Analysis of Draft Law on Non-Bank Financial Institutions in Mongolia

Review and Recommendations

By Enkhbat Batsukh and Khulan Bayarsaikhan, KhanLex Partners LLP

The draft law on non-bank financial institutions (NBFIs) in Mongolia has been reviewed and analyzed by the authors. This comprehensive critique highlights both the strengths and weaknesses of the proposed legislation.

Key Points

• Regulatory Powers Delegation

  • The draft law proposes that the Financial Regulatory Commission (FRC) may delegate regulatory powers to the Association of Mongolian NBFIs.

• Substantial Secondary Legislation

  • The FRC is expected to issue several new or amended secondary legislative regulations, including:
    • Prudential ratios
    • Liquidity requirements
    • Accounting rules

• Industry Trade Group Transformation

  • The existing Association of Mongolian NBFIs may become a self-regulating industry trade group.
  • This transformation would require strong cooperation between the regulator and the association as well as significant capacity-building.

• Omissions and Errors in the Draft Law

  • Several omissions, misspellings, mis-references, or terms that are defined but unused throughout the text have been identified.

Conclusion

The authors conclude that the draft law is a rough preliminary draft that requires significant work in both substance and form. They recommend seeking input from various stakeholders, including government agencies and non-government parties, to improve the quality of the draft law.

Recommendations for Improvement

• Engage with multiple stakeholders to gather feedback and suggestions.
• Conduct thorough review and revision of the draft law to address identified omissions, errors, and weaknesses.
• Develop a clear plan for capacity-building and cooperation between the regulator and the industry trade group.