Mongolia’s Financial Institutions Must Comply with Strict Regulations
Stabilizing Mongolia’s Financial Sector
In a bid to stabilize the country’s financial sector, authorities in Mongolia have implemented strict compliance measures for commercial banks and non-bank financial institutions. The Mongolian banking sector has been plagued by crises in the past, including the most severe one occurring between 1998-1999.
Recent Efforts to Restructure and Regulate
Since then, the government has taken steps to restructure ailing banks, privatize major banks, improve the Bank of Mongolia’s ability to enforce compliance with prudential regulations, and strengthen market discipline and incentives for sound bank management. The minimum capital requirement for commercial banks stands at MNT 8.0 billion ($6.4 million) as of January 2011.
Key Players in Financial Supervision
The following organizations are responsible for financial stability and supervision of the sector in Mongolia:
- Bank of Mongolia: supervises banks
- Financial Stability Council: monitors financial stability
- Financial Regulatory Commission: oversees other financial institutions, including:
- Insurance companies
- Security companies
- Credit and savings unions
- Non-banking financial institutions
New Banking Law and Supervision Measures
A new banking law was approved by Parliament in 2009 to reduce financial risks in the banking sector and increase risk capacity. The Supervision Department has prepared for:
- Consolidated supervision: a single, comprehensive approach to supervising banks
- Information technology inspections: ensuring that IT systems are secure and compliant with regulations
- Proper management monitoring: regular checks on bank management practices
- Amendments to supervisory regulations: updating regulations to reflect changing market conditions
Commitment to Financial Stability
“Mongolia’s financial authorities are working tirelessly to ensure stability and soundness of the country’s financial institutions,” said a government official. “We are committed to creating a healthy and competitive financial sector that supports sustainable economic growth.”
Deposit Guarantee Law Amendments
The Deposit Guarantee Law has been amended, no longer providing unlimited coverage. As demand for credit is expected to increase in the coming years as businesses need more capital, Mongolia’s financial institutions must remain vigilant in their compliance with regulations to ensure stability and soundness.