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Bank of Lao’s Transition to Risk-Based Supervision with Offsite Team Completing IP RAS Documents

Vientiane, Laos - The Bank of Lao (BoL) has made significant progress in its transition to risk-based supervision (RBS), with the offsite team completing Internal Pillar (IP) and Risk Assessment System (RAS) documents for all banks in the country.

Mission Review

The mission reviewed IP and RAS documents for one commercial bank and one foreign branch, providing a snapshot of the current capacity of offsite staff transitioning to RBS. While progress has been made, the mission emphasized that some streamlining is needed along with additional practice and coaching.

Recommendations

Implement Revised RAS and IP Formats

• Implement revised RAS and IP formats for all banks starting from 2019:3Q.
• Evaluate and supervise multiple branches of the same bank as a group, preparing one IP, one RAS, and one Risk-Return Outcome eXtreme (ROX).

Data Quality and Performance Ranges

Enhance Liquidity Indicators

• Enhance liquidity indicators presented in RAS; clarify calculation of total net open position in FX to capital ratio.

Systemic Report

Include Additional Important Indicators

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

Conclusion

Overall, the BoL’s transition to RBS is underway, with the offsite team making significant progress in completing IP and RAS documents. The mission’s recommendations aim to enhance the quality and effectiveness of the supervision process, ensuring a safer and more stable banking system for the Lao PDR.