Lao Banking Regulations Get a Boost with Amended Law on Commercial Banks
Strengthening the Country’s Banking System
VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC - On July 17, 2023, Laos’ official gazette published an amended Law on Commercial Banks No. 39/NA, which took effect on September 15, 2023, following its promulgation by President of Laos.
Key Changes in the Amended Law
- Minimum Registered Capital Requirements: The minimum registered capital for establishing a commercial bank has been increased from LAK 500 billion (approximately USD 24.2 million) to LAK 1 trillion (approximately USD 48.4 million), while the minimum registered capital for Lao branches of foreign commercial banks has been raised from LAK 300 billion (approximately USD 14.5 million) to LAK 600 billion (approximately USD 29 million).
- Timeframe for Capital Increase: A new regulation defines the timeframe within which banks established in Laos before the enactment of the amended law must increase their registered capital.
- Alteration of Bank Status: The law outlines two scenarios in which banks may alter their status, including changing from a foreign commercial bank holding 100% shares to a Lao branch of a foreign commercial bank or elevating its status to that of a foreign commercial bank holding 100% shares. In both cases, the bank must request a business operating license from the Bank of Lao PDR (BOL) corresponding to its new status.
New Requirements for Management Boards
- Regular Meetings: The amended law requires the Management Board to meet at least once every three months.
- Member Qualifications: Members are not allowed to have been sanctioned for misdeeds such as asset misappropriation, document forgery, money laundering, and other financial wrongdoings.
Other Key Requirements
- Document Retention: Commercial banks must keep certain documents at their headquarters or branches in Laos, including articles of association, internal policies, handbooks, shareholders’ registry, records of meetings, and financial transactions.
- Lao Bankers’ Association (LBA): The law establishes the LBA for the purpose of managing and coordinating activities between commercial banks in Laos. The LBA’s objectives include providing assistance, holding consultations, facilitating exchanges on various banking matters, enhancing banking business operations and experiences, and addressing issues or concerns of its members with relevant government agencies.
Conclusion
The amended Law on Commercial Banks updates some of the rules for Laos’ banking system while maintaining a steady continuation of most existing principles and guidelines. Commercial banks in Laos (including branches of foreign banks) should ensure timely compliance with the changes, particularly the increased minimum registered capital requirements, and take note of how the country’s regulatory environment for commercial banks is evolving.