MONGOLIA: BANKING COMPLIANCE REGULATIONS GET A MAJOR OVERHAUL

In a significant move, the State Great Khural (the Parliament) of Mongolia has approved a draft law amending the Law on Banking. The changes aim to strengthen banking compliance regulations and address concerns over shareholding concentration in the sector.

Key Reforms

The amendments bring about several key reforms designed to improve banking stability and prevent conflicts of interest:

• Restrictions on shareholder ownership: Banks are now required to operate as open joint-stock companies, with no individual or related party allowed to hold more than 20% of shares.
• Influential shareholders: New rules set criteria for influential shareholders, including financial capability, transparency of beneficial ownership, and restrictions on conflict of interest.
• Increased oversight by the Mongolbank: The central bank will now have greater powers to revoke licenses, approve changes in share capital, and monitor shareholder activities.

Enhanced Transparency Requirements

The amendments also introduce new requirements for:

1. Disclosure of ultimate beneficial owners
2. Approval from the Mongolbank for certain transactions
3. Enhanced transparency in shareholder ownership and activities

These reforms aim to improve banking stability, prevent conflicts of interest, and ensure compliance with regulatory requirements.

Impact on the Banking Sector

The changes will likely have a significant impact on the banking sector in Mongolia, requiring banks to adapt to new regulations and increase transparency in their operations. The Mongolian government’s move is seen as a positive step towards improving financial stability and protecting investors.