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Why did the Government need to pass new rules of the Bank?
The Government had adopted a set of rules for the Development Bank before Parliament had passed the law on the Bank. After this law was passed, it became necessary to amend some rules so that there would be no contradiction between them and the law. For example, the Government had restricted the amount of loan the bank could issue to 20% of its total capital. This is what commercial banks do, but is not apt for a development bank, whose main purpose is to finance large and long-term projects. Other countries where development banks have been successful adopted special regulations for them, and this is what the Government did last week.
What changes were made in the first rules?
The main thing was to make it clear that the Development Bank would not grant small loans and would finance large projects exclusively.
Will there be a change in the way the Representatives Managing Council is to be constituted?
Earlier the Government had said that three members of the council would be independent and would come from the Commercial Banks’ Federation, the Mongol Bank and the Mongolian National Chamber of Commerce and Industry. Tomorrow’s special meeting of the Government would discuss the issue.
The general budget of 2011 has allocated the money for the capital of the Development Bank. How is this being spent?
The budget fixed the equity capital at MNT16.4 billion. The law allows the Government to guarantee repayment of loans 50 times this amount MNT830 billion. Parliament would every year decide how much loan can be issued and how much guarantee the Government will give. For 2011, Parliament has fixed MNT1.9 trillion or 23.3% of the GDP of Mongolia as the upper limit of loans the Development Bank can grant. Parliament has also listed which projects would be financed by such loans. These include the Sainshand Industrial Complex, railway construction, and the New Creation program.
