The Financial Regulatory Commission (FRC) is required to report annually to Parliament's Standing Committee on Economic Affairs. The Commission’s annual report for 2020 was discussed and summed up at the latest meeting of the Standing Committee on Economic Affairs.
The FRC monitored the activities of 3,260 regulated entities, 2,473 insurance agents, and a total of 5,733 citizens and legal entities, within the scope of its legal responsibilities. The total number of regulated entities had increased 2.5 times since 2016.
The Law on the Legal Status of the FRC, the Law on Business Licensing, and the Law on Combating Money Laundering and the Financing of Terrorism (AML/CFT) were amended to provide for FRC’s oversight of the related activities in non-financial businesses. To provide for the implementation of AML/CFT laws, the registration of real estate brokers and dealers in precious metals and stones was completed in 2020
Mongolia was removed from the ‘grey’ list of countries with strategic shortcomings (in CML/CFT) at the Financial Action Task Force’s (FATF’s) General Assembly on 23 October 2020. The FRC had taken measures to implement remedial tasks (assigned by the FATF) in four areas. The FRC also played an important role in Mongolia’s removal from the European Union’s ‘black’ list on 9 December 2020.
During the Standing Committee’s meeting, Mr D. Bayarsaikhan (Chairman, FRC) emphasized that the financial market had reached 15.4% of GDP in the reporting year, an increase of two percentage points from the previous year and 4.5 percentage points compared to 2016.
Some of the highlights - of each financial sector - in 2020, were as follows:
Capital market: Since 2019, it increased by 12.5% and reached MNT 3.0 trillion. Total trading volume reached MNT65.4 billion and liquidity reached 18 %. Within the market, shares accounted for 82.5%, investment funds for 7.8%, corporate bonds for 8.9% and government securities for 0.9%.
Insurance market: Since the previous year, insurance premiums increased by 2.5% to MNT201.5 billion, the reserve fund increased by 4.8% to MNT173.5 billion, and MNT59.8 billion was spent on compensation. Insurance depth (a measure of insurance coverage) reached 0.57 %, an increase of 0.01 percentage points, and insurance density increased by 0.7% from the previous year, to reach MNT61,117.
Non-bank financial institutions (NBFIs): Since 2019, the total assets of NBFIs increased by 16.0% to MNT 2.0 trillion, the number of customers increased by 2.8 million and the number of borrowers increased by 1.9 times (to 788, 100). Most (88.4%) customers and 40.0 % of borrowers, received fintech services. Outstanding loans of NBFIs reached MNT1.3 trillion, of which 84.8 % were personal loans.
Savings and credit cooperatives (SCCs): The total assets of the sector increased by 15.0% from the previous year, to MNT256.0 billion. The total number of SCCs’ members in 2020 increased by 2.4% (from the previous year) to 72,651.
Non-financial business: 167 licensed real estate brokerage companies were active in 2020. A total of 610,300 square meters of real estate worth MNT281.9 billion was sold, purchased, and transferred through intermediaries. Also, a total of 88,600 square meters of real estate - worth MNT 39.9 billion - was leased. Thirty legal entities and 399 citizens trading in precious metals and stones (or articles made from them) were operating in 2020 with licenses. The value of their operations was MNT577.0 billion in sales and MNT 624.2 billion in purchases.
Last year, the financial market faced a risky and difficult situation due to the pandemic. The FRC undertook a number of steps to implement the Ensuring Financial and Economic Stability during the pandemic of Covid-19 infection and Loan Interest Rate Reduction Strategy. For example, the Procedure for over-the-counter market was approved; to raise funding for small and medium enterprises from the over-the-counter market, by creating favorable conditions for raising funds. In addition, for the first time, market capitalization reached MNT3.0 trillion due to the dual securities registration system, which facilitates the free exchange and trading of securities between the two exchanges.
2020 also saw the successful conversion of certain shares of Erdene Resources Development Corporation JSC, which was listed on the Stock Exchange to the Canadian Stock Exchange; opening a new page in the development of the stock market.
Mr D. Bayarsaikhan (Chairman of the Commission) said that he will work to support investment. He also stated that ‘In order to continue to attract investors to the stock market, we need to improve the legal environment of investment funds and create a form for many options for legal entities. In addition, attracting large international financial institutions with high credit ratings to the market, which can have a significant impact on the development of our country's stock market’.
In connection with the FRC’s annual report for 2020, Mr J. Ganbaatar (Chairman, Standing Committee) Mr T. Dorjkhand, Mr D. Batlut, and Ms M. Oyunchimeg (members of the Standing Committee) asked questions and received comments from the leadership of the Commission.