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The Central Bank of Mongolia

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The Central Bank of Mongolia

Overview:

The Bank of Mongolia is the central bank of Mongolia. The legal grounds of the central bank’s powers, its management, organization, activities and the relations concerning the implementation of state monetary policy are stipulated in the central bank’s law approved by State Great Hural (Mongolian Parliament).

The central bank of Mongolia is the organization in charge of implementing state monetary policy within the territory of Mongolia. Its primary objectives are to ensure stability of the Mongolian national currency-Togrog and to promote balanced and sustained development of the national economy, through maintaining the stability of financial markets and banking system.

The Bank of Mongolia conducts the following activities in order to achieve its objectives. These are:

   * Formulation and implementation of the monetary policy by regulating money supply in the economy
   * Acting as the Government’s fiscal intermediary
   * Supervision of banking activities
   * Organization of inter-bank payments and settlement
   * Holding and management of the State reserves of foreign currencies
   * Issuing currencies into circulation

The Bank of Mongolia prepares and submits the Monetary Policy Guidelines for next fiscal year to the State Great Hural and seeks for its approval. The Bank of Mongolia shall report to the State Great Hural on the implementation and the results of the Monetary Polcy Guidelines next year.

According to the State Monetary Policy Guidelines-2007, the Bank of Mongolia has planned to:

   * propose major principal amendments into existing Central Bank Law aimed at increasing transparency of the monetary policy decision making and change existing Banking Law with more emphasis on corporate governance and consolidated bank supervision .
   * apply new instruments to reduce the amount of short term-excess reserves at the inter-bank market
   * regulate the reserve requirements in a more flexible way
   * streamline the existing system of the Central Bank Bills(CBB)
   * introduce new banking services and products
   * improve the legal environment which will facilitate more efficient capital market
   * set the Deposit Insurance System
   * improve the ethics of the bank officers

The Bank of Mongolia works with credit rating agencies such as Fitch, Moody’s and Standard & Poor’s on the up-grade of Mongolia’s sovereign credit rating. The Standard & Poor’s has upgraded the sovereign credit rating of Mongolia to “B+Positive” in December 2006.

The Bank of Mongolia’s organizational structure is comprised of the management, 6 major policy departments, 11 divisions, 11 units, 1 special sub division, 1 clearing center, 17 local branches in provinces and a representative office in London.

History:

Starting with the first days after the victory of the people Revolution, Mongolia started to work out and fulfill many kinds of important measures to restructure its political, economic and social life in strict sequence. The most important issue in connection with this was to establish a national bank and a monetary-credit system as pushing aside the foreign dealers and usurers that used to predominate in the local market.

On the basis of appropriate preparation and carrying out many kinds of systematic measures, Mongolian-Russian Joint bank "Trade and Industry" bank of Mongolia (Bank of Mongolia) was newly opened in June 02, 1924 in Altanbulag with a single branch. At that time the bank's capital was 260000 yanchaan (currency in given period). It was operating with 22 employees totally, 18 of which were Russian specialists and 4 of them were Mongolian. From the very first, this joint bank was called by 2 names, such as Trade and Industry bank of Mongolia and the Bank of Mongolia, but mainly it used to be named the Bank of Mongolia in official papers and documents.

Due to absence of national currency, the bank was facing some difficulties on fulfilling the compiled financial and monetary-credit policy in the first 1.5 years, whereas the foreign currency used to be in circulation. Consequently, according to the decision of Ikh Khural the Government of Mongolia issued a Resolution to conduct monetary reform in Feb. 22, 1925. In accordance with this Resolution the Bank of Mongolia was enacted on authority to issue national currency "Togrog" in circulation which was approved to be consisted of 25 % for precious metal and foreign stable currency, 75 % for marketable goods. In 1954, Mongolian staff of the Bank was increased to 98 % as compared to 18 % in 1924. On the basis of this extension, former Soviet Union transferred to Mongolia it's own share of capital and stocks in the Bank of Mongolia in 1954. Since then the Bank of Mongolia was reorganized as the State bank of Mongolia.

In 1991 a completely new 2 level banking system was established in Mongolia: State bank of Mongolia "Bank of Mongolia" and commercial banks. Since it's establishment the Bank of Mongolia has been influencing and contributing real efforts on the economy of the country as maintaining the tight monetary policy aimed at the stabilisation of the value of the currency and reduction of the inflation rate in the unstable transitional period.

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