Financial Crime World

Mongolia Approves Banking Compliance Regulations Amid Calls for Greater Transparency

New Law Aims to Reduce Ownership Concentration and Enhance Public Control

The Mongolian parliament has approved amendments to the country’s banking law, aimed at reducing ownership concentration and enhancing public control over the sector. The changes, approved by 90.9% of lawmakers present in the State Great Khural on January 28, include provisions that require systemically influential banks to transform into publicly traded companies through an initial public offering (IPO) on the stock market by June 30, 2022.

Key Provisions of the Revised Law

  • Publicly Traded Companies: Systemically influential banks will be required to transform into publicly traded companies through an IPO on the stock market by June 30, 2022.
  • Ownership Limits: Individual ownership in banks will be limited to 20%, with all banks required to comply with this rule by December 31, 2023.
  • Customer Protection: In case of liquidation, deposit account holders, including citizens and household families, will be prioritized over legal entities.

Influential Banks Defined by Multiple Factors

Influential banks will be defined based on a range of factors, including their assets, transaction flow, core activities, relevance, customer base, and other features, rather than just their share in the banking system. This approach aims to ensure that all influential banks are subject to the same level of scrutiny.

Banks Must Meet Complex Criteria

The Bank of Mongolia said that as banks prepare for listing on the stock market, they will need to meet more complex criteria related to transparency, capital, earnings, and corporate governance to conform to the revised law. This will help ensure that banks operate in a more transparent and accountable manner.

Reforms Aim to Enhance Public Control and Accountability

The reforms aim to enhance public control and independence of banking supervision, bring greater transparency and accountability, and strengthen governance in the sector. The Mongolian banking sector’s total assets stood at approximately MNT 35.8 trillion ($11.6 billion) by the end of November 2020, with around 90% of them owned by the public and 10% by bank shareholders.