VIENTIANE: The Bank of the Lao PDR (BOL) has pledged stronger action to address corruption, weak internal controls and loan violations that continue to affect the banking system.
The Governor of the BOL, Bounkham Vorachit, presented this update to the 10th Ordinary Session of the 9th National Assembly on Monday (Nov 17), and said the central bank has worked closely with commercial banks to fix long-standing problems but several serious issues remain unresolved.
The clarification was made after a report by the State Audit Organisation found numerous irregularities, including embezzlement, improper procurement and other issues.
A major concern highlighted in the report was corruption among staff of commercial banks. From 2021 to 2025, inspection teams recorded 181 cases of embezzlement and misappropriation, resulting in losses of 66.86 billion kip. Only 22.96 per cent of this amount has been recovered.
However, the details in the report concerning how the embezzlement was carried out and the cases have not yet been disclosed.
Bounkham said weak staff ethics and poor internal controls were the main causes of these irregularities. During the past four years, 311 staff received Level I discipline, 232 staff received Level II, 31 staff received Level III, and 46 staff received Level IV.
Commercial banks were told to strengthen staff training, improve internal control systems, and tighten risk prevention measures.
She said the bank continues to face pressures from loan guarantees issued for companies that built national priority projects. These companies have failed to meet repayment obligations, forcing BOL, as the guarantor, to pay loan interest on their behalf. Debt recovery has improved, but progress is still below target.
Bounkham said this step is necessary to protect the financial stability of commercial banks and to prevent wider risks in the banking system. The central bank will continue to press partner companies to repay debts as agreed.
Unlawful procurement of equipment and vehicles also remains a problem. Although the central bank set up a procurement committee and strengthened rules in 2024, violations still occurred at the BOL branch in Oudomxay and the Agricultural Promotion Bank. These agencies are now required to prepare full action plans to correct the violations.
Loan approvals that exceed tier-one capital limits continue to occur despite clear rules. Under the 2025 credit regulations, banks must keep lending to single customers below 25 per cent of tier-one capital, and lending to related customers below 50 per cent.
But Bounkham said capital demand for large national projects often exceeds what commercial banks can supply.
Weak bank capital and difficulties in finding co-lenders have led to some banks requesting exceptions. The central bank approved some of these requests after assessing the importance of the projects and the banks’ financial strength.
She said some banks still take violation penalties lightly, as profits from large loans remain higher than fines. To address this, the central bank will now require commercial banks that exceed lending limits to prepare capital increase plans and strengthen their financial position.
Bounkham told the National Assembly that the central bank accepts all comments raised by members and will study them to guide its future work. She asked the National Assembly to continue providing guidance and support as Laos works to overcome economic and financial challenges. - Vientiane Times/ANN
