Mon­gol Bank de­tails more about up­com­ing as­set qual­ity re­view


As part of the ex­tended fund fa­cil­ity pro­gram that Mongolia en­tered into with the In­ter­na­tional Mone­tary Fund (IMF), state of­fi­cials re­ported that a com­pre­hen­sive di­ag­no­sis of the bank­ing sys­tem would be un­der­taken. Mon­gol Bank has an­nounced that it has cho­sen the Pricewater­house­Coop­ers (PWC) branch in the Czech Repub­lic to con­duct an as­set qual­ity re­view.

The as­set qual­ity re­view is part of a larger ef­fort to as­sess the fi­nan­cial sound­ness and re­silience of the coun­try. This will be fol­lowed by re­cap­i­tal­iza­tion and re­struc­tur­ing as needed. Of­fi­cials be­lieve that the reg­u­la­tory and su­per­vi­sory frame­work of the bank­ing sys­tem will be strength­ened as a re­sult of the re­view.

B.Tu­mentsen­gel, a se­nior econ­o­mist at Mon­gol Bank, gave an in­ter­view to dis­cuss in more de­tail about the up­com­ing as­set qual­ity re­view.

Can you please give us a con­cise ex­pla­na­tion into as to why the as­set qual­ity re­view is nec­es­sary and why it is be­ing con­ducted by a for­eign firm?

In or­der to get out of the cur­rent eco­nomic cri­sis and to sta­bi­lize the econ­omy, the gov­ern­ment reached an agree­ment with IMF to im­ple­ment the ex­tended fund fa­cil­ity pro­gram. An in­te­gral part of the pro­gram is to en­sure the health of the bank­ing sec­tor and main­tain a model of sus­tain­abil­ity. In or­der to ac­com­plish this, an as­set qual­ity re­view was needed to de­ter­mine the risk ca­pac­ity of the bank­ing sys­tem and as an ex­ten­sion the fi­nan­cial sys­tem.

IMF re­quired us to con­tract an in­ter­na­tional firm that has ex­pe­ri­ence in con­duct­ing as­set qual­ity re­view that is up to the stan­dards of the fund.

What fac­tors were taken into ac­count when se­lect­ing a firm to con­duct the as­set qual­ity re­view?

When se­lect­ing a firm to con­duct the re­view, we took into ac­count the stan­dard pro­ce­dures used in OECD (Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment) coun­tries and wanted to select a rep­utable firm that had ex­ten­sive ex­pe­ri­ence con­duct­ing such re­views.

Can you give us more in­for­ma­tion about PWC?

The se­lec­tion process was done in com­pli­ance with all the rel­e­vant Mon­go­lian laws re­gard­ing au­dit­ing. In the end, the Pricewater­house­Coop­ers branch in the Czech Repub­lic was se­lected to con­duct the re­view. PWC is one of the Big Four au­di­tors, along with Deloitte, EY and KPMG. Dur­ing the se­lec­tion process, PWC proved to us that it had the tech­ni­cal and fi­nan­cial ca­pac­ity to con­duct such a re­view.

Are the cur­rent stan­dards in the Mon­go­lian bank­ing sec­tor up to par with the stan­dards that the as­set qual­ity re­view re­quires?

Mon­gol Bank will im­ple­ment the Basel Stan­dards ap­prove by the Bank for In­ter­na­tional Set­tle­ments (BIS) when con­duct­ing re­views on the bank­ing sec­tor. When con­duct­ing the as­set qual­ity re­view, we will ad­here to in­ter­na­tional stan­dards and com­mon prac­tice ap­proved by the Euro­pean Cen­tral Bank.

There has been some skep­ti­cism that the re­sults of the re­view might de­crease trust in com­mer­cial banks. Did Mon­gol Bank and IMF dis­cuss the pos­si­bil­ity of this and if so how will this be ad­dressed?

The as­set qual­ity re­view will re­veal what steps and ac­tions are needed in the fu­ture in or­der to sta­bi­lize and make the flow of fi­nanc­ing and loans sus­tain­able. Mon­gol Bank be­lieves that the re­sults of the re­view will in­crease the trust of investors and cus­tomers in banks.

At what stage is the process of the as­set qual­ity re­view in now?

The process of the as­set qual­ity re­view is on sched­ule and is in progress.

How many stages will the re­view have and ex­actly which doc­u­ments and re­ports will be ex­am­ined as part of the re­view?

The re­view will take into ac­count all of the rel­e­vant fi­nan­cial state­ments and re­ports of banks.

In the event that a bank re­ceives an un­sat­is­fac­tory grad­ing, will they have the op­por­tu­nity to im­prove on their short­com­ings?

The as­set qual­ity re­view will re­veal cor­rec­tive ac­tions needed in the bank­ing sec­tor, and the re­view will take into ac­count any nu­ances in the Mon­go­lian bank­ing sec­tor and prob­lems that may arise dur­ing the process.

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