3. GDP Growth (USD billions)
Source: Bank of Mongolia, NSO, World Bank DataBank
Since negative growth in 2009, Mongolia has made strong economic growth.
In 2011, real GDP grew by 17.5%. One of the fastest in the world.
Mongolia Economy
1.491
1.980
1.600
2.300
3.288
4.321
5.226
6.156
6.516
7.684
0.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
2007
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
2.6 2.8 2.8 3.0
3.5 3.7
4.4
5.1
5.6
6.4
0
2
4
6
8
10
2007
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
3
GDP per Capita (USD)
4. Source: Bank of Mongolia, NSO, World Bank DataBank
Industry growth rates were 42.5% in wholesale and retail, 16% in
manufacturing, 14% in construction, and 8.7% in mining; Supply Chain Effect
GDP Composition by Sector (2011)
20%
13%
10%
7%7%
7%
3%
33%
Mining & quarrying
Agriculture
Wholesale and retail trade
Transportation and
storage
Manufacturing
Real estate
Government
Others
Mongolia Economy
4
9. Mongolia Macroeconomic Overview
Inflation (CPI) MNT against USD
9
1000
1100
1200
1300
1400
1500
1600
2008Mar
Jun
Sep
Dec
2009Mar
Jun
Sep
Dec
2010Mar
Jun
Sep
Dec
2011Jan
Mar
Jun
Sep
Dec
2012Jan
Mar
Jun
Sept
Source: Bank of Mongolia, NSO, World Bank DataBank
0
5
10
15
20
25
30
35
40
2008m01
2008m04
2008m07
2008m10
2009m01
2009m04
2009m07
2009m10
2010m01
2010m04
2010m07
2010m10
2011m01
2011m04
2011m07
2011m10
2012m01
2012m04
2012m07
Core Inflation Inflation
*Meat, milk and vegetables are excluded from consumer
basket to calculate core inflation.
*
10. 14 commercial banks, 1 development bank, 195 small NBFIs,162 savings & credit
cooperatives, and 17 insurance companies.
2 foreign bank representative offices.
90-95% percent of financial sector assets are dominated by commercial banks.
Top 3 banks (Khan, TDB, Golomt) make up 70% of total assets.
Top 5 banks (Top 3, Xac, and Savings) make up 87% of total assets.
Banking Sector
Source: Banks’ websites
10
Top 3
Banks
70%
Other
Banks
30%
Top 5
Banks
87%
Other
Banks
13%
Top 3 Banks’ Assets (2012 2Q) Top 5 Banks’ Assets (2012 2Q)
11. Banking Sector Assets vs. GDP (USD millions)
11
Banking Sector
69%
56%
68%
75%
87%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2007 2008 2009 2010 2011
GDP Banking Sector Assets Banking Sector Assets to GDP
Source: Bank of Mongolia, NSO
12. GDP and Loan Growth (USD millions) GDP and Deposit Growth (USD millions)
Banking Sector
In 2011, sector loans grew 79% and deposits grew 42% while GDP grew 17.5%.
2012 3Q, loans grew 23% and deposits grew by 19%.
12
Source: Bank of Mongolia, NSO
25.3%
-6.6%
26.0%
79.6%
8.9%
-1.3%
6.4%
17.5%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2008 2009 2010 2011
Loans Loan Growth GDP Growth
23% 25%
55%
42%
8.9%
-1.3%
6.4%
17.5%
-10%
0%
10%
20%
30%
40%
50%
60%
0
1000
2000
3000
4000
5000
6000
2008 2009 2010 2011
Deposits Deposit Growth GDP Growth
16. Regulatory Development in Financial Sector
Key Prudential Ratios set by Bank of Mongolia
Liquidity Ratio > 25% Liquid Assets / Total Deposits
Capital Adequacy Ratio >12.5% (Tier 1 + Tier 2 ) / Risk Weighted Assets
Tier 1 Capital Adequacy > 7% Tier 1 / Risk Weighted Assets
Reserve Requirement >12% of total deposits (MNT and FC)
Credit Concentration
Total Related Parties Lending < 20% of total capital
Single Related Party Lending < 5% of total capital
Single Borrower Lending < 20% of total capital
Foreign Exchange Risk
Open Position on Single Currency < 15% of total capital
Total Open Position < 40% of total capital
16
Source: Bank of Mongolia,
17. Regulatory Development in Financial Sector
Increase bank’s statutory fund from MNT 8 billion to MNT 16 billion
effective May 2013.
Blanket Deposit Guarantee Law, to expire in November 2012, will be
extended one more year.
Deposit insurance system is planned to be introduced.
Additional capital requirement on systematically important banks whose
assets are greater than 5% of the total assets in the system.
30 Jun 2012 31 Dec 2012 30 Jun 2013
Tier 1 Capital
Adequacy 7.0% 8.0% 9.0%
Capital Adequacy
Ratio 12.5% 13.0% 14.0%
Banking Sector Regulatory Changes
17
Source: Bank of Mongolia,
18. Regulatory Development in Financial Sector
Financial Sector Regulatory Changes
Parallel Development of Capital Markets
A new securities law has been submitted to Parliament in order to
develop and regulate securities and capital markets.
Millennium IT trading system is introduced with T+3 for securities
settlement.
A new Investment Fund law is being developed by Financial
Regulatory Commission.
Regulation of Custodian Operation is under review.
18
Source: Financial Regulatory Commission, MSE
19. Challenges
Small size of capital of the banks
Underdeveloped interbank market, capital markets, custody service
Lack of long term MNT funding source, maturity gap mismatch
Underdeveloped derivative market and hedging instruments
Legal and regulatory framework
e.g. movable assets pledge, non-banking finance business
financial holding company
Risk management and system investment
Compliance, AML, KYC
Governance and transparency
19
20. Month End Balance of Interbank Transactions (USD thousands)
20
0%
1%
2%
3%
4%
5%
6%
7%
0
20,000
40,000
60,000
80,000
100,000
120,000
05.01.31
05.03.31
05.05.31
05.07.31
05.09.30
05.11.30
06.01.31
06.03.31
06.05.31
06.07.31
06.09.30
06.11.30
07.01.31
07.03.31
07.05.31
07.07.31
07.09.30
07.11.30
08.01.31
08.03.31
08.05.31
08.07.31
08.09.30
08.11.30
09.01.31
09.03.31
09.05.31
09.07.31
09.09.30
11/30/2009
01/31/2010
03/31/2010
05/31/2010
07/30/2010
09/30/2010
11/30/2010
01/31/2011
03/31/2011
05/31/2011
07/30/2011
09/30/2011
11/30/2011
01/31/2012
03/31/2012
05/31/2012
07/30/2012
Interbank transaction volume / banking sector assets
Interbank transaction in MNT
Interbank transaction in FC
Interbank transactions
had an upward trend till
economic crisis
Daily interbank transaction size is
no more than 6% of the total assets
Source: Bank of Mongolia,
Interbank transactions: repo, overnight, loans,
deposits, and central bank bills