Financial Crime World

Regulation of Non-Banking Financial Institutions (NBFI) in Mongolia

License Requirements

To operate as an NBFI in Mongolia, a license must be obtained from Mongolbank. The application process involves submitting documents that comply with the requirements set forth in the regulation.

Grounds for Revocation or Termination of License

A license can be revoked or terminated on various grounds, including:

  • Failure to fulfill prudential ratios: NBFI must maintain certain prudential ratios, such as a capital adequacy ratio not less than 8% and a liquidity ratio not less than 20%.
  • Engaging in unauthorized banking activities: NBFI are not permitted to engage in activities that are not specified in their license.
  • Failing to report financial statements: NBFI must submit regular financial reports to Mongolbank.
  • Bankruptcy or liquidation of the institution: If an NBFI becomes insolvent, its license may be revoked.
  • Failure to commence operations within a specified timeframe: NBFI must start operating within a certain timeframe after receiving their license.

Supervision

Mongolbank is responsible for supervising NBFI activities, including:

  • Conducting regular examinations and assessments: Mongolbank will conduct regular inspections of NBFI to ensure compliance with regulations.
  • Ensuring compliance with prudential ratios: Mongolbank will monitor NBFI’s adherence to prudential ratios.
  • Monitoring loan concentration risk: Mongolbank will monitor the level of risk associated with NBFI’s loans.

Prudential Ratios

NBFI are required to maintain certain prudential ratios, including:

  • Capital adequacy ratio (not less than 8%): This means that an NBFI must have a minimum amount of capital in relation to its assets.
  • Liquidity ratio (not less than 20%): This means that an NBFI must have a sufficient level of liquid assets to meet its financial obligations.
  • Loan concentration risk requirements (not exceeding 20% of total capital): This means that an NBFI is not permitted to lend more than 20% of its total capital to one borrower.

Responsibilities

The management or decision-making body of an NBFI is responsible for financial losses resulting from a breach of the regulation. If an NBFI fails to comply with regulations, it may be held liable for any financial losses incurred as a result.

Penalties

Non-compliance with the regulation can result in penalties, including confiscation of income and closure of unauthorized units. To ensure compliance with this regulation, NBFI must maintain accurate records, report financial statements on time, and adhere to prudential ratios.