Mongolia is still struggling to finish its IPO, despite the stock index performing well a year ago. The country aims at transforming its banking sector by completing an IPO. Last year in 2021, Mongolian Stock Exchange TOP20 index gained 130%. It was a near-doubling of the bourse’s market capitalization reaching to Tug6trn or $1.9bn. The country expected the IPO could help transform the banking sector at least by the first half of this year.
Previously in the early month of 2021, the country launched the amendment to banking law requiring all domestic banks (D-SIBs) to enter listing at least by June 2022. D-SIBs here must have at least nine directors, in which the three of them should be independent. The five current D-SIBs are Khan Bank, XACBANK, and State Bank. Golomt Bank, Trade and Development Bank of Mongolia. There is a punishment for D-SIBs bank failing to list by the due month.
The punishment could range from a suspension of dividends to being placed into administration. The part of the requirements also allows individual shareholders and related parties to reduce their stakes no more than 20% by 2023. Currently, there is only one D-SIB with a shareholding structure meeting the requirement. Xac Bank currently meets 20% of the cap. By the end of 2021, BOGD Bank is the first Mongolian bank to IPO for 12 years. The bank sold a 20% stake to the IPO through Ard Securities as the lead underwriter.
BOGD would not be in the IPO-required listing, because the bank is not D-SIB. However, the Tug31.8bn deal ignited hopes that D-SIBs would complete their IPOs based on the deadline. Early this year, there was a shock in the financial system. The Development Bank of Mongolia, the state-owned bank discovered that 58% of the loans were under performing. This is actually following the BoM inspection in December 2021.
