BOL temporarily halts private bank establishment
BOL temporarily halts private bank establishment
The Bank of the Lao PDR (BOL) will temporarily cease issuing licences for the establishment of new banks in the private sector or for business operators from now until 2016.
“We have to do this because we want to use this time to check the existing banks to see if they are up to standard for both quality service and management,” said BOL Deputy Governor, Mr Sonexay Sithphaxay.
“Another issue is we have many banks in Laos now and we may need them to improve in both service and management,” Mr Sonexay said.
He said the temporary halt in new licences was according to a BOL letter issued in May this year.
Before the letter was sent out, BOL had issued licences for a private bank's establishment to both local and foreign operators, including Phongsavanh Bank Limited, ST Bank Co Ltd, Maruhan Japan Bank Lao, Indochina Bank Ltd and Lao Construction Bank.
This meant that in the past the private sector could establish a bank in Laos even though it did not have a parent bank to support it or back it up.
“Stopping the issuing of new licences does not mean that we have closed the door. We will still consider applications for a bank's establishment and the issuing of a licence for major foreign banks that want to invest and develop in Laos.”
BOL has not yet finished its assessment of the existing banks . “Once we have completed our checking, we expect to return to issuing new licences but for higher quality and standards of banking with stricter rules and regulations in the future,” he said.
“The plan is to ensure that the banking service here relates to the region and global integration and to make sure it is to the correct quality and standard when we reach the onset of the Asean Economic Community (AEC).
Currently BOL is urging the banks in Laos to upgrade their service systems and management to guarantee their quality meets international standards.
The improvement includes the use of an international system, Basel II, which ACLEDA Bank Lao Ltd is now conducting a study on.
Basel II is intended to create an international standard for banking regulators to control how much capital banks need to put aside to guard against the types of financial and operational risks banks (and the whole economy) face.
BOL is urging banks to speed up progress on the ATM integration project, which will allow customers of one bank to use other banks' ATMs for a variety of services, readying the Lao banking sector for the AEC.
Banks which are part of the ATM network include Banque pour le Commerce Exterieur Lao Public, Lao Development Bank, Agricultural Promotion Bank, Lao Viet Bank, Joint Development Bank, ST Bank Co. Ltd, Indochina Bank Ltd and Banque Franco-Lao Ltd.
The wider the system the higher customer satisfaction will be. This will also boost the banking business and increase the competitiveness of the domestic banks.
There are currently more than 30 banks in Laos, including representative banks from overseas.
vientiane times
