BANKING REFORMS

BANKING REFORMS

On January 28, 2021, amendments to the Mongolian Banking Law were passed at Parliament's autumn plenary session. The amendments to the Banking Law will reduce the concentration of ownership of a bank's shares, create a balance between ownership, management, and control, centralize management, create public oversight, increase the independence of banking supervision, and have many other benefits that will benefit stock market development.

THE THREE MAIN PROVISIONS IN THE BANKING LAW AMENDMENTS ARE AS FOLLOWS:

1. A bank must be a joint stock company: There are 12 banks in the banking system, and five of the most prominent banks are required by law to become public businesses and undertake initial public offerings (IPOs) in the financial market by June 30, 2022. Other banks will have the option of becoming open or closed joint stock entities.

2. Shareholder limits: A single shareholder, alone or in conjunction with a connected party, may own no more than 20% of a bank's total issued shares. This regulatory obligation must be met by all banks by December 31, 2023.

3. Payment orders: To preserve the legal rights of non-business customers with savings, the legislation allows for clarification of the order of payment in the case of a bank's liquidation. Non-business clients must receive all funds in savings and current accounts prior to or from legal entities.

When banks become joint stock companies and issue securities on the stock market in the future, they will face a slew of new criteria for transparency, capital sufficiency, profitability, and good governance.

 

Source: “Invest in Mongolia” monthly newsletter of the

national development agency