Risk-Based Approach to Compliance Gains Traction in Laos’ Democratic Republic of People’s

The Bank of Lao (BoL) has been piloting a risk-based supervision (RBS) method, with significant progress made in recent months.

Progress on Risk-Based Supervision Manual

According to officials, the RBS manual is now largely complete, and BoL staff are actively applying the methodology on a pilot basis. This initiative aims to enhance the effectiveness of BoL’s supervisory activities by allowing regulators to focus resources on areas where they can have the greatest impact.

Key Achievements

• Institutional Profiles (IP) and Risk Assessment Summaries (RAS) prepared for over half of the country’s banks
  • Benchmarks and peer groups implemented
• On-site examination reports utilized for several financial institutions

Pilot Program Success

In a significant development, the mission worked closely with off-site and on-site teams to analyze data for two pilot banks. Using actual results from these pilot banks, the team assisted BSD staff in:

• Identifying key risks
• Measuring their impact on bank condition
• Formulating appropriate conclusions and ratings

Benefits of Risk-Based Approach

This risk-based approach is expected to:

• Enhance the effectiveness of BoL’s supervisory activities
• Allow regulators to focus resources on areas where they can have the greatest impact
• Strengthen the country’s financial sector and promote stability in the face of increasing complexity and uncertainty

By adopting a risk-based approach, the Bank of Lao is taking a critical step towards promoting a more stable and resilient financial system.