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Offsite Supervision Review in Lao PDR

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Introduction

This policy review document from the Basel Committee on Banking Supervision highlights areas where the Bank of Laos (BoL) can improve its offsite supervision processes.

Main Points and Recommendations

The review identifies several key areas for improvement:

Offsite Supervision

  • The transition to Risk-Based Supervision (RBS) has led to completion of Internal Peer Review (IP) and Risk Assessment Survey (RAS) documents for all banks in Laos.
  • However, some streamlining is needed along with additional practice and coaching for offsite staff.

Recommendations:

  • Implement revised RAS and IP format: All banks should implement the revised RAS and IP formats starting from 2019:3Q.
  • Evaluate multiple branches as a group: Offsite supervisors should evaluate and supervise multiple branches of the same bank as a group, preparing one IP, one RAS, and one Risk Oversight Report (ROX).

Data Quality and Performance Ranges

Real bank examples identified two data issues:

  • Additional attention is needed for liquidity measures: Liquidity measures require additional attention.
  • Calculation and monitoring of Total Net Open Position in Foreign Currencies should be clarified: The calculation and monitoring of Total Net Open Position in FX to capital ratio should be clarified.

Recommendations:

  • Enhance liquidity indicators presented in RAS: Enhance liquidity indicators presented in RAS.
  • Clarify calculation of total net open position in FX to capital ratio: Clarify the calculation of total net open position in FX to capital ratio.

Systemic Report

Offsite supervisors have drafted a report on the banking system for senior management of the BoL. The mission welcomed discussions about the report and appreciated the opportunity to see graphic illustrations of some data provided.

Recommendations:

  • Include additional important indicators of institutional and systemic liquidity: Include additional important indicators of institutional and systemic liquidity in the report.

Conclusion

The review highlights areas where the BoL can improve its offsite supervision processes, including revising the RAS and IP formats, enhancing liquidity indicators, clarifying Total Net Open Position calculations, and improving the systemic report.