Banking Regulations in Lao PDR Aim to Prevent Financial Crime

June 18, 2020 - Vientiane, Laos

The Banking Supervision Department of the Bank of Laos (BoL) has launched a new risk-based supervision approach aimed at preventing financial crime and maintaining the stability of the country’s banking system.

New Commercial Banking Law: A Step Towards Prevention

In June 2019, the commercial banking law came into effect, requiring financial institutions to establish robust risk management systems and maintain adequate capital and liquidity. The law also grants the BoL oversight powers over the adequacy of risk management practices in banks. Key features of the new law include:

• Risk Management Systems: Financial institutions must establish effective risk management systems to identify, assess, and mitigate potential risks.
• Adequate Capital and Liquidity: Banks must maintain adequate capital and liquidity levels to ensure their stability and solvency.
• BoL Oversight Powers: The BoL has oversight powers over the adequacy of risk management practices in banks.

Implementation of Risk-Based Supervision

The Banking Supervision Department is making progress in implementing risk-based supervision methods, with staff demonstrating a growing understanding and application of these techniques. However, officials acknowledge that this is still an early stage in capacity development and further training is needed to ensure effective implementation.

Experts’ Perspective: A Crucial Step Towards Prevention

Experts say that the new banking regulations are a crucial step towards preventing financial crime in Lao PDR, which has experienced rapid growth in its financial sector over the past decade. The country’s banks have expanded their operations, and the government aims to maintain financial stability while promoting economic development.

International Partnerships: Ensuring Compliance with Global Standards

The Bank of Laos is working closely with international partners to ensure compliance with global banking standards and best practices. The new commercial banking law reflects this commitment, as it incorporates international norms on risk management, capital adequacy, and liquidity requirements.

Conclusion

As Lao PDR continues to develop its banking system, the BoL’s efforts to prevent financial crime will be crucial in maintaining confidence in the country’s financial institutions and supporting economic growth.