A.Batsukh: False rumors about banks are really harmful
At the regular session on Thursday the Parliament discussed the ratification of the draft resolution on State Monetary Policy Guidelines of the year 2009.
As reported by the Governor A.Batsukh, since 2007 the Mongol bank has been responsible for formulating the State Monetary Policy Guidelines covering three years of period, clarifying the SMP each year and maintaining future perspectives. The objective of the State Monetary Policy Guidelines of the year 2009 is to maintain inflation rate which is measured by consumer price index at the average of 9.5 percent in the years between 2009 and 2011: at 12 percent at the end of coming year, at 10 percent in 2010 and at 6.5 percent in 2011. Coherent monetary and financial policy shall be extended in line with reducing inflation rates and preserving social living standards in the coming year.
The following objectives and goals, incorporated in the draft SMP Guidelines of the year 2009, are distinguished from those of previous years, informed the Governor A.Batsukh:
- Coherent monetary and financial policy shall be extended in line with reducing inflation rates and preserving social living standards;
- Draft law on modifications to the Bank law of Mongolia on establishing monetary policy council shall be formulated;
- IMF Transparency principles of monetary policy shall be obeyed and accessibility, efficiency and visibility of policy measures shall be ensured;
- Cooperation shall be extended with National Statistics Commission in studying monetary policy effects on inflation expectancy, labor market and real sectors;
- Digital systems shall be adopted in international currency market trading and participation of commercial banks in domestic gold market shall be boosted in sequence;
- Independence and transparency of the Mongol bank shall be strengthened and wrong inflation expectancy among the public shall be prevented;
- More attention shall be paid on increasing the awareness of public knowledge on economy.
- In framework of increasing financial sector efficiency:
- Loan and interest rate policies that focused on improving productivity and creating job places shall be encouraged;
- Transparency and reliability of the banking sector shall be maintained, beliefs of investors and clientele shall be increased and measures shall be taken to prevent financial crimes;
- Legal renovations in the banking sector shall be continued in line with creating opportunities for launching investment banking activities and adopting deposit insurance system;
- Prudential ratios and information on authority and shareholders shall be transparent to the public
Assistance shall be provided to Mongolian banks for extending activities to attract sources from foreign markets.
The main reason for inflation increase has been explained that salary has been increased via price-wage-price cycle, budget has been expanded had affected. After the report, Parliamentarians run Q&A and held discussions. The Mongol bank Governor A.Batsukh and the First Deputy Governor D.Enkhkhuyag answered their questions.
E.Bat-Uul: -There are rumors that commercial banks are going bankruptcy. Banks exist on customer belief and trust to place deposits there and if there is not such trust there will be no banks. This is a serious matter. In 1929 US Great Depression covered all. Where these rumors are from? According to the Criminal procedures law those who spread rumors with purpose should be punished. If the public is in panic, we’ll end up. How did you reject it?
A.Batsukh: -There are some slanders and we already claimed to the legal and compliance organizations. This is an ethical and moral issue. Some just guesstimate that those happening in the international market would happen in Mongolia as well. We take possible preventive measures. Nonsense rumors are really harmful and we are working on it.
E.Bat-Uul: -According to the Mongolian inflation studies of IMF and WB, inflation rate of 34 percent ws because of unreasonable increase of salary rather than foreign market effects but the report didn’t mention about it.
А.Batsukh: -This is true that salary increase by price-wage-price cycle affected on it.
B.Batbayar: -Risk tolerance of commercial banks should be enhanced. Can’t you protect the banks with $900 million in reserve?
J.Enkhbayar: -Commercial banks run for drawing sources by increasing deposit rates. Why? Are they going to become like savings and loan cooperatives. Due to lack of lending to herders in local areas, they have no their income sources.
D.Enkhkhuyag: -Banks are different from SLCs through its ways of making up assets and calculating risks. Now banks require feedback from deposit holders and transactions more than MNT 20 million and susceptible transactions are informed to the Mongol bank.
A.Batsukh: -Interest rates are related to inflation. If inflation stabilizes and decreases, deposit interest rates will not go up. A relatively high interest rate decreases demand. In rural areas lending is stagnant.
Ts.Davaasuren: -Extracted and handed-over gold amount differs. Hidden gold business flourishes due to windfall tax. Will the state take any measures? Is there any visions regarding gold and copper prices?
A.Batsukh: -Gold and copper prices would not undergo any major increase in 2009. Gold tends to go up and copper would go down.
S.Bayartsogt: -Ministry of Finance, Ministry of Justice and Domestic Affairs and National Tax Authority collaborates on hidden gold business. Regulations are being formulated on whether 68 percent windfall tax should be imposed on gold or not.
A.Tleikhan: -Why inflation is so high?
A.Batsukh: -We set a goal to maintain inflation rate at 6 percent in the year 2008. It goes up because monetary policy could not regulate. Inflation rate dropped down by minus 0.2 unit percent on September. It is possible to stabilize and decrease it in the future.
N.Ganbyamba: -World economic crisis gains ground and there were reasons not dependent upon Mongolbank. Inflation reached 2 digit numbers during the office term of former Parliament. The previous Parliament did not support Atar campaign. Don’t blame Mongol bank for everything.
Ch.Khurelbaatar: -According to the International financial organization, meat and flour price increase covered 2/3 of the inflation, budget expansion policy and petroleum price increase took 1/3. There was nothing dependent upon Mongol bank. Inflation might have reached if the Mongolbank didn’t tighten the policy rate. Could the monetary policy be loosened if the budget is cut by policy?
A.Batsukh: -Monetary policy needs to be loosened step by step.
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2 Responses to “A.Batsukh: False rumors about banks are really harmful”
By Roy Dongen on Nov 4, 2008 | Reply
The competent board of Mongol Bank headed by Mr. Batsukh has a sound and realistic view on the task and possibilities of Mongol Bank in the current economic situation.
And indeed the situation in Mongolia’s banking sector is hardly related to the credit crunch elsewhere in the world, something everyone should be grateful for.
Inflation is just one factor of measuring the economical situation (Mongolia’s economic growth is still far out higher than of the developed countries for example and Mongolia has its first deficit after 4 years unlike nearly every developed country) but of course it is too high. Luckily the Mongol Bank acted to curb inflation by raising interest rates and warning the government and the financial sector.
The government acted promptly by addressing the local agricultural sector to increase food production in Mongolia of which actions (in combination with a good and wet summer) we already see the first positive results.
Thus, in combination with decreasing petrol prices, increasing national agricultural production, minimal increases in government measures that lead to consumer spending inflation can be fought successful.
By question on Dec 3, 2008 | Reply
it was only a month ago and look at the banks now. No one sells US dollars and can’t give any money, even savings account!!!!!!!