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Lao People’s Democratic Republic: Banking Industry Compliance Standards Face Urgent Need for Reform

October 30, 2019

The Lao People’s Democratic Republic is facing a pressing need to expedite its implementation of risk-based supervision (RBS) standards in the banking industry. A recent Technical Assistance report highlights the importance of this reform and provides recommendations for improvement.

The Need for Risk-Based Supervision

Implementing RBS is crucial for enhancing the quality of supervision, according to the report. However, despite some initial delays due to competing supervisory priorities, formal approval of the RBS manual and full incorporation of its methods into practice are still pending.

• Key areas requiring attention:
  • Identifying root causes of risks
  • Conducting well-reasoned analysis of risks and accompanying supervisory action
  • Enhancing the usefulness and quality of existing documents

Foreign-Branch Supervision: A Special Consideration

In addition to RBS, foreign-branch supervision requires special consideration. This includes:

• Adequate oversight by branch head offices
• Supervision by home supervisors
• Overall financial condition of foreign banking groups

The report provides qualitative criteria for rating foreign branches.

Country Report No. 2019/331: A Comprehensive Analysis

The findings of this Technical Assistance report are part of Country Report No. 2019/331, which aims to provide a comprehensive analysis of the Lao People’s Democratic Republic’s banking industry compliance standards. The report highlights the importance of urgent reform and provides recommendations for improvement in order to enhance the quality of supervision and ensure compliance with international standards.