The Standing Committee on Economy reviewed the draft amendment to the Law on Procedures for Enforcing the Amended Banking Law on May 17.

The bill provides for the extension of the time required to convert some banks into open joint stock companies. In accordance with the Law on Procedures for Enforcing the Amended Banking Law, which was passed on January 29, 2021, some influential banks must be restructured into publicly-traded companies by June 30, 2022. However, the Standing Committee on Economy passed a resolution on May 3 this year, proposing Prime Minister L.Oyun-Erdene to extend the period for transforming banks into open joint stock companies.

In particular, the draft amendment extends the deadline for the transition of banks to an open joint stock company until June 30 next year.

Bill initiators informed that the Financial Regulatory Commission and Mongol Bank are reviewing proposals submitted by banks for restructuring in accordance with joint regulations.

Mongol Bank views it necessary to re-evaluate the quality of banks’ assets and take measures to reflect the results of the assessment in the financial statements of banks.

During the meeting, lawmaker Kh.Gankhuyag commented, “This deadline issue was settled after a lot of discussions. In accordance with the law, one person cannot own more than 20 percent stakes in a bank after December 31, 2023. There were reports that banks were embezzling state property and even influencing elections. To close this, the deadline was set for the banking reform. Therefore, this work must begin before the election cycle. However, this period is about to be extended. This is the biggest reform of the current Parliament. Why is it being postponed because of only four to five people? I don’t think there are enough grounds to postpone it.”

“Banks were able to launch an IPO last year. Last year, 2 trillion MNT was converted into cryptocurrencies. Two trillion MNT has been invested in worthless things. But today, bill initiators are saying that some banks do not have enough money to issue shares worth 500 billion MNT. When issuing an IPO, banks do not have to issue all their shares at first. It is possible to issue additional shares and clarify the ownership share before December 31, 2023. Some banks that have not been prepared in the past and do not want to do so will not be able to transfer 80 percent of their shares to others. In this way, the issue of deadline extension will be discussed again. So, I would like to say to Governor of Mongol Bank B.Lkhagvasuren to take courageous action on this issue,” he said.

At the meeting, Chairman of the Standing Committee on Budget Ch.Khurelbaatar criticized Mongol Bank for performing poorly. He noted, “Why didn’t Mongol Bank prepare banks’ quantitative risk assessment? Bill initiators explain that the deadline will be postponed in accordance with recommendations from the International Monetary Fund (IMF). I understand that the central bank has not done its job and is basically postponing it. Citizens are at risk of buying shares of bad banks. So you should have done the asset quality review in advance. B.Lkhagvasuren is too irresponsible.”

Governor of Mongol Bank B.Lkhagvasuren informed, “Banks have submitted their IPO plans to the central bank. They will be able to avoid potential challenges in the stock market if their legal deadline for offering their shares to the public on the primary market is extended. Moreover, the economic situation is not stable due to the international situation. Therefore, we believe that it is necessary to re-evaluate the quality of banks’ assets and take measures to reflect the results of the assessment in the financial statements of banks. The period extension is an extension to the deadline for banks to transform into an open joint stock company. It is not a postponement. If the five largest systemically influential banks offer their shares at the same time before June 30, there is a risk that the share price will be affected.”

Last April, IMF expressed its support for the idea of commercial banks launching IPO but advised to postpone this work in consideration of the current pandemic situation and the international crisis.