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Mongolia to Regulate Financial Instruments Denominated in Foreign Currencies
Ulaanbaatar, Mongolia - The Mongolian government has announced plans to regulate financial instruments denominated in foreign currencies, a move aimed at strengthening the country’s financial sector and protecting investors.
Regulation of Bank Activities
According to a new law, all bank activities related to the issuance, acceptance as collateral, sale, and/or purchase of securities traded on the capital market will be regulated by an applicable law. The law also sets out criteria for banks, including:
- Maintaining reserve requirements
- Safeguarding customer deposits
- Ensuring compliance with prudential requirements
Restrictions on Banking Activities
The law establishes restrictions on banking activities, including limits on loans to related parties, guarantees, and warranties. Banks are prohibited from issuing loans or securities to their related parties if the total value of such transactions exceeds 20 percent of the bank’s equity.
Information Disclosure
In addition, the law requires banks to provide accurate information about their financial situation and activities to the Bank of Mongolia, the country’s central bank.
Expected Impact
The new law is expected to come into effect in the coming months, following a period of public consultation and review by parliament. This move is seen as an important step towards strengthening the country’s financial sector and improving transparency and stability in the market.
Background
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Mongolia has been working to strengthen its financial sector in recent years, including introducing reforms aimed at improving banking regulation and supervision. The country has also been seeking to increase foreign investment and attract more international businesses to the country.
The new law is seen as an important step in this process, providing a framework for regulating financial instruments denominated in foreign currencies. This will help to improve transparency and stability in the financial sector, while also providing greater protection for investors.
Reactions
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Banking Association
The Mongolian banking association has welcomed the new law, saying that it will provide greater clarity and stability for banks operating in the country.
“This is a positive development for the banking sector in Mongolia,” said a spokesperson for the association. “The law provides a clear framework for regulating financial instruments denominated in foreign currencies, which will help to improve transparency and stability in the sector.”
Opposition
However, some critics have raised concerns about the potential impact of the law on small businesses and entrepreneurs.
“This law could make it more difficult for small businesses to access finance,” said an opposition politician. “We need to make sure that we are not creating barriers to entry for new businesses, while also protecting investors and maintaining financial stability.”
Conclusion
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The Mongolian government’s decision to regulate financial instruments denominated in foreign currencies is a significant step forward for the country’s financial sector. The law provides a framework for regulating these instruments, which will help to improve transparency and stability in the sector.
While some concerns have been raised about the potential impact of the law on small businesses and entrepreneurs, the majority of stakeholders appear to support the new legislation. As the law comes into effect, it is expected that Mongolia’s financial sector will become even more attractive to international investors and businesses.