Financial Crime World

LAOS’ AMENDED LAW ON COMMERCIAL BANKS BRINGS NEW REQUIREMENTS FOR LOCAL INSTITUTIONS

VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC - The Lao government has introduced significant changes to the country’s banking sector with the amended Law on Commercial Banks No. 39/NA dated July 17, 2023, which took effect on September 15, 2023.

Key Changes and Requirements

  • Minimum Registered Capital: Commercial banks in Laos must now have a minimum registered capital of LAK 1 trillion (approximately USD 48.4 million), up from LAK 500 billion (around USD 24.2 million) previously.
  • Foreign Branches: Lao branches of foreign commercial banks will need to increase their registered capital to LAK 600 billion (approximately USD 29 million) from the previous requirement of LAK 300 billion (around USD 14.5 million).
  • Governance Structure: The Management Board of commercial banks must now meet at least once every three months, and board members are required to have no history of misconduct or wrongdoing.

New Rules for Changing Bank Status

The amended law introduces new rules for changing the status of a commercial bank, allowing foreign commercial banks in Laos holding 100% shares to become a Lao branch of a foreign commercial bank or vice versa. However, this change does not affect the bank’s commitments to depositors and creditors, nor its tax obligations.

Lao Bankers’ Association (LBA)

The amended law establishes the Lao Bankers’ Association (LBA) to promote cooperation and coordination between commercial banks in the country. Both local and foreign banks will have equal membership status within the LBA, which aims to enhance banking operations and address issues with relevant government agencies.

Conclusion

In conclusion, the updated Law on Commercial Banks aims to strengthen Laos’ banking system while maintaining continuity with existing principles and guidelines. Local financial institutions are advised to ensure timely compliance with the changes, particularly the increased minimum registered capital requirements, as the country’s regulatory environment continues to evolve.