New Amendments to the Law of Mongolia on Central Bank
In our previous post, we introduced changes to the law on the governance of the Mongolia Central Bank. In this post, we will take a closer look at the most important changes.
Monetary Policy Committee
According to the new amendments to the Law of Mongolia on Central Bank, major changes are coming for the management committees’ roles. For instance, the Monetary Policy Committee will consist of 7 members including 4 adjunct members, and members will be appointed in terms of 6 years. Monetary Policy Committee will discuss and decide following matters: a) a draft of state monetary policy; b) determine interest of instrument of monetary policy; c) determine required reserves amount of bank, requirement of proper balance of percentage and amount. Form/ Formula of Monetary policy committee’s activity will be meeting.
The Monetary Policy Committee will decide matters via a majority vote of members participating in the meeting and the chairman will make a final decision in case of a tie. The meeting of the monetary policy committee will be held no less than 4 times a year. If President of Central bank of Mongolia or not less than 3 members of committee proposed to hold a meeting, special meeting will be conducted. Monetary policy committee’s decision will be issued by resolution type/form/format and certified by the signature of the chairman of meeting.
Monetary Policy Instrument
The Central Bank of Mongolia will use the following instruments to implement the state monetary policy.
1) Setting of the amount and proportion of compulsory reserves to be maintained by banks;
2) Grant a credit to the banks and use financial instruments;
3) pursuing a unified policy on interest rate;
4) conducting open market operations;
5) imposing a ceiling on credit outstanding to be granted by banks.
The Central bank will develop/draft the procedure for the determination, assessment, supervision of the required compulsory reserves of banks.
Supervision Committee of Bank:
Supervision Committee of Bank will discuss and issue recommendations on the following matters regarding to implement power of Central Bank to supervise on the banks.
- To implement to supervise banks, regulate bank’s activity pursuant to the law, a draft of resolution, methodology, procedure, guidance, rule in connection with enforcement measure to the bank;
- Report on the supervision of the banks;
- Proposal to grant credit to the bank, Corporation of Savings Insurance in order to stabilize banking and financial system under the law.
The composition and rule of Supervision committee of Bank will be approved by the President of Central Bank of Mongolia.