Mongol Bank announces state takeover of "Zoos" bank

Last Friday, Purevdorj, Governor of the Mongol Bank (central bank) announced Government decision to take over Zoos bank, one of 15 commercial banks of Mongolia.
Earlier, some shareholders of the Zoos bank said they intend to merge with Savings Banks of Mongolia. The Savings Bank of Mongolia is managed by "Just" Group, private Mongolian congolomerate with interests in meat processing and export, petroleum import and retail and construction sector. The group exclusively exports meat to Russia and reportedly has good ties with Russian businesses.

On Oct 12, major shareholders of the Mongol Post Bank and Savings Bank and top managers of the "Just" Group announced about merger of the two banks.The merger created one of largest banks in Mongolia with 324 branches and 1982 employees. Rumor about financial difficulty facing "Zoos" bank surfaced in Mongolia media by late October and confirmed by Mongol Bank Governor two weeks ago. "Zoos" bank is open shareholding company 25%+1 owned by European Bank of Reconstruction and Development (EBRD) and rest is owned by other Mongolian politicians and businessmen including Deputy Premier Enkhbold Miegombo. EBRD appointed American banker Benjamin Turnbull as CEO of the Zoos bank in July this year to secure its stake in the Zoos Bank. Benjamin Turnbull was Chief-Operating-Officer of Khan Bank (Agricultural Bank of Mongolia) under Peter Morrow, the CEO during early 2000.

According to Mongolian media sources, inability of "Mongol Gazar Holdings" (MGH) LLC , Mongolian gold mining company to repay back its loan from "Zoos"Bank was main cause for the bank to seek merger with Savings Bank. MGH is a private gold mining company owned by Myanganbayar, Mongolian tycoon. Reportedly, MGH took large loan using "Ovoot Tolgoit", gold deposit as collateral.

After reviewing request of the Zoos and the Savings bank to merge, Mongol Bank refused the merger and decided to take over. Main reason for refusal was the Savings Bank asked for state cash injection if it merges with Zoos bank.On the other hand, EBRD, as largest shareholder stood against merger with Savings Bank.

Mongol Bank appointed Official receiver in the Zoos Bank starting Nov 20 and announced that by Nov 25, the bank will be operational. Myanganbayar, largest borrower of the Zoos Bank is under investigation of Economic Police bureau for failing to repay the loan.

By Ganbat, MonInfo News Service