BILL ON BANKING GUARANTEE TO BE AMENDED

Ulaanbaatar, Mongolia, /MONTSAME/ Wednesday's cabinet meeting discussed and backed a draft amendment to the law on issuing a guarantee for money of bank deposit. The amendment will be urgently submitted to the State Great Khural.
Since commercial banks issued guarantee for money of bank deposit, they have distorted clauses of the relevant law for illegal purposes. Furthermore, commercial banks have slackened their crisis management and have placed their capital in other risky banks in spite of financial and paying capacities of client banks, because the state guarantees the most amount of capital of the commercial banks. These negative aspects influence badly a stability of the banking system. Those banks not having ability-to-pay or who are prone to this risk have been offering high interest to clients and accumulating big amounts of capital exceeding their ability to bear risks, with a negative effect to reducing the average level of loan interest of banking system.
In accordance with the current law, the state guarantee involves all the loans and the active capital like loans at certain banks, guarantee, guaranteed people and current accounts. It increases proper conditions for the credit recipients who have no ability-to-pay to avoid paying loans and take responsibilities.
Thus, the government considered that it is necessary to reflect additional clauses in the law to limit the capital types and size to be guaranteed by the state. Moreover, commercial banks guaranteed by the state must place a deduction that is equal to one percent of the current and account residues in the governmental special account every year, according to the amendment. It has a great importance in reducing the capital expenditure of the state in case of a difficulty emerged in the banking system.
B.Khuder