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The Bank of Mongolia, or Mongolbank, is the central bank of Mongolia. The main objective of the Bank of Mongolia is to ensure stability of the Mongolian tögrög. Within its main objective the Bank of Mongolia promotes balanced and sustained development of the national economy, through maintaining the stability of money, financial markets and the banking system.

In order to implement its objectives as set forth in this law, the Bank of Mongolia shall conduct the following activities:

  1. Issuing currencies into circulation;
  2. Formulation and implementation of monetary policy by coordinating money supply in the economy;
  3. Acting as the Government's fiscal intermediary;
  4. Supervision of banking activities;
  5. Organization of inter-bank payments and settlement;
  6. Holding and management of the State's reserves of foreign currencies.

History

A joint Mongolian-Russian bank, called the "Trade and Industry Bank of Mongolia" (Bank of Mongolia) was opened on June 2, 1924 in Altanbulag with a single branch.

At that time, the bank's capital was 260000 yanchaan (the currency of the period). It operated with 22 employees, 18 of which were Russian specialists and 4 of them were Mongolian. At the start, the joint bank was called by two names, "Trade and Industry Bank of Mongolia", and the "Bank of Mongolia", but it was named the Bank of Mongolia in official papers and documents.

Due to the absence of a national currency, the bank faced difficulties in fulfilling financial and monetary-credit policy in the first 18 months, and foreign currencies were used in circulation.

Consequently, according to the decision of Ikh Khural, the Government of Mongolia issued a resolution to conduct monetary reform on February 22, 1925. In accordance with this resolution, the Bank of Mongolia issued a new national currency, the Tögrög, comprising of 25% for precious metal and foreign stable currency, and 75% for marketable goods.

In 1954, the makeup of the Bank staff had increased to 98% (compare to 18% in 1924). On the basis of this extension, the former Soviet Union transferred its own share of capital and stocks in the Bank of Mongolia to the state of Mongolia. Following this, the Bank of Mongolia was renamed as the State Bank of Mongolia.

In 1991, a completely new 2 level banking system was established in Mongolia. Since its establishment, the Bank of Mongolia has been influencing and contributing efforts on the economy of the country, in maintaining the monetary policy aimed at the stabilisation of the value of the currency, and reduction of the inflation rate in the unstable transitional period.

Ongoing activities

Bank of Mongolia increased minimum capital requirement for banks periodically, and capital adequacy ratio of the banking sector was as high as 14-24 percent since 2000, which is 1.8-3 times higher than international minimum standards. With strong economic growth, private sector credit has increased significantly. Banks’ total outstanding loans were MNT60 billion which were issued to 1700 borrowers in 2000, compared to total outstanding loans of MNT 2,000 billion issued to 483 thousand borrowers in September, 2007. Ratio of non-performing loans fell to 3.5 per cent in September 2007, down from 30 per cent in 2000.[citation needed]

Financial sector is fully privatized, and now 16 banks,141 non-bank financial institutions and 131 savings and credit cooperatives are operating in Mongolia. Profitability of banks was high compared to most advanced countries, which have return on assets ratio of 2.7 per cent in 2007. And three commercial banks such as Khan Bank, Xac bank and Trade and Development Bank of Mongolia are also rated by the agencies on its products, assets and activities. They are on its way to issue securities to foreign market.[citation needed]

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