This case began with the first announcement of the state-owned policy bank, Development Bank of Mongolia. Based on this release, at least 58% of the loans were non-performing following the BoM inspection. Since last year, BoM has been taking a closer look to review few banks’ asset quality. However, they delayed it this year. On the other hand, BoM argued that this delay is vital for creating financial stability. This is because inflation has leapt to 14% especially on imported goods. Plus, the economy has been sinking for at least 3.8% this year.
It is really concerning for Mongolia.
The country almost pushed the banks to complete the IPO no matter what. It means that the investors would not be able to look at the full picture of a few banks finances, said IFR Asia. The International Monetary Fund announced that the BoM’s action to delay the initiated AQR raises concerns. It employs further problems in which the IPO listing process may create less transparency on few bank’s asset quality and financial positions.
The IMF added that parliament should delay the June IPO deadline at least until the uncertain economy is back to stability. Thus, AQR could complete the bank’s balance sheet. However the parliament is reluctant to do so. Therefore, it requires the second approach. The approach should allow BoM to go on with and complete the AQR before larger amounts of shares meet the 2023 issuance deadline. This way, they could decrease shareholder concentration.
Furthermore, the IMF urged the BoM to have stress tests modeling the impact of adverse conditions especially in the mining sector. This is because commodities like coal and copper cover the larger parts of Mongolia’s economy. After receiving suggestions from the IMF, BoM delayed the June IPO deadline as a goal to stabilize the financial situation. The Central bank has proposed extension for a year long for the listing deadline.
