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Depositors' protection fund boosts reserves
Asset value of the Depositors' Protection Fund (DPF) will increase by 48 percent compared to last year, according to a report.
Last year, the fund contained 38,732 million kip, but this year the figure will climb to 57,478 million kip according to the fund's Acting Director, Mr Sunty Phonmeuanglao, speaking at an executive council meeting last week.
The fund plans to encourage two Vietnamese banks recently established in Laos, the Military Bank and Sacombank-SBS and 34 other finance institutions, to become members of the fund.
Last year, fund membership increased from 14 banks in 2009 to 20 banks, allowing the DPF to increase interest earned on the fund from 5,714 million kip in 2009 to 8,000 million kip last year – an increase of 40 percent, said Mr Sunty.
The fund aims to increase responsibility and integrate policies in line with international commitment by changing from using local systems to high technology.
The fund also promotes education on government policies to staff to ensure they understand their responsibilities to the nation.
This year, the fund plans to send technical staff to Vietnam and Thailand for training.
At present, 106 countries have established depositor protection funds, Mr Sunty said.
The first one was established in the USA after the financial crisis of the 1930s.
The crisis resulted in the failure of the banking system and to the establishment of the Federal Deposit Insurance Corporation (FDIC) to prevent the problem recurring in the future.
The corporation is appointed as receiver for failed banks, he explained.
In 2007, three financial institutions in the USA went out of business, followed by 25 in 2008, 64 in 2009 and 157 in 2010.
In addressing the closures FDIC spent US$22 billion, Mr Sunty said.
This year, 12 banks in the Philippines have been affected by similar crises, he added.
In 1997-1998 the financial crisis in Asia caused many banks to fail which directly impacted on depositors and the wider economy.
The establishment of the DPF in Laos was in response to this crisis and will handle any future problems, he said.
The Lao Depositors Protection Fund was established in 1999 by the Ministry of Finance under the Bank of the Lao PDR and was made independent in 2007.
vientiane times
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