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Legal Document
Title: Decree On Deposit of Protection No. 329/GOV, dated 25 October 2017
Type: Decree
Responsible Agency: Bank of the Lao PDR
Issuing Date: 2019-11-29
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Lao People’s Democratic Republic

Peace Independence Democracy Unity Prosperity

The Government                                                                                                                                                                                 No.: 329/GVT

                                                                                               Vientiane, October 25, 2017

Decree

On Deposit of Protection

  • Pursuant to Law on the Government (amended), No. 04/NA, dated 08 November 2016;
  • Pursuant to Law on Bank of Lao PDR, No. 05/NA, dated 14 October 1995;
  • Pursuant to Law on Commercial Banks, No. 03/NA, dated 26 December 2006;
  • Pursuant to Proposal, No. 170/BOL, dated 12 May 2017, of the Bank of Lao PDR.

 

The Government decrees that:

Chapter 1

General Provisions

 

Article 1 Objective

This decree shall determine the principles, regulations and measures of management and inspection on the operation to ensure legitimate rights and interests of depositors, to create public confidence on financial institution system, and to contribute to stable maintenance and development of financial institutions in Lao PDR.

Article 2 Deposit Protection

The deposit protection is to protect the legitimate rights and interests of depositors of the members of the Deposit Protection Office.

Article 3 Definitions

            Terms used in this decree are defined as follows:

  1. Financial Institutions mean the commercial bank and deposit-taking microfinance institution established in accordance with laws and regulations of Lao PDR;
  2. Members mean the financial institutions that are members of the Deposit Protection Office;
  3. Deposit means the account balance of depositors of the members;
  4. Depositors mean individuals, legal entities or organizations that deposit with members;
  5. Premium means an amount that members shall pay to the Deposit Protection Office at the rate specified in each period;
  6. Deposit Insurance means an amount that the Deposit Protection Office shall pay to depositors according to the specified amount;
  7. Board of Rehabilitation means the board appointed by the Bank of Lao PDR to control business operation of members with financial and unstable issues that may lead to bankruptcy;
  8. Bankruptcy means the state when an individual financial institution is facing the trouble or financial loss from operation. Even though using the essential financial methods, the financial institution is still unbale to pay its debt at the specified period and declared by the Bank of Lao PDR;
  9. Last Day of Business Operation means the day when the Bank of Lao PDR declares bankruptcy.

Article 4 State Policy on Deposit Protection

            The government promotes and supports the deposit protection by imposing policy, regulations and measures for the Deposit Protection Office to operate effectively for legitimate rights and interests of depositors.    

Article 5 Basic Principles of Deposit Protection

            Rights of protection shall comply with the following principles:

  1. Ensuring centralized and equalized management across nationwide;
  2. Ensuring justice, transparency, accuracy, completeness and accountability;
  3. Ensuring legitimate rights and interests of depositors, members and the Deposit Protection Office.

Article 6 Scope of Application

            This decree is used for the Deposit Protection Office, members, depositors and relevant organizations concerning deposit protection.

Article 7 International Cooperation

            The government promotes the foreign, regional and international cooperation on deposit protection through sharing lessons, information, techniques and expertise, human resource development for efficient and productive tasks, regional and global integration, and commitment to the treaties and agreements that Lao PDR is the member.

 

Chapter 2

Deposit Protection

Article 8 Protected Deposits

            Protected deposits shall consist of all deposits of individuals, legal entities and organizations, of members, unspecified in the Article 9 of this decree. The protected deposits are included demand deposits, saving deposits and terms deposits, in either local or foreign currencies, including principal and interest indicated by the Deposit Protection Office.

Article 9 Unprotected Deposits

            Unprotected deposits shall consist of deposits of administrators, significant shareholders and board members of financial institutions, other financial institution deposits, national treasury deposits, government deposits, international organization deposits and security trading deposits.

Article 10 Rights and Obligations of Depositors

            The depositors shall have rights and obligations as follows:

  1. Receive protection on deposits with members according to the insurance and period specified on this decree;
  2. Receive information on deposit protection from members and the Deposit Protection Office;
  3. Complain to relevant organizations about violation of depositor’s legitimate rights and interests;
  4. Research information, of financial institutions, on deposit protection policy in details before a decision to open deposit account;
  5. Provide complete and correct information concerning own deposit to members and the Deposit Protection Office;
  6. Perform strictly all rights and obligations specified on laws and regulations.

Chapter 3

The Payment of Deposit Insurance

Article 11 Amount of Deposit Insurance

Amount of deposit insurance is the maximum amount, of which the Deposit Protection Office shall pay to depositors of the bankrupt members, including remaining principal and interest on the last day of business operations of the members.

            The Bank of Lao PDR researches to determine the amount of deposit insurance in each period to ensure that each depositor receives deposit insurance not less than double amount of Gross Domestic Products per capita. 

Article 12 The Payment of Deposit Insurance

            The Deposit Protection Office shall pay the insurance to depositors of the members since bankruptcy declared by the Bank of Lao PDR.

            Insurance shall be paid in Kip (LAK) currency according to exchange rate specified by Bank of Lao PDR on the last day of business operation of the bankrupt members.

Article 13 Preparation of the Insurance Payment

            After issuing an agreement to appoint a Board of Rehabilitation, the Bank of Lao PDR shall notify the Deposit Protection Office within three business days.

Since notification, the Deposit Protection Office shall prepare the main tasks as follows:

<>1.2.3.The bankrupt member shall propose to the Deposit Protection Office and provide all relevant information and documents within 15 days after the declaration by the Bank of Lao PDR;
  • Not more than 60 days after the accurate and complete proposal is received, the Deposit Protection Office shall notify to depositor the payment schedule with indicated time, place and processes through the public media;
  • The depositor shall prepare correct and complete documents for insurance according to printed forms indicated by the Deposit Protection Office within 90 days since notification. If necessary, the time can be extended twice but not more than 90 days each. If the depositor does not submit the proposal within specified time, he/she shall propose to obtain the deposit including principal and interest with the Board of Rehabilitation under the laws and regulations;
  • The depositor shall be entitled to receive the insurance at the maximum insured amount only. The remaining deposit balance above the insurance shall be informed to the Board of Rehabilitation. Any amount due and related costs by the depositors shall be deducted from insurance before repayment.

The member financial institution is authorized by the Deposit Protection Office to represent and pay insurance. An account shall be opened if the depositor does not have account with the financial institution.

            The detailed processes of insurance payment are specified in regulations separately.

Article 15 The Repayment

            After the financial institution is declared bankrupt, the Bank of Lao PDR shall appoint the Board of repayment with representatives from the Deposit Protection Office.

            The priority of repayments shall be adhered in compliance with the Law on Commercial Bank and Decree on Microfinance Institution.

            The Deposit Protection Office is the creditor of bankrupt financial institution in the total amount, paid to the depositors, shall be repaid according to the priority of repayments.

 

Chapter 4

The Deposit Protection Office

Article 16 The Deposit Protection Office

            The Deposit Protection Office, abbreviated to DPO, is the government organization equivalent to the department. It is non-profit and financially independent legal entity under the Bank of Lao PDR.

Article 17 Rights and Duties of the Deposit Protection Office

            The Deposit Protection Office has rights and duties as following:

  1. Research to formulate the strategic plans and legislation on rights of protection to propose to the hierarchy for approval;
  2. Research and propose to the Bank of Lao PDR to consider contributing more funds in each period;
  3. Issue the certificate of membership and dismissal of membership of the Deposit Protection Office;
  4. Calculate and collect premiums from the members at the rate specified in each period;
  5. Monitor and evaluate the depositor’s conditions and the deposit amount with members in each period;
  6. Propose the information concerning rights of protection from members and related agencies;
  7. Disseminate the information on rights of protection to members and public in each period;
  8. Manage funds and Deposit Protection Treasury on the low-risk activities such as, government bonds, the Bank of Lao PDR’s bonds, and deposit with the Bank of Lao PDR.
  9. Request loans from domestic and international financial institutions with the government assurance at the proposal of the Bank of Lao PDR;
  10. Disburse the insurance to depositors based on the insured amount specified in the Article 11 of this decree;
  11. Recall all debts in the course of repayment;
  12. Collaborate with departments of the Bank of Lao PDR and other relevant agencies concerning the rights of protection;
  13. Summarize and report the operation on rights of protection to the Bank of Lao PDR regularly;
  14. Perform all rights and duties specified on laws and regulations;

Article 18 Organizational Structure

            The Deposit Protection Office has the organizational structure as follows:

  1. Board of Directors
  2. Board of the Deposit Protection Office
  3. Divisions
  4. Sectors

Rights and duties of the divisions and sectors are specified separately.

Article 19 Board of Directors

            The Board of Directors is the highest structure in the Deposit Protection Office. They are authorized to steer and lead all operations and be responsible for the assignments from the Bank of Lao PDR.

            The Board of Directors, appointed by the Prime Minister, consists of 7 members as follows:

  1. The Vice Governor, the Bank of Lao PDR          President;
  2. The Director General, Department of Monetary Policy, Ministry of Finance

Vice president;

  1. The Director General, Department of Commercial Bank Supervision, the Bank of Lao PDR                                                                        Board member;
  2. The Director General, Department of Microfinance Institution Supervision, the Bank of Lao PDR                                                   Board member;
  3. The lawyer                                                                Board member;
  4. The auditor                                                                Board member;
  5. The head of Deposit Protection Office                 Board member and secretary; 

Article 20 Rights and Obligations of the Board of Directors

            The Board of Directors has rights and obligations as follows:

  1. Consider approving the development and amendment of the strategic plans, five-year plan, annual plan and annual report at the proposal of a head of the Deposit Protection Office;
  2. Approve the related domestic regulations and legislations of the Deposit Protection Office;
  3. Consider approving policy on fund management of the Deposit Protection Office and Deposit Protection Treasury at the proposal of a head of the Deposit Protection Office;
  4. Steer, supervise and inspect the administration of the Deposit Protection Office;
  5. Appoint or dismiss the Board of Division of the Deposit Protection Office as agreed by the governor of the Bank of Lao PDR;
  6. Perform all rights and obligations specified on the laws and regulations of the Deposit Protection Office;

Article 21 The Board of the Deposit Protection Office

            The Board of the Deposit Protection Office manages daily operation, acts as a secretariat, and reports to Board of Directors.

            The Board of the Deposit Protection Office consists of a head and some deputy heads.

            The head of the Deposit Protection Office is appointed and dismissed by the Prime Minister at the proposal of the governor of the Bank of Lao PDR.

            The deputy head of the Deposit Protection Office is appointed and dismissed by the governor of the Bank of Lao PDR.  

Article 22 Rights and Duties of a Head of the Deposit Protection Office

            The head of the Deposit Protection Office has rights and duties as follows:

  1. Disseminate and implement the agreements from the Board of Director meeting;
  2. Formulate or amend the strategic plan, five-year plan, annual plan, annual report and legislation to propose to the Board of Directors for approval;
  3. Research to develop legislations on rights of protection in his/her own framework;
  4. Research the policy on the fund management of the Deposit Protection Office and the Deposit Protection Treasury to propose to the Board of Directors for approval;
  5. Appoint and dismiss the Board of Sector of the Deposit Protection Office as agreed by the Board of Directors;
  6. Manage daily operation of the Deposit Protection Office according to limited rights and duties specified on the domestic regulation or assignment of the Board of Directors;   
  7. Represent signing the agreements and other official documents of the Deposit Protection Office;
  8. Supply information and explain the issues to the Board of Directors and external auditors;
  9. Perform all rights and duties as assigned by the hierarchy.

Article 23 Fund of the Deposit Protection Office

            The government contributes fund to the Deposit Protection Office by authorizing the Bank of Lao PDR to research and propose to government for consideration in each period at the proposal of the Board of Directors. In addition, fund from the Deposit Protection Office is the excessive income from fund management and contribution from other agencies.

Article 24 Fund Management of the Deposit Protection Office

            Fund of the Deposit Protection Office is invested in the low-risk fund management activities, such as the government bonds and the Bank of Lao PDR’s bonds.

            The Deposit Protection Office is obligated to manage fund in stable and expandable manner.

Article 25 Accounting

            The accounting year of the Deposit Protection Office starts on 01 January and ends on 31 December of every year.

            The Deposit Protection Office shall follow the accounting system based on the laws and regulations that the Bank of Lao PDR imposes.

            The Deposit Protection Office shall prepare financial reports based on format and regulations that the Bank of Lao PDR carries out.

Article 26 The Documents for Financial Report

            The documents for accounting report of the Deposit Protection Office consist of:

  1. Income Statement
  2. Balance Sheet
  3. Statement of Cash Flow
  4. Statement of Changes in Equity

The income statement and balance sheet shall have three columns: column “the Deposit Protection Office”, column “the Deposit Protection Treasury” and column “total”.

Article 27 Incomes – Expenditures

            Incomes – expenditures of the Deposit Protection Office are included as follows:

  1. Incomes:
    • Interest;
    • Dividend from the excessive income from the management of the Deposit Protection Treasury;
    • Penalty fees;
    • Sales of the fixed assets;
    • Other legal incomes;
  2. Expenditures:
    • Operating expenditures;
    • Repair expenditures;
    • Depreciations and amortizations;
    • Fee and service fees;
    • Interest and loan fees;
    • Advertising and public relation expenditures;
    • Other expenditures.

The annual income is the negative or positive excess between incomes and expenditures within a year. The dividends, received in the treasuries, are agreed by the Board of Directors.

Article 28 Reporting   

The Deposit Protection Office shall report the operational conditions and financial statements to the Bank of Lao PDR on monthly, quarterly and annually basis.   

 

Chapter 5

Deposit Protection Treasury

Article 29 The Deposit Protection Treasury

            The Deposit Protection Treasury is established by the Deposit Protection Office to accumulate and use the premiums to pay the insurance to bankrupt member.

Article 30 Fund of the Deposit Protection Treasury

            Fund of the Deposit Protection Treasury is generated from premiums of the members, excessive income from the protected deposit management, contribution from individuals or legal entities and loans.

Article 31 The Management of the Deposit Protection Treasury

            The Board of Directors shall set out the regulation on the management of the Rights of Protection Treasury.

Article 32 The Utilization of the Deposit Protection Treasury

            The Deposit Protection Treasury shall be utilized to disburse the insurance including the principal and interest of loans to the depositors

            The excessive income from the management of the Deposit Protection Treasury in each year shall be used to operate the Deposit Protection Office as agreed by the Board of Directors.

 

Chapter 6

Members of the Deposit Protection Office

Article 33 Membership

            The commercial banks, licensed in accordance with the laws of Lao PDR before or after this decree has been effective, shall become the members as compulsory.

            The commercial banks shall submit the proposal to the Deposit Protection Office for membership within 15 days since this decree becomes affective or the establishment is approved. The documents requesting for membership are as follows:

  1. A proposal;
  2. A copy of the Business License;
  3. A copy of the Enterprise Registration.

The deposit-taking microfinance institutions, licensed in accordance with the laws of Lao PDR before or after this decree has been effective, shall become the members and have the following criteria:

  1. Shall have been audited from the external auditing companies for at least two years consecutively.
  2. Shall contribute at least 50% of minimal registered capital as specified in the Article 10 of the Decree on the Microfinance Institutions, No.: 460/GOVT, dated 03 December 2012;
  3. Shall strictly comply with requirements, rules and stability ratios set out by the Bank of Lao PDR;
  4. Shall submit the report with the format carried out by the Bank of Lao PDR in each period in the correct, complete and punctual manner;
  5. Shall have profits from the business operations for at least two years consecutively;
  6. Shall have non-performance loan (NPL) rate of less than 5%;
  7. Shall pay the premium at the rate specified on laws and regulations.

Article 34 Rights and Obligations of Members

The members have rights and obligations as follows:

  1. Shall receive certificate of membership;
  2. Shall pay the premiums according to specific regulations;
  3. Shall supply the information according to the format set out by the Deposit Protection Office monthly, quarterly and yearly, or at proposal of the Deposit Protection Office;
  4. Shall make its membership known to the public by posting the certificate of membership and information on the rights of protection from the Deposit Protection Office in all service units;
  5. Shall cooperate on the inspection and coordination with officers of the Deposit Protection Office;
  6. Perform all other rights and obligations specified on laws and regulations.

Article 35 Premium Rate

            The Bank of Lao PDR determines premium rate in each period at the proposal of the Deposit Protection Office. The premium rate in all currencies shall not exceed 1% of the average insurance balance per annum.

Article 36 Payment of Premium

            The premium shall be paid quarterly according to the accounting year and considered as the expenditures of members. The payment procedures and processes of premium shall be indicated on the specific regulations of the Rights of Protection Office.

Article 37 Dismissing from Membership

The financial institution will be dismissed from its membership in below circumstances:

  1.   Cease of business operation, and withdrawal of the Business License;
  2.   After the eligible money disbursed by the Deposit Protection Office.

 

Chapter 7

Prohibitions

Article 38 Prohibitions for the Administrators and Officers of the Deposit Protection Office

            The administrators and officers of the Deposit Protection Office are prohibited as below:

  1. Operate business and work as advisor or technical officer, for the members, related to his/her responsibilities;
  2. Disclose the information of members;
  3. Collect, ask for and take bribe, prejudice, delay, falsify documents, and corrupt for personal or mutual benefits on the rights of protection activities;
  4. Disregard his/her own responsibilities or frauds of the Deposit Protection Office;
  5. Purchase the properties of the bankrupt member in any cases;
  6. Perform any other actions in violation of laws and regulations. 

Article 39 Prohibitions for the Members

            The members are prohibited from following actions:

  1. Do not pay the premium or in the full amount;
  2. Do not report the financial conditions and deposit information to the Deposit Protection Office regularly;
  3. Falsify the documents concerning the rights of protection that may harm rights and benefits of depositors and the Deposit Protection Office;
  4. Advertise or supply the incorrect and over-exaggerating information on rights protection to the public;
  5. Prevent, in-collaborate or in-cooperate the operation of all related agencies;
  6. Perform any other actions in violation of laws and regulations. 

Article 40 Prohibitions for Depositors

            The depositors are prohibited as follows:

  1. Create obstacles and intervene the operation of the Deposit Protection Office;
  2. Falsify documents of his/her own deposit to receive insurance;
  3. Erroneously advertise the rights of protection that misleads others or accuse unjustly to the Deposit Protection Office;
  4. Perform any other actions in violation of laws and regulations. 

 

Chapter 8

Management and Inspection

Article 41 Management Authorities

            The government manages the rights of protection in a centralized and unified principle throughout the country by assigning the Bank of Lao PDR as the central coordinating agency with relevant agencies.

Article 42 Rights and Duties of the Bank of Lao PDR

            In supervision of the Deposit Protection Office, the Bank of Lao PDR has the rights and duties as follows:

  1. Approve the strategic plans and overall policies on rights of protection;
  2. Research to develop legislation on the rights of protection;
  3. Research to propose the Prime Minister to consider the appointment of the Board of Directors and the head of the Deposit Protection Office;
  4. Appoint or dismiss the deputy head of the Deposit Protection Office at the proposal of the Board of Directors;
  5. Request information or documents on the organization and operation of the Deposit Protection Office;
  6. Manage operation of the Deposit Protection Office and coordinate with other relevant agencies to perform their rights and duties;
  7. Perform other rights and duties specified on laws and regulations.

Article 43 Inspection Authorities

            The Inspection Authorities on rights of protection include:

  1. The internal inspection authority is the same as the management authority stipulated in Article 41 of this decree;
  2. The external inspection authority is the Government Inspection Authority.

Article 44 Content of Inspection

            The content of inspection on rights of protection is as follows:

  1. The implementation of policy and legislation on rights of protection;
  2. The organization and operation of the Deposit Protection Office;
  3. Fund and financial condition of the Deposit Protection Office;
  4. Other inspections as assigned by the government.

Article 45 Types of Inspection

            There are three types of inspection on the rights of protection as follows:

  1. Regular inspection;
  2. Inspection with advance notification;
  3. Irregular inspection.

Regular inspection is conducted according to certain schedule and time indicated.

Inspection with advance notification is an unplanned inspection undertaken when it is deemed necessary. The inspected party shall be given notice in advance at least 24 hours.

Irregular inspection is a sudden inspection as a matter of necessity and urgency without notice given to the Deposit Protection Office in advance.

The inspection shall be undertaken for document and reality check at the relevant operation place.

Chapter 9

Rewards for Those Who Perform Well and Measures for Those Who Violate

Article 46 Rewards for Those Who Perform Well

            Any individuals, legal entities or organizations that achieve exemplary performance on implementation of this decree particularly on rights of protection in effective and efficient manner shall be complemented or rewarded according to regulations.

Article 47 Measures for Those Who Violate

            Any individuals, legal entities or organizations that violate this decree and relevant regulations on rights of protection by causing damage to the state and public shall be subject to education measures, disciplinary measures, penalty, civil measures and criminal measures according to the seriousness of the violations.

Article 48 Education Measures

            If this decree is violated for the first time and unintentionally, any individuals, legal entities or organizations shall be subject to education measures or warning and taking record.

Article 49 Disciplinary Measures

               If administrators or officers of the Deposit Protection Office violate against the prohibitions as prescribed in the Article 38 of this decree shall be forced as follows:
<>1.2.3.4.Chapter 10

 

Final Provisions

Article 53 Symbol and Seal

            The Deposit Protection Office has its own official symbol and seal to serve the official operation.

Article 54 Implementation

            The Bank of Lao PDR, the Ministry of Finance, the Deposit Protection Office, members and relevant agencies are strictly assigned to implement this decree.

            Ministries, ministry-equivalent bodies and local administration authorities shall acknowledge and cooperate the implementation of this decree in accordance with their functions and responsibilities.

Article 55 Effectiveness

            This Decree shall become effective on signature and 15 days from official letter.

            Requirements and provision, which contradict this law, are hereby repealed.

 

 

                                                                                                            Government of Lao PDR

                                                                                                            Prime Minister

                                                                                                            (Seal and Signature)

  1. Thongloun Sisoulith

 

 

           



Download English:Decree On Deposit of Protection No. 329/GOV, dated 25 October 2017

Download Lao:Decree On Deposit of Protection No. 329/GOV, dated 25 October 2017