Financial Crime World

Assessment of Bank of Lao PDR’s Offsite Supervision Practices

Introduction

This report assesses the Bank of Lao PDR’s (BoL) offsite supervision practices, with a focus on Risk-Based Supervision (RBS). The assessment highlights key points and recommendations for improvement to strengthen the BoL’s efforts in this area.

Key Findings

Offsite Supervision

  • The offsite team has made progress in completing IP RAS documents for all banks in Lao PDR, but more work is needed to streamline processes and improve risk focus.
  • Recommendations include:
    • Implementing revised RAS and IP formats for all banks starting from 2019:3Q.
    • Evaluating and supervising multiple branches of the same bank as a group, preparing one IP, one RAS, and one ROX (Return on Equity).

Data Quality and Performance Ranges

  • The mission identified two data issues:
    • Liquidity measures
    • Calculation/monitoring of total net open position in foreign currencies
  • Recommendations include:
    • Enhancing liquidity indicators presented in RAS reports.
    • Clarifying the calculation of total net open position in FX to capital ratio.

Systemic Report

  • The report highlights that offsite supervisors have drafted a report on the banking system, but suggests improvements, such as:
    • Presenting data in table format rather than narrative text.
    • Including additional important indicators of institutional and systemic liquidity.

Recommendations

  1. Implement revised RAS and IP formats for all banks starting from 2019:3Q.
  2. Evaluate and supervise multiple branches of the same bank as a group, preparing one IP, one RAS, and one ROX (Return on Equity).
  3. Enhance liquidity indicators presented in RAS reports and clarify calculation of total net open position in FX to capital ratio.

Conclusion

This report aims to support the BoL’s efforts to strengthen its offsite supervision practices and improve the effectiveness of its risk-based supervision approach. By implementing these recommendations, the BoL can enhance the quality of its supervision and better protect the financial stability of Lao PDR.