Мэдээ / Feb 06, 2024

Trade and Development Bank JSC (TDB)’s First Deputy CEO O.Banzragch: TDB becomes the first Mongolian bank to reconnect to the Global US Dollar Payment Systems.

Since last July, Mongolia has fully complied with the 40 recommendations of the Financial Action Task Force (FATF) and further enhanced its evaluation. As a result, the continuous international remittance challenge is now being eased. In this regard, I spoke with Mr. Banzragch.O, the First Deputy CEO of TDB, which is the leading commercial bank in the international banking market.

Greetings and happy new year. Firstly, I would like to congratulate your esteemed colleagues who have successfully launched the bank’s IPO and transformed into a joint stock company. The fact that top commercial banks have become an open joint-stock companies is a significant event not only for the banking industry, but also for Mongolia as a whole. Shall we start our conversation about this?

Greetings and thank you. I would like to wish a happy new year to all the dear readers, our customers, counterparts, and shareholders. The systematically influential commercial banks launching the IPO signifies the new era of financial markets, which is also a crucial step in the development of the securities market in Mongolia.

As you are undoubtedly aware, TDB holds the distinction of being the pioneer and sole commercial bank to have conducted bond issuances in the international market. To date, we have successfully issued five bonds, raising medium and long-term funding with total amount of USD 1.14 billion, which was utilized to support the business activities of our valued customers. Notably, we have diligently honored our financial obligations, including the complete repayment of the most recent USD 500 million bond in 2020. By leveraging both internal and external funding sources, we are committed to providing essential financing to the prominent enterprises that constitute a driving force within Mongolia's economy. Through fulfilling this crucial responsibility, we continue to play an instrumental role in fueling economic growth and development.

TDB has a commendable track record of successfully issuing bonds in the international market and possesses substantial experience in operating within the international capital market. Building upon this foundation, our intention is to conduct the IPO in accordance with recognized international norms and standards. Our journey here will not cease in 2023, but we are striving to become an international joint-stock company through the international securities market.

As you have mentioned, we are well aware that TDB is the leading Mongolian international bank through its vast global relations and cooperations. Could you highlight some of the achievements of 2023?

Ever since its establishment, TDB has been a central and trusted figure Mongolia’s banking and financial environment. Through our 33-year long history, we have successfully fulfilled our role, and will continue to strengthen and expand our position. Undoubtedly, our intention is to foster extensive relations and collaboration with international organizations operating within Mongolia. Our primary objective is to provide unwavering support to businesses. Noteworthy examples of this commitment include our partnerships with prestigious entities such as the American and Australian Chambers of Commerce and Industry. Strengthening these high-level mutual relationships serves to enhance the business environment between the respective countries, ultimately benefiting both the business community and Mongolia's overall economy. To briefly highlight our international achievements in 2023,

  • In June 2023, TDB signed an official partnership agreement with the World Economic Forum for the first time from Mongolia, which is a major step in introducing Mongolia to global investors and entrepreneurs.
  • Additionally, TDB has participated in the China-Mongolia Economic and Trade Cooperation Forum and signed a "Strategic Memorandum of Understanding" with Bank of China. This presents opportunities for cooperation between the two countries in trade, finance, and economic development.
  • “Sustainable Finance Week 2023” was held in Mongolia in celebration of the tenth anniversary of the Mongolian Sustainable Finance Initiative, a globally recognized example of public-private partnership to scale up sustainable finance. The event was hosted by the Office of the President of Mongolia in partnership with the Mongolian Sustainable Finance Association (MSFA), International Finance Corporation (IFC), and many other partner organizations. With over 40 countries and regions represented, the international forum drew more than 1,000 participants, which was an important event at a strategic level of Mongolia.
  • TDB became the first and only Mongolian bank to establish U.S. cooperation and open USD direct clearing account at the The Bank of New York Mellon (BNY Mellon) since the country's inclusion in the Financial Action Task Force (FATF) grey list.
  • There are numerous outstanding works and so forth, however I have only briefly mentioned some highlights with high importance for Mongolia.

What difficulties have arisen in the operations of businesses since Mongolia entered the grey list of FATF? Especially for commercial banks?

The negative impact of Mongolia's inclusion in FATF's grey list has hit commercial banks tremendously, as FATF itself is an international financial crime organization that oversee measures to tackle money laundering and terrorist financing. As a FATF member country, Mongolia has certain obligations. However, from 2017, Mongolia came under the supervision of FATF and began to receive strict warnings and recommendations. At that time, Mongolia fulfilled 36 out of a total of 40 recommendations on combating money laundering and terrorist financing. In 2019, Mongolia entered the grey list of FATF due to half implementation of five recommendations.

Consequently, major U.S. and European banks have started to impose strict standards on Mongolian commercial banks, resulting in a restricted cooperation with U.S. banks in terms of international remittance.  Since then, most Mongolian banks have been making USD payments through a Singapore bank. In short, the process of USD payments took several days and transferred through various intermediary banks, which has resulted in an increased cost. This, however, is just one example of the many problems facing the banking and financial system.

It had a major impact for entrepreneurs, resulting in a deterioration of international business relations, difficulties for citizens to apply for visas to work in European countries, difficulties in traveling, shortage of currency reserves, and restrictions on transaction amounts. 

Last July, the Asia-Pacific Group on Money Laundering confirmed Mongolia's full implementation of FATF's 40 Recommendations and raised its evaluation. Did it make things better?

Yes, on July 13, 2023, the Asia-Pacific Group on Money Laundering improved the evaluation result of FATF 40 recommendations in the meeting of mutual evaluation follow-up reports. By improving its evaluation, Mongolia became the first country in Asia and the Pacific and the fifth country worldwide to fully comply with the FATF 40 Recommendations.

Since then, one of the positive changes is that for the first time from Mongolia, TDB has successfully started cooperation with the BNY Mellon, one of the top five commercial banks in the United States, by opening a USD correspondent account. TDB has successfully reconnected Mongolia to the global USD payment system as an internationally known and recognized bank. This is an opportunity derived from the endless hard work of our colleagues at the International Banking Department and Compliance Unit. TDB’s cooperation with BNY Mellon creates an opportunity to further develop our partnership with European banks in the future. It also signifies that Mongolia can implement international financial standards, restore the confidence of global investors and partners, and be a major impetus in positively showcasing the economy.

Earlier, you mentioned that since 2019, the process of making foreign settlement in US dollars took several days and the cost was higher due to intermediary banks. Can it be understood that it will change now?

Yes, the end result is customer satisfaction. By opening a USD correspondent account in the United States, TDB will remit US dollar transfers to more than one hundred countries more quickly at a low-cost. Thereby, immensely favorable opportunities will be available for companies and individuals doing business between Mongolia and the United States.

It indeed sounds incredibly good to me as a person who regularly transfers money to my son studying in the United States. Lastly, may I leave the last question open for you?

As of 2023, with over 300 correspondent relationships with international financial institutions and 80+ nostro accounts with major clearing banks around the world, TDB handles the majority of Mongolia’s total trade finance and international remittance services. We are dedicated to continuing our role as a catalyst for economic growth and be the global financial gateway for our customers. Thank you.

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