Accra:Bank of the Lao PDR Governor Bounkham Vorachit has introduced a draft Law on Deposit Protection to the 10th National Assembly's second ordinary session. This legislative proposal aims to enhance the country's financial safety net and increase public confidence.

According to Lao News Agency, the proposed law seeks to establish a more robust legal framework to protect depositors and align with international financial standards. The initiative stems from lessons learned during the 1997-1998 Asian financial crisis, which led to the creation of the Deposit Protections Fund. This institution evolved into the Deposit Protection Office (DPO) in 2017, now safeguarding deposits up to 100 million LAK per depositor at each member institution.

The new legislation proposes key changes, including a shift from a flat 0.1% premium to a risk-based premium structure, capped at 1%, to better reflect the risk profiles of financial institutions. Additionally, the DPO will transition from a simple "paybox" model to a "paybox plus" system, allowing it to provide liquidity support and facilitate mergers for troubled institutions.

The law also plans to raise the maximum coverage limit to at least three times the GDP per capita, aiming to cover 90% of insured depositors. It mandates all deposit-taking microfinance institutions to join the DPO and introduces legal protections for DPO staff acting in good faith.

Comprising 66 articles across eight chapters, the legislation is expected to play a critical role in achieving the 10th National Socio-Economic Development Plan's objectives, including increasing the deposits-to-GDP ratio above 90%. By enhancing deposit limits and crisis-response tools, the law aims to reduce the risk of bank runs and ensure long-term stability in Laos' financial sector.