Mongolia Moots Asset Management Company To Tackle Bad Loans

The Mongolian government is considering the establishment of an asset management company before the end of the year to offload onerous non-performing loans from domestic banks’ balance sheets, the Financial Times reported. Mongolia secured an International Monetary Fund financial package last month to slash a bulging debt load. That package included a requirement for an audit of the domestic banking sector as part of its fiscal discipline guidelines. The IMF’s three-year, $434m loan unlocked financial support from the Asian Development Bank, the World Bank, Japan and South Korea, while the People’s Bank of China extended existing swap lines with the Bank of Mongolia, the central bank. The total financial package amounts to $5.5bn, helping Mongolia service external debt repayments of about $2bn through to 2022. The 16 banks serving Mongolia’s $10bn economy are small, pay extraordinarily high deposit rates and are burdened with bad debt built up during the mining industry’s previous boom and bust cycle. The asset management company would help banks offload NPLs and release capital that is held against bad loans, which many banks prefer to roll over rather than recognise. Read more.