Central bank wants small commercial banks to merge

Aug 1 • Banking, News • 661 Views • No Comments on Central bank wants small commercial banks to merge

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According to the new decree of the President of the Mongol bank, the capital reserves of the Commercial banks are to be doubled to minimum of MNT 16 billion by May 2013. Mongolia has 14 commercial banks and of which the 7 banks already achieved the target of MNT 16 billion. If the commercial banks could not reach the target within the deadline, the banks will be forced to shut or be merged. According to the calculations and predictions of Mongol bank, the commercial banks can all fully achieve the target by increasing their revenue and profit.

Law on bank was first approved in 1991 and the minimum capital reserves of commercial banks were set at MNT 50 million. Amendments to the law on bank were made in 1995, 1999, 2001 and 2006 respectively. President of Mongol bank started to set the minimum capital reserves of commercial banks since the year 1999.

There are few reasons behind this change. D.Lkhagvasuren, Inspection Director of Mongol bank explained that Mongolian commercial banks should be financially strong when dealing with big investments and cooperating with large mining companies. The move by the central bank clearly wants smaller banks to merge in a way to reduce risks. 14 is clearly a big number for country like Mongolia with small population.

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