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Banque Pour Le Commerce Exterieur Lao Public

A Summary of Business Performance of the year 2017

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1. Banque pour le Commerce Exterieur Lao Public

Banque Pour Le Commerce Exterieur Lao Public (BCEL) is a joint-stock bank incorporated and

registered in the Lao People’s Democratic Republic

BCEL was established in accordance with the Business License No. 129/BOL dated 01

November 1989. On the 23rd

December 2010, the bank was equitized and renamed into Banque Pour

Le Commerce Exterieur Lao Public under the Enterprise Registration License No.0061 dated on 10

January 2011 issued by the Department of Enterprise Registration and Management, Ministry of

Industry and Commerce of the Lao P.D.R. The Ministry of Finance representing the Government

held 80% of the total shares.

On 15 July 2011, the Ministry of Finance sold 10% of the total ordinary shares to its strategic

partner named COFIBRED in accordance with the Ordinary Shares Purchase Agreement between

the Ministry of Finance and COFIBRED.

The current structure of BCEL’s shareholders includes: The Government’s shares account for

70% of the Bank’s chartered capital; local investors’ shares (including employees of the Bank) and

other foreign investors’ proportion of 20%; strategic partners’ shares account for 10%.

On 17 August 2017, Lao Securities Commission Office approved the Bank to recapitalize by

both Rights offering to the existing shareholders. This recapitalization aims to increase the

registered capital. The bank received new Banking License No. 21/BOL, dated 13 September 2017,

issued by Bank of the Lao PDR. On 15th

September 2017, Lao Securities Exchange certified that the

bank has increased its registered capital in the amount of 355.728.500.000 LAK (71.145.700 shares)

according to the certificate No. 01/LSX, dated 15 September 2017 and the business license

No.0889/ERO, dated 15 September 2017, issued by Ministry of Industry and Commerce.

The principal activities of the Bank are to provide banking services including fund

mobilization and deposit-taking for short-term, medium-term, and long-term from organizations and

individuals. The bank also provides loans for short-term, medium-term, and long-term to business

units and individuals based on the loan purposes and the capability of the bank for lending; foreign

exchange transactions, international trade financial services, Letter of credits, guarantees, gold

trading via account and other banking services allowed by the Bank of the Lao PDR.

Charter Capital

The charter capital as of 31 December 2017 is 1.038.617 million LAK (as of 31 Dec 2016:

682.888 million LAK).

Location and Network

The Bank’s Head Office is located at No.01, Pangkham Street, Ban Xiengnheun, Chanthabouly

District, Vientiane, Lao PDR. As of 31st December 2017, the Bank has one (01) Head Office, one

(1) subsidiary, four (4) joint ventures, nineteen (19) main branches, eighty-five (85) services units,

and sixteen (16) exchange units all over Lao P.D.R.

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2. Vision

BCEL has adopted a vision and apply to its business development to achieve its goal and

objective of “Becoming a strong, modern and meet international standards bank”.

3. Mission

In order to become a strong, modern and meet international standards bank, the important

missions of BCEL includes improving the strength in all the areas , especially the Corporate

Governance (CG) by focusing on development of banking services to be suitable for the changes in

each period; embracing the creation of the strength in the culture of Risk Management and to

comply with the BASEL II principles; increasing business operation capacity; creating and

developing the capacity of the Management of Information System (MIS) to be effective,

completed, correct and punctual and meet international standards of the reporting system; applying

modern technology and upgrading the knowledge and expertise of the employees as of regional and

international levels.

Business Targets for 2017

In order to prepare for and ensure the effective implementation of the long-term missions, BCEL

has to develop its fundamental organizational structure to be appropriate; to develop necessary tools

in all areas and improve other fundamental factors to facilitate for the development of its services; to

build its financial capacity and to achieve excellent management. For the excellent management

ideal, the allocation and appointment of management structure and organizational structure are

needed to be improved such the establishment of the Marketing Division, the establishment of the

branches in Vientiane Capital and to extend the service units where appropriate; to improve the

regulations on internal administration to be complied with the new amended legal documents and

additional regulations; and to improve the roles and responsibilities of the Board of Directors to

comply with CG.

4. Organizational Structure.

4.1 The organization of BCEL consists of the Board of Directors (7 Directors), Executive

Management (7 members), 11 Divisions, 3 Centers, 19 Branches, 85 Service Units and 16

Money Changers nationwide.

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BCEL’s Board of Directors

Dr. Bounleua Sinxayvoravong Chairman

Mr. Khamsouk Sundara Voice Chairman

Mr. Phoukhong Chanthachack

Member

Ms. Khanthaly Vongxayarath Member

Mr. Phansana Khounnouvong Member

Mr . Viengxay

Chanthanvisouk Member

Mr Marc ROBERT Member

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BCEL’s Board of Management

Mr. Lachay Khanppravong Deputy managing Director

Mr. Nanthalath Keopaseuth Deputy managing

Mr. Khamsian Mingboupha Deputy managing Director

Mr. Souphak Thinxayphone Deputy managing Director

Mr. Phansana Khounnouvong Deputy managing Director

Mr. Bouavanh Symalyvong Deputy managing Director

Mr. Phoukhong Chanthachack General Managing Director

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5. Achievement for the year 2017

For the year 2017, BCEL achieved its targets in many areas such as completing the year-end

financial report for 2017, holding the Business Performance Review Meetings for the year 2016,

holding of the Quarterly Business Review Meeting and holding of the Board of Directors Meeting

for 3 times. The bank also held BCEL’s ordinary shareholders Meeting for the year 2016 to approve

the important issues and the dividend payment for the year 2016 in the amount of 614 kip/share.

BCEL has successfully selected and appointed the financial advisor, legal advisor and

underwriter for recapitalization in the amount of 360 billion LAK. The recapitalization was

successfully completed. The bank also launched the Implementation of the BASEL II Project and

gap analysis of all risks according to Basel II principles; Checked the draft of the gap analysis report

on ICAAP risks as well as completed basic projects including gap analysis of risks, creating the

roadmap of BASEL II project and solving the risk gaps which were found; Researched and proposed

to the Bank of Lao PDR on the establishment of Marketing Division, the establishment of a new

branch in Xaysettha District and the merger of Audit Division and Branch Management Division.

BCEL has disclosed its financial statements for the year 2016, the business performance report

for the first quarter of 2017, the first six month and the 9 months of 2017 via the disclosure system

of the Lao Securities Exchange. BCEL has launched the new credit program which was under the

process of gathering the information from related divisions to provide for the consulting company.

In additions, BCEL has distributed its long-term strategic plan from 2016-2020 and the 2017 plan to

all of branches in order to raise the acknowledgement of the bank’s directions of the plan at branch

level and to implement such plans for the achievements. The bank also researched and improved job

description and Key performance indicators for staff which can be basically competed by 4

Divisions (including 1.Human Resource and Personnel Division, 2.Research and Development and

Marketing Division, 3.Credit division, and 4.Service Center) and to propose for the approval in

starting the pilot study. The bank also created BCEL’s profile in Lao and English versions and the

using of BCEL’s new cheque books.

BCEL has also expanded its service by cooperating with various parties such as signing ceremony

on the overall banking cooperation between BCEL and Bank of China Limited, the signing

ceremony on financial advisory service between BCEL and Lao-China Securities Company Limited,

the signing ceremony on bill payment with Krungsri Leasing service Company, AEON leasing

company, Thai-Ace leasing company, Pratukham deposit-taking financial institution and ST-

Meuangthai insurance. The bank also signed MOU with KEB Hana Bank from South Korea on

Overall banking Co-operation.

The bank has successfully held the signing ceremony on modern payment of road taxes between

BCEL and Tax Department and developed the advanced payment via QR code or OnePay which

will be part of BCEL One application. This service was installed at many shops in Vientiane Capital

and BCEL’s branches overall the country. Moreover, the bank also held the display and information

support event for the promotion of OnePay (QR Code Payment) service at Lao-ITECC to promote

and introduce how to apply OnePay for product settlement.

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In 2017, BCEL extended its network by opening 5 new service units, in which 2 units located in

Vientiane Capital, including 1.Hauy Hong Service Unit, 2.Dong Chong Service Unit (at PTT gas

station), 3. Upgrading of Numphou Service Unit, 4. 35 KM Service Units at Savanhnaketh province

and 5.Xiengngern Service Unit. The bank also launched the grand opening of Meung ngoi Service

Unit’s new building which is under Laungprabang Branch and the new building of BCEL’s Salavan

Branch.

Moreover, BCEL also received the award of Domestic Retail Bank of The Year 2017; the

bank collaborated with China Union Pay (CUP) held the campaign for returning benefits to the

customers by creating 4 promotions which provided the travel packages to Malaysia-Singapore for

13 prizes, to Honkhong-Macua for 6 prizes, and Iphone 7 for 5 prizes for the customers who were

the top spenders by using UnionPay’s card. BCEL also set up an advertisement boot at the

intellectual property exhibition. At the end of the year, BCEL received the award for Operational

Excellence for 2016 from Wells Fargo Bank which is one of the top 5 financial institutions in the

US.

6. The Activities of the Board of Directors, the Board of Management and other Committees

The Board of Directors

For the year 2017, the Board of Directors held the meeting to discuss and approve important

issues as follows:

-Approved the recapitalization plan, the purposes for the use of recapitalized fund, approved the

appointment of Lao China Securities Co., Ltd as the underwriter for the recapitalization and

approved the appointment of Lao Law and Consultancy Group as the legal advisor for the

recapitalization.

- Approved the nomination for the new members of BCEL’s Board of Directors and the new Audit

Committee to BCEL’s Board of Directors and the Shareholders.

-Approved the business performance for the year 2016 and approved the principles on allocation of

the profit after tax and to pay for dividend 50% and 50% will be the compulsory reserves.

-Approved the closing date of the shareholders’ registration book, the date for the Annual General

Shareholders’ Meeting and the date for dividend payment for the year 2016.

-Approved the Financial Statements for the year 2016 and for the six months of the year 2017 in

accordance with LAS and IFRS via circular letter.

-Approved the regulation on the roles, rights and responsibilities of the 5 committees to the Board of

Directors.

-Approved the amendment of the regulation on procurement, construction and repair.

-Approved Ernst & Young Lao Company Limited for auditing BCEL’s financial statements of the

year 2018.

-Approved the recapitalization of BCEL from 682.888 mil LAK to 1.038.617 mil LAK.

-Approved in principle on the reduction of the shareholding portion of BCEL at BFL which

decreased from 46% to 30%.

-Approved the business feasibility Study of BCEL and the establishment of new branch (Xaysetha

Branch) and the branch’s administrative regulation.

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Governance Committee

For the year 2017, the committee focused on research and monitoring of BCEL’s business

performance in each period and provided effective supervision to the business operation of BCEL

in all areas such as monitoring on human resource development; following up on the consideration

of BCEL’s new members of the Board of Directors; monitoring on fund mobilization by

appointment of committee to research on fund mobilization through several channels as such

advertisement and setting of interests; following up the credit management work, especially the

cooperate clients and control NPL to be at the suitable level; following up the research of targets

for the business plan of the year 2018 in order to propose to the Board of Directors; following up

the management of affiliated companies and to claim for the dividends from the profit of those

companies; following up the possibility of offering the shares held by the government for 19% and

considered the level of BCEL’s capital adequacy ratio based on LAS and IFRS.

In additions, the committee also supervised the implementation of BCEL’s long-term strategic

plan; researched on the roles of the Board of Directors’ Committees in order to propose to the Board

of Directors; followed up the development of human resource and BCEL’s products; considered the

allocation of profit after tax for 2017 into each reserve and proposed to Board of Directors for

approval; considered the recapitalization for Lao-China bank and to propose to the Board of

Directors. Moreover, the Committee also assessed the KPI at branches based on the defined

conditions and followed up the research on KPI of BCEL’s staff at Head Office and supervised the

authorization right at branch and service unit level by standardizing each authorization level in

accordance with cash and deposit transactions.

The Committee has approved the amendment of many regulations such as BCEL’s Articles

of Association; the regulation on procurement, construction and repair of BCEL; the regulation on

vehicle management; the regulations on the roles, rights and responsibilities of the committees to the

Board of Directors and approved the Annual report for 2016 of BCEL.

Risk Management Committee

BCEL has continuously focused on the efficient implementation of the Risk

Management. Some of outstanding performances by the committee including the summary of the

findings and risk recommendations of BCEL for the 2016 and to input in the Risk Record

Document (Cloud Computing Risk Log), which was basically created for risk analysis and the

Analysis of the impacts from internal and external risks on the business operation of BCEL such as

frauds on credit cards, the use of EDC in the offline form for frauds and other purposes, closely

monitored credit risk, liquidity risk, and operational risk.

Moreover, the committee monthly evaluated the transactions of divisions, centers and

branches which were not complied with the service rules as well as compared the data among

divisions, centers, branches then reported to the risk management section (Second Line of

Defense); reported the findings to the Audit Section (Third Line of Defense) to ensure the accuracy

of the report and drafted the risk management policy for BCEL. BCEL has also focused on

implementation of risk management to meet with the international standards which can be seen in

the preparation for the adoption of BASEL II and the completion of the Roadmap for Basel II

implementation which is divided into 3 phases. BCEL also cooperated with E&Y in a project to

improve the credit approval procedures by using Loan Origination System (LOS), Credit Rating

System (CRS) and researched the possible risks associated with all products of BCEL.