Mongolia’s banking sector faces heightened systemic risks driven primarily by corporate interconnectedness and rapid consumer credit expansion, according to an August 17 report by CreditSights, a Fitch Solutions company. Following field visits with financial intermediaries, regulators, and issuers in Ulaanbaatar, the firm emphasized that intricate relationships connecting commercial banks, non-bank financial institutions, major corporations, and controlling families represent a core vulnerability in the country’s financial ecosystem. Nevertheless, analysts noted encouraging signs in recent regulatory initiatives aimed at tackling these complex corporate dependencies and mitigating overall systemic exposure.

At the same time, the fast-paced growth of non-bank financial institutions, coupled with regulatory fragmentation, has fueled an escalation in consumer lending risks. This credit boom coincides with persistent difficulties in managing corporate non-performing loans, which remain elevated largely due to judicial inefficiencies that slow down bad debt resolution. While state officials have proposed creating a national asset management company to handle bad loans, CreditSights expressed limited confidence in the plan, pointing to ongoing uncertainties regarding its operational viability, ownership framework, and ability to attract private investor participation.

Click here for more on Banking