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Financial Supervision System Assessment in Lao PDR

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The external mission’s evaluation of the financial supervision system in Lao PDR highlights areas where improvements are needed to strengthen offsite supervision and risk assessment.

Offsite Supervision

Current State

• The team has completed IP RAS documents for all banks in Lao PDR.
• However, there is a need for streamlining along with additional practice and coaching.

Recommendations

• Revised RAS and IP Formats: Implement revised RAS and IP formats for all banks starting from 2019:3Q.
• Group Supervision: Evaluate and supervise multiple branches of the same bank as a group, preparing one IP, one RAS, and one ROX.

Data Quality and Performance Ranges

Current Issues

• Two data issues were identified using real bank examples:
  • Additional attention should be given to liquidity measures.
  • Calculation and monitoring of the total net open position in foreign currencies should be clarified.
• Recommendations include:
  • Enhancing Liquidity Indicators: Enhance liquidity indicators presented in RAS.
  • Clarifying Total Net Open Position: Clarify calculation of total net open position in FX to capital ratio.

Systemic Report

Current State

• Offsite supervisors have drafted a report on the banking system for senior management of the BoL.
• The mission welcomed discussions about the report and appreciated graphic illustrations of some data.

Recommendations

• Additional Indicators: Present additional important indicators of institutional and systemic liquidity in the report.

Overall, this assessment highlights areas where improvements are needed to strengthen offsite supervision and risk assessment in Lao PDR.