Mongolia’s Central Bank Takes Over Second Lender in a Year

By Rob Delaney

Dec. 11 (Bloomberg) -- Mongolia’s central bank took control of a second commercial lender in a year after a drop in property prices in the central Asian nation’s capital Ulaanbaatar.

Bank of Mongolia put Zoos Bank JSC into receivership on Nov. 20 after determining that it exceeded limits on loans to individual clients, the central bank said in a Nov. 30 statement posted on its Web site. Bank of Mongolia put Anod Bank JSC into receivership on Dec. 10, 2008, in response to “illegal actions” by the owners, according to the statement.

Mongolia, landlocked between China and Russia with a population of 2.7 million, is suffering from a downturn in exports caused by the global recession. A decline in prices for copper, cashmere and other commodities exported by Mongolia has slowed investment in the country.

“In the last few years, banks gave a lot of loans to construction companies and individuals looking to buy property, and this created a bubble,” Sedvanchig Tserenbat, a lawmaker who sits on the parliamentary budget committee, said in a Dec. 9 interview. The government had to issue 180 billion tugrik ($123.5 million) in bonds to recapitalize the lenders, which have been merged under government control.

The value of Mongolia’s exports in the first 11 months this year fell 28 percent to $1.68 billion, the National Statistics Office said in a statement yesterday.

Mongolia’s non-performing loans rose fivefold in the first 11 months this year to 456 billion tugrik, up from 87.1 billion tugrik a year earlier, according to the statistics office statement.

Metals Prices

“When the metal prices started to fall, the property buying stopped and that left oversupply,” Unenbat Jigjid, executive director of the Mongolia chapter of the Corporate Governance Development Centre, and the country’s central bank governor from 1996 to 2000, said in a Dec. 9 interview.

Real estate prices in Ulaanbaatar fell to $800 a square meter in August from $1,100 in mid-2008, according to a September report released by Eurasia Capital, a Singapore-based investment group that buys resource assets in Central Asia, China and Russia.

To contact the reporters on this story: Rob Delaney in Ulaanbaatar at

Last Updated: December 11, 2009 01:39 EST (Bloomberg news Service)


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