This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000235 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 02/23/2013 
TAGS: EFIN PREL ECON BM
SUBJECT: BURMA'S BANKS: SURVIVAL OF THE FITTEST 
 
REF: A. RANGOON 225 
 
     ¶B. RANGOON 214 
     ¶C. RANGOON 213 
     ¶D. RANGOON 30 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
¶1. (C) Summary: The GOB has finally made a public statement 
(on February 21) and committed to a strategy that will 
hopefully spark a turnaround and begin to reshape the private 
banking sector.  As the crisis enters its second week, we can 
only await the effect of the GOB's strategy on depositors, 
industry, and wage earners.  End summary. 
 
S-1: Go About Your Business 
 
¶2. (C) Secretary One (S-1), General Khin Nyunt, made the 
first public GOB statement on the banking crisis on Friday 
the 21st.  To ensure its readers would not skip over the 
important message, which was buried toward the end of a 
ponderous speech on the economy, the SPDC mouthpiece "The New 
Light of Myanmar" printed in bold type (in both the English 
and Burmese language editions) S-1's brief statement on the 
banks. 
 
¶3. (C) The comment, surprisingly measured, called on people 
to "do their work as usual without any worry concerning the 
banks."  The causes for the current crisis were not 
"destructionist elements," but negative "rumors" about the 
safety of the banks.  S-1 assured listeners that money is 
safer in the banks than outside, and that "banks guarantee 
the safety of the savings."  While not going so far as to 
extend a GOB guarantee of people's savings, S-1 did say that 
"the government is rendering assistance for the convenience 
of the people." 
 
Assistance Being Rendered 
 
¶4. (C) In fact, the GOB did start off the week with some 
efforts to get the crisis under control.  Bankers and other 
businessmen corroborated a rumor we'd been hearing that the 
Central Bank had extended lines of credit worth 25 billion 
kyat (about $25 million) to the three largest private banks 
-- AWB, Yoma, and KBZ -- and between 10 billion and 20 
billion kyat total to three other private banks -- MOB, MUB, 
and Mayflower.  As mentioned in Ref A, this money is being 
offered only to banks that can provide collateral (real 
assets) both on their books and in their possession.  At the 
end of business on February 24, limits on withdrawals were 
still in place and most private banks still were offering 
only 100,000 kyat (about $100) per week to depositors. 
 
¶5. (C) We've also heard that the quasi-governmental 
association overseeing Burma's industrial zones has 
instructed garment factory owners to discuss with their 
bankers the lifting, if need be, of withdrawal ceilings to 
allow for factories to meet payroll requirements on February 
¶28.  The details and background of this order are unclear, 
but the businessmen posited that the regime had ordered 
private banks to support factory payroll operations as part 
of the deal for additional loans from the Central Bank. 
 
¶6. (C) Trading companies and other firms needing to meet 
payroll have not received similar instructions.  However, one 
large trader with whom we spoke said that he expected banks 
to offer some sort of preferential system of withdrawals for 
corporate customers as payday draws near. 
 
Comment 
 
¶7. (C) The GOB appears to be stumbling toward a reasonable, 
market-based solution to the current banking crisis.  It 
hasn't provided an across-the-board guarantee of deposits, 
and has required the banks to cough up real collateral in 
return for the additional liquidity they require.  The 
collateral will help ensure banks retire their borrowings 
from the Central Bank as soon as they can, while the lack of 
a deposit guarantee will leave the onus on depositors, if and 
when they do get access to their accounts, to choose the best 
bank for any return deposits they make.  Some banks -- 
basically the worst of them -- will go under, but that's the 
price of bad operations.  Only if all banks threaten to sink 
will the GOB have to do more. End comment. 
Martinez