The Bank of Lao PDR, the nation’s central bank, has announced a suspension of the establishment of new commercial banks in Laos, as it moves to evaluate the current situation in the country’s banking industry.
The temporary suspension will allow the central bank time to evaluate the existing banking enterprises and introduce necessary policies to boost and strengthen their business operations to support their growth.
The suspension applies to investors and legal identities who are not representing an existing bank or group of banking businesses which already have operations in foreign countries. It will be imposed from 2014-16.
Consideration and approval remains open for existing domestic banks or banking groups or banks registered in foreign countries to set up new offices or branches in Laos, according to an announcement from the central bank issued on May 21.
The announcement of the suspension was based on the Law on Commercial Banks promulgated in 2006, and the government’s announcement on the establishment of commercial banks in Laos, which was issued in March.
According to the central bank’s department in charge of commercial bank management, the suspension is imposed on both domestic and foreign investors and legal entities who are not representing a bank or group of banking businesses.
The central bank stressed the need to evaluate the current situation regarding commercial banks in Laos and introduce necessary policies to support their growth. It explained that although commercial banks in Laos have been growing in number in recent years, they are considered as small banks whose competitive capacities are limited compared to bigger banks in other countries in the region.
“Therefore, the Bank of Lao PDR is of the view that there is a need to review and evaluate commercial banks in Laos in order to define policies and relevant laws to improve Laos’s commercial banking system to coincide with current circumstances in Laos and the region. This is to ensure the banking systems of the commercial banks are strengthened, secured and able to integrate with the region and world,” the central bank said in its announcement.
According to the central bank, the number of commercial banks in Laos increased from 12 in 2006 to 33 banks at present, which the central bank said has mobilised significant capital for Lao socio-economic development.
As of March 2014, credits in all banking systems in Laos increased to more than 42,387 billion kip (Bt171.7 million) from just more than 38,229 billion kip in September, 2013. The credit of almost 42,400 billion kip represents some 46.7 per cent of GDP, according to an official report from the government.
Source: The Nation