MONGOLIA SET TO ENHANCE BANKING COMPLIANCE REGULATIONS
Strengthening the Country’s Financial System
In a bid to enhance the country’s financial system, the Bank of Mongolia has outlined key objectives for the national payment system. The move is aimed at ensuring safe and efficient operation of payment systems, supporting non-cash payments, and developing the financial market infrastructure.
The Emergence of New Payment Systems
According to industry experts, the introduction of new technology has led to innovative non-cash payment instruments being brought into use, resulting in the emergence of new payment systems that enable faster and more efficient payment processing. However, this has also raised concerns about ensuring stability, reliability, and efficiency within these systems.
Establishing a Legal Framework
To address these concerns, the Law on National Payment System was approved in 2017, establishing a legal framework for the national payment system. The law defines the organizational and operating requirements for payment service providers and operators, as well as procedures for exercising supervision and oversight.
The Role of the Bank of Mongolia
The Bank of Mongolia plays a crucial role in ensuring the stability and efficiency of the national payment system. Under Article 6 of the Law on National Payment System, the central bank is responsible for managing, regulating, and overseeing the national payment system. This includes defining policy, issuing licenses to participants, approving rules and regulations, monitoring activities, and performing other prescribed functions.
Key Responsibilities of the Bank of Mongolia
- Managing, regulating, and overseeing the national payment system
- Defining policy and issuing licenses to participants
- Approving rules and regulations for payment service providers and operators
- Monitoring activities of licensed banks and payment service providers
- Assessing new payment instruments and services
The National Payment System
The country’s payment system consists of three subsystems:
Subsystems of the National Payment System
- Real Time Gross Settlement (RTGS): enables participants to transfer funds over MNT 3 million per transaction, with intraday liquidity reducing settlement risk
- Automated Clearing House (ACH+): transfers low-value payments of MNT 3 million or less per transaction, clearing on a net basis and settling within a certain interval
- Interbank card transactions processed through the National Electronic Transaction Center (NETC): cleared on a net basis by the NETC, with final settlement taking place in the RTGS system
Competition in the Payment System Arena
The introduction of the Law on National Payment System has led to increased competition in the payment system arena, with non-bank financial institutions and other payment service providers competing directly with banks by introducing new products and services using latest technology.
Types of Payment Instruments and Channels
- Cash
- Internet banking
- Mobile banking
- Payment cards
- Remittances
- E-money
- Billing
Conclusion
The Bank of Mongolia aims to continue strengthening the national payment system, supporting non-cash payments, and developing financial market infrastructure to ensure safe, reliable, and efficient operation of payment systems. With ongoing efforts to enhance compliance regulations and promote competition in the payment system arena, Mongolia is set to achieve its objectives and strengthen its financial system.