Overview of the Bank Sector 

The Regulatory Body

The Bank of Mongolia is the central bank of Mongolia, established in 1924. Initially founded with the support from the Soviet Union, it has since operated with the mandate to ensure the stability of the nation’s finances and monetary system. The core functions of the Bank of Mongolia include promoting economic growth, maintaining price stability (controlling inflation), and regulating the banking and financial system. As of the year-end 2024, it acts as the regulatory body of 12 commercial banks with total assets of 71.4 trillion MNT, in addition to the Development Bank.

Key Central Bank Indicators (as of January 2025):

·        Policy Interest Rate: 10% (updated 2025-01-14)

·        Inflation: 9.6% (up from 7.6% as of 2024-01-31)

·        USD Exchange Rate: 3,447.43 MNT (+1.3% annual increase).

·        National Foreign Exchange Rate: 4.88 billion USD (+0.72% annual increase).

Sector Stability:

The stability of Mongolia’s banking sector is influenced by the following three fundamental factors:

·       Regulatory Environment: The regulatory framework of the Bank of Mongolia is designed to ensure financial stability and protect the interests of depositors. The bank effectively mitigates systemic risk by establishing and monitoring prudential ratios for banking operations.  

·      Economic Indicators: The stability of the banking sector is closely linked to key economic indicators, including GDP growth, inflation, and external debt. Given Mongolia’s high dependence on mineral exports, efforts to diversify and strengthen other sectors will enhance the stability of the banking sector.

·     Solvency: A low non-performing loan ratio contributes to the banking sector’s resilience to economic shocks. Improvements in risk management systems and increases in contributed capital further solidify financial stability.

Role in Supporting Economic Growth:

The banking sector plays crucial roles in fostering economic growth, including:

·      Facilitating Entrepreneurial Ventures: By extending credit to small and medium-sized enterprises (SMEs) and corporate entities, the sector makes a significant contribution to job creation and economic diversification.

·     Enabling Infrastructure Development: Banks finance infrastructure projects that are essential for sustaining economic expansion. Public-private partnerships, supported by active bank participation, are a vital mechanism for funding critical projects such as affordable housing loans, the expansion and commissioning of power plants, and the construction of significant highways connecting urban and rural areas.

·   Streamlining Payment Systems: The banking sector enhances financial inclusion and promotes business activity by digitizing and simplifying payment processes. Moreover, the reduction of cash transactions and the enhancement of financial flow transparency mitigate the risk of money laundering and terrorist financing.

Key Banking Sector Indicators (as of January 2025):

·        Monetary Indicators: M2 money supply is 41.8 trillion MNT (+11.6% annual change).

·        Commercial Bank Assets: Total assets worth 66.0 trillion MNT (+21.9% annual change).

·        Lending Indicators (Total loans issued): Total issued loans of 2.5 trillion MNT (+11.3% annual growth)

·        Interest Rates: Lending interest rate is 16.9% and Deposit interest rate is 11.5%

·        Mortgage Loans: Total outstanding balance of 9.4 trillion MNT (+23.4% annual change).