Mongolian Banking Regulations: Concerns and Considerations

Overview of New Banking Regulations in Mongolia

The Mongolian government has introduced new banking regulations, which are expected to have a significant impact on the country’s financial sector. However, several concerns and potential issues have been raised regarding the implementation and effectiveness of these regulations.

Concerns with Implementation Timeline

• Challenging Timelines: The advisors express concerns that implementing the Core Requirements within the intended timelines may be challenging.
• External Factors: External factors such as lack of established investment funds, investor depth, technical capacity of the stock market, political and regulatory uncertainties in Mongolia, and the impact of the pandemic, which may force delays or a phased approach to implementation.

Potential Unintended Consequences

• Foreign Investors Acquiring Freefloat Shares: The Core Requirements may lead to unintended consequences, such as foreign investors acquiring freefloat shares.
• Legal Challenges: The Core Requirements could be prone to legal challenges in Mongolia, particularly with regard to constitutional rights of existing bank shareholders.

Banking Act Amendments

• Listing Rules: The Banking Act should be amended to include requirements such as listing rules, reporting and disclosure obligations, investor requirements, capital criteria, etc.
• Retroactivity of Amendments: Any change to the Banking Act should not apply retroactively.

Cross-Listing on Foreign Stock Exchanges

• Limited Listing on MSE: Banks operating in Mongolia may choose to list on a foreign stock exchange, even if limited to the Mongolian Stock Exchange (MSE).

The advisory is written by B.Enkhbat, Partner at an unspecified law firm, and appears to be addressed to clients or stakeholders seeking information on new banking regulations in Mongolia.