In July of last year, Mongolia successfully fulfilled all 40 recommendations of the Financial Action Task Force (FATF), resulting in an improved rating. This development has positively impacted previously challenging issues related to international payments. On this topic, we spoke with O. Banzragch, First Deputy CEO of Trade and Development Bank (TDB), a leading commercial bank in international relations and collaboration.
Journalist: Hello! Happy New Year to you. First of all, congratulations on TDB’s IPO last year, making it a publicly traded company. The fact that major commercial banks have become public companies is a significant event not only for the banking sector but also for Mongolia as a whole. Let’s start our discussion with this milestone.
O. Banzragch: Hello, and thank you. I’d like to extend New Year’s greetings to you, as well as to our readers, customers, partners, and shareholders. The move by systemically important commercial banks to issue shares and become public companies marks the beginning of a new era in the financial market. It is also a significant step forward in the development of the capital market.
As you may know, TDB is the first and only commercial bank in Mongolia to issue bonds in the international market. We have issued bonds five times, raising a total of $1.14 billion in medium- and long-term funding, which has been used to finance our clients' businesses. Our most recent bond, worth $500 million, was fully repaid in 2020. TDB plays a vital role in Mongolia's economy by providing necessary financing for major businesses through domestic and international resources, acting as a driving force for economic growth—a role we are committed to continuing.
Building on our extensive experience in issuing bonds and operating in international capital markets, we aimed to conduct our IPO in accordance with global standards and practices. Becoming a publicly traded company in 2023 is not the end of the road for us. We are working to expand further and become a publicly listed company on international stock exchanges. In other words, TDB’s next destination is the international capital markets.
Journalist: As you mentioned, TDB is widely recognized as Mongolia’s top international bank, known for its extensive global relations and collaborations. What were the notable achievements in this area for TDB in 2023?
O. Banzragch: Since its establishment, TDB has served as Mongolia's financial ambassador, backbone, and trusted representative in the international arena. Over the course of its 33-year history, the bank has fulfilled this role successfully and continues to strengthen and expand its position.
We also prioritize maintaining broad relationships and collaborations with international organizations operating in Mongolia. The goal is simple—to support businesses. For example, we’ve established partnerships with organizations such as the American and Australian Chambers of Commerce. By fostering high-level collaborations, the business environment between the two countries improves, ultimately benefiting businesses and Mongolia’s economy.
Let me highlight a few of TDB’s international achievements in 2023:
- In June 2023, TDB became the first bank in Mongolia to sign an official partnership agreement with the World Economic Forum. This is a crucial step in raising global awareness about Mongolia among international investors and business leaders.
- TDB participated in the Mongolia-China Financial Cooperation Forum and signed a Strategic Cooperation Memorandum with the Bank of China. This opens up new opportunities to expand trade, finance, and economic collaboration between the two countries.
- To mark the 10th anniversary of Mongolia’s Sustainable Finance Program, TDB co-organized the Sustainable Finance Week 2023 alongside the President’s Office of Mongolia, the Mongolian Sustainable Finance Association, the International Finance Corporation, and other supporting partners. This high-level event included a leadership program and policy discussions, bringing together more than 1,000 delegates from over 40 countries, establishing itself as a key strategic initiative for Mongolia.
- TDB became the first and only commercial bank in Mongolia to collaborate with the United States following Mongolia's removal from FATF's grey list.
These are just a few highlights of our impactful initiatives in 2023 that hold significant importance for Mongolia.
Journalist: What challenges did businesses face when Mongolia was placed on FATF's grey list? How did it affect commercial banks in particular?
O. Banzragch: The negative impact of Mongolia being placed on FATF's grey list was significant for commercial banks. FATF is an international organization focused on combating money laundering and financing terrorism. As a member country, Mongolia has specific obligations to fulfill. However, since 2017, Mongolia was under FATF’s observation and received strict warnings and recommendations. Out of FATF's 40 recommendations, Mongolia had implemented 36 to some extent, but five were only partially addressed. This led to the entire country being placed on the grey list in 2019.
As a result, stricter criteria were imposed on Mongolian commercial banks by U.S. and European banks, and no U.S. bank was willing to facilitate USD payments for Mongolia. Since then, most banks in Mongolia have routed USD transactions through banks in Singapore. This made the process slower, taking several days, and increased fees due to the involvement of intermediary banks. This is just one example of the challenges the financial system faced.
For businesses, international relations became strained. For individuals, it became harder to apply for work visas or travel to European countries. Currency reserves dwindled, and there were restrictions on transaction amounts, among other difficulties.
Journalist: In July last year, the Asia-Pacific Group on Money Laundering confirmed Mongolia’s full implementation of FATF's 40 recommendations, improving the country’s rating. Has this brought positive changes?
O. Banzragch: Yes, on July 13, 2023, the Asia-Pacific Group on Money Laundering reviewed Mongolia’s progress report on FATF's 40 recommendations. During this meeting, the previous “partially implemented” rating was upgraded to “fully implemented,” confirming Mongolia’s technical compliance. With this, Mongolia became the first country in the Asia-Pacific region and the fifth country globally to achieve full implementation of FATF's recommendations.
One of the positive outcomes since this milestone is that TDB has become the first Mongolian bank to establish a partnership with Bank of New York Mellon, one of the top five U.S. commercial banks, and open a nostro account. As a globally recognized and trusted bank, TDB successfully initiated this partnership, reconnecting Mongolia to the global USD payment system. This is a significant achievement, made possible by the tireless efforts of our International Banking Division and Compliance Department.
Collaborating with a top U.S. bank not only strengthens ties with the U.S. but also serves as a bridge for future partnerships with European banks. Moreover, it demonstrates to the world that Mongolia can adhere to international financial standards, restoring investor confidence and positively reflecting on the economy.
Journalist: Earlier, you mentioned that since 2019, USD payment processes have been slow and costly due to reliance on intermediary banks. Can we expect this to change now?
O. Banzragch: Absolutely. At the end of the day, our ultimate goal is customer satisfaction. By opening a nostro account in the U.S., TDB can now process USD transfers to over 100 countries more quickly and at lower costs. This reopens favorable opportunities for companies and individuals engaged in business between Mongolia and the U.S., marking a significant step forward.
Journalist: As someone who regularly sends money to my son studying in the U.S., this is very encouraging news. Let me leave the final question open for you.
O. Banzragch: As of 2023, TDB has established correspondent relationships with over 300 international financial institutions and maintains more than 80 nostro accounts with major clearing banks worldwide. We handle the majority of Mongolia's international financing and payments. Moving forward, we will continue to lead the banking sector by expanding and enhancing our correspondent banking operations globally. Our goal remains to be a financial bridge for our customers, helping them connect with the world.
Thank you.
Interview by B. Od