescribed by the Central Bank of Myanmar.

“Since our paid up capital now equals our authorised capital it has become necessary to raise our authorised capital if we are to expand.”

The paid up capital to deposits ratio is set for all private sector banks to ensure unexpected short term demands on liquidity can be met and to avoid liquidity crises, such as that of February 2003.

In the wake of the 2003 liquidity crisis, the Central Bank of Myanmar instructed private sector banks to limit deposits to seven times their paid up capital. This was relaxed to 1:10 in 2006 to allow an expansion of deposits while ensuring depositor withdrawals on demand can easily be met.

“Now that paid up capital has reached our authorised limit of K5 billion, we can receive a maximum of K50 billion in deposits,” Dr Sein Maung said.

As of November 20, the bank’s total deposits were K31 billion. That still leaves scope for an expansion of deposits in the near term but raising the authorised capital to K10 billion creates the longer term capacity to triple total deposits from the current level to K100 billion.

“If we raise our authorised capital and then our paid up capital, we will be able to accept more deposits and hence expand our banking business, and new branch openings will extend our coverage,” said Dr Sein Maung.

“We will be better able to compete with other domestic private sector banks and we will be better equipped to promptly solve any financial problems in an emergency,” he said, adding that the public credibility in the bank would be greatly enhanced.

Kanbawza and Myawaddy are the two largest private sector banks by authorised capital, with K20 billion and K15 billion respectively.

Cooperative Bank, the third largest, has paid up capital of K6.6 billion but is authorised for K20 billion like Kanbawza Bank.

“Our authorised capital is the lowest among the top four private sector banks in Myanmar,” Dr Sein Maung said.

First Private Bank still requires approval from the Central Bank, the Trade Council and the Cabinet to raise its authorised capital.

“After the bank receives government approval, we will offer new shares to the public, but we do not expect to sell them all right away,” Dr Sein Maung said.