Banking & Finance
Banking sector prevails in financial sector of Mongolia. Main objective of the Central Bank (Bank of Mongolia) is to ensure stability of national currency-tugrug. Bank of Mongolia, under its main objective, supports stable development of economy by ensuring stability of the financial market and banking system. Financial Regulatory Commission is a government organisation and its function is to regulate financial service except for banking, to monitor implementation of relevant legislation and to protect interest of investors and customers. Broad range of services, including insurance, non-banking financial institutions, savings and credit cooperatives, securities market institutions, external audit, asset valuation, finance lease, pawnshops, asset broker, currency exchange, raw materials exchange and financial pyramid, are operating in non-banking financial market. These services are considered as regulated activities or special license activities.
During centrally planned economy, Mongolia had only one bank which was responsible for monetary policy, loan, calculation and foreign transaction. The two level banking system was introduced by the banking law of Mongolian People’s Republic, passed in April 1991, which states that the banking system of the country consists of Central Bank and commercial banks. Due to high inflation rate till mid-1990s, interest rate of banks raised and loans could not finance manufacturing, but only financed trade and service with fast cycle. And this resulted risk for banks. As a result of collapse in manufacturing industry, banks did not have reliable resource and they were surviving with short term, high interest loans. In other words, the manufacturing and banking did not cooperate to encourage each other. Liquidation of 18 banks in the past 20 years and mergers of the banks indicate that this sector developed with burden.
MDS KhanLex provides legal service for several banks. For example, we have worked with Central Bank of Mongolia and other banks on developing mortgage primary market products in banking sector and performed in working group of regulation on mortgage loan. At the time our lawyers worked in the working group of drafting Law of Mongolia on Immovable Property Pledge (2009) and Law of Mongolia on Asset Backed Securities (2010). Furthermore, we work to develop secondary market in banking sector. We also participate in the working group of Regulation on Mortgage loan funding from Central Bank of Mongolia. Our firm had worked as external legal advisor on issuance of mortgage backed security of 8% interest in the total amount of MNT 2.3 trillion.
Our firm also provides local law advice and legal opinion for financing transactions by foreign banks and financial institutions to Mongolian entities and companies.