Portal
Type: Guidelines
Responsible Agency: Bank of the Lao PDR
Issuing Date: 2011-09-29
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Contents
IV.Transfer loan in foreign currency to LAK
VI. Provisions for Classified Loan
VII. Loan writing off and loss recovery
VIII. Reporting and keeping documentation
Lao People’s Democratic Republic
Peace Independence Democracy Unity Prosperity
Bank of Lao PDR (BOL)
Commercial Banks Supervision Department
No: 541/CBSD
Vientiane Capital, date 29/Sep/2011
INSTRUCTION
ON IMPLEMENTATION OF DECISION ON
LOAN CLASSIFICATION AND PROVISION OF CLASSIFIED LOANS FOR COMMERCIAL BANKS
- Pursuant to the Decision on Loan Classification and Provision of Classified Loans for Commercial Banks No. 324/BOL, dated 19 April 2011
- Pursuant to the Role of Commercial Banks and Financial Institutions Supervision Department.
The instruction explains some articles in Decision No. 324/BOL, dated 19 April 2011, on Classification and Provision of Commercial Banks, in order to ensure the correctness and fully understanding among commercial banks.
1.Decision refers to decision on loan classification and provision of classified loans for commercial banks No. 324/BOL, dated 19 April 2011.
2.Forward exchange contract refers special type of foreign currency transaction between two parties to exchange designated currency, exchange rate, amount and a specific time for the transaction.
3.Non-accrual status refer to NPL, interest is no longer accrued or taken into income of bank, previous accrued interest must be written off and record in accrued interest from NPL. As well as, continue to calculate and monitor in off balance sheet based on accounting policy of bank.
Normal, special mention can be classified as NPL, if banks consider there are external factors affect to borrower’s business such as economic crisis, natural disaster and so on.
Special mention and NPL, after borrower pay total principal and interest, or pay a partial of unpaid balance, the classification will consider based on article 4 of decision.
IV.Transfer loan in foreign currency to LAK
Loan in foreign currency, if income of borrower is not in foreign currency, bank must create forward exchange contract in sufficient amount for payment. If the forward exchange contract not available, bank must consider as substandard or lower at the date of contract and make provision based on agreement.
Loan with no income in foreign currency and it is classified as NPL, bank should transfer to LAK based on exchange rate in classification date and continue to record in LAK until making payment or write-off, but contract must be in original currency.
Restructure aim to help borrower to have condition to continue their business and make payment. For normal loan, borrowers who have a good condition on their business, the interest set lower for the borrowers due to the market strategy and develop payment terms comply with real situation which not consider to be loan restructure.
Loan restructuring of each loan have to complete condition referred in Article 8 of the agreement.
Banks have appointed party to research and develop structure loan which independent from research/loan analysis. Loan restructuring and able follow not more than 2 times from original contract on wards, period of amended contract each time no exceed the period of old contract.
VI. Provisions for Classified Loan
Provision for classified Loan to be implemented frequently in each month by actual changing of each loan.
VII. Loan writing off and loss recovery
Bad debt to complete provision of loan writing off and follow up in the off balance sheet, after approved from board director or management of credit department or the person who have authority, making loan loss latest no exceed the fourth quarter of the year.
Loan writing off and loss recovery must follow accounting method of regulation of BOL.
VIII. Reporting and keeping documentation
Banks must report about loan classification and provisions by format form of BOL in each period.
Banks have to keeps documents related to loan classification and provisions and have to provide documents when requested by BOL.
This recommendation is effective from the date signature on wards. Any regulations conflict this recommendation had to be canceled.
Head of Commercial Banks
Phuthaxay syvilay
Download English:INSTRUCTION ON IMPLEMENTATION OF DECISION ON LOAN CLASSIFICATION AND PROVISION OF CLASSIFIED LOANS FOR COMMERCIAL BANKS No. 541/CBSD, dated 29 September 2011
Download Lao:INSTRUCTION ON IMPLEMENTATION OF DECISION ON LOAN CLASSIFICATION AND PROVISION OF CLASSIFIED LOANS FOR COMMERCIAL BANKS No. 541/CBSD, dated 29 September 2011
List Measures Related to Legal Documents
| Name | Description | Status |
|---|---|---|
| Requirement to classify the debt and deduct provision | The bank must make foreign currency sale and purchase contract with the customers for lending in foreign currency to customers that does not have income sources in foreign currency. If no foreign currency sale and purchase contract, the bank must classify as lower than standard debt and deduct the provision. If debt that does not have income sources in foreign currency is classified as non-performance debt, it must convert such debt in Kip | Active |