Specifics of banking in Mongolia

Mongolia is among the fastest growing economies in the world with growth rates approaching 20%. This is all thanks to a boom in natural resource extraction that has attracted foreign investors to the local market with the idea of ​​investing in Mongolia, as well as exporting to neighboring Russia and China.

Banking System of Mongolia

The financial sector of Mongolia includes banks, non-bank financial institutions, savings and credit cooperatives, and securities companies. There are 16 banks, 23 non-life insurance companies, over 150 non-bank financial institutions (NBFIs) engaged in various financial activities such as leasing, factoring, money transfer, consulting, and trust management, and over 800 officially registered savings and credit cooperatives. Until recently, savings and credit unions were largely unregulated and unsupervised.

Banks dominate the financial institutions and play a critical role in ensuring financial and macroeconomic stability. In addition, the banking sector is highly concentrated, with 80% of assets concentrated in the seven largest banks. The Bank of Mongolia supervises the banking sector, while other financial sectors are supervised by the newly established Financial Regulatory Commission (FRC).

Strengthening the banking system is a central element of Mongolia's reform program, particularly in the areas of banking supervision, corporate governance in banks, and strengthening market discipline.

With increased competition in the banking sector, banks have expanded their activities to include commission businesses, electronic banking, and derivatives operations, taking on risks different from those associated with traditional bank lending.

Before 1991, Mongolia did not have a Western-style commercial or centralized banking system. The State Bank was the only bank in Mongolia. In October 1990, the Government of Mongolia, in line with market-oriented economic reforms, dissolved the State Bank. In 1991, the country adopted a new banking law that created a Western-style banking system. The law reorganized the banking system into a two-tier structure. The Bank of Mongolia, or Mongolbank, acts as the central bank, implementing monetary policy. Other private and state-owned banks provide commercial services.

Largest Banks

• Trade and Development Bank (TDBM)

Mongolia's oldest commercial bank, Trade and Development Bank, was originally founded as a 100% state-owned company. As such, it served as the Development Bank of Mongolia, including international investment, financing, and bonds. The bank accounts for half of the corporate banking market and remains the largest commercial bank.

In 2023, six commercial banks were transformed into public joint-stock companies and their shares began trading on the stock exchange. Over the 100-year history of the system, commercial banks have managed to create a modern, open and sustainable system of "green" banking that meets international standards, has international regulation and a legal framework and offers all the products and services available on the international market.

The Bank actively promotes the transition to a "green" economy by financing projects such as the introduction of energy-efficient technologies, sustainable water use and waste management.

Mongolia became the first country to open a US dollar nostro account with an American bank after the country was added to the FATF "grey list". The Trade and Development Bank began cooperation with the American bank The Bank of New York Mellon, restoring Mongolia's connection to the global US dollar payment system.

By the Resolution of the Board of Directors of JSC "Trade Development Bank" № 9 dated February 7, 2024, for the first time in the banking and financial sector of Mongolia, the Sustainable Development Committee was established under the Board of Directors, the functions of which are to provide support and recommendations in the field of banking, sustainable finance, environment, society and governance.

The credit rating of the Trade and Development Bank of Mongolia was upgraded by the international rating agency Standard & Poor's Ratings Services (S&P) to B+ with a stable outlook. This reflects the diversification of the bank's loan portfolio, effective asset management and active expansion into the retail and small and medium-sized business markets.

The bank also signed a long-term financing agreement with the US Government Development Finance Corporation.

• Golomt Bank

Founded in 1995, Golomt Bank has become a cornerstone of Mongolia’s financial sector, serving over 1,000,000 customers with a full range of banking solutions tailored to both individual and corporate needs. As Mongolia’s third largest commercial bank, it boasts an extensive network of 100 branches across the country, ensuring wide accessibility and convenience.

The bank has pioneered digital banking in Mongolia, introducing a variety of online and mobile banking services that highlight its commitment to customer convenience and technological innovation. Its diverse product offering includes traditional banking services as well as specialized financial solutions such as loans to support women entrepreneurs, green loans, the first fintech service SocialPay digital wallet, and educational packages designed specifically for young people under the Junior brand. These initiatives are part of Golomt Bank’s broader commitment to sustainable banking, demonstrated by the provision of green loans that promote responsible financial growth.

In the corporate sector, the bank offers a wide range of services, from trade finance to specialized training on digital products, aimed at making business operations more efficient and secure. Golomt Bank has also expanded its presence in international markets, providing Mongolian companies with seamless global transactions through reliable and secure payment solutions. The bank’s recent publication of unaudited financial results for Q1 2024 further underlines its commitment to transparency and prudent financial management. This continued commitment to innovation, customer satisfaction and sustainable banking practices has firmly secured Golomt Bank the title of “Best Bank (Mongolia)” 2024.

• XacBank

Since its establishment in 2001, XacBank has steadily grown and expanded its operations in the Mongolian banking and financial system and is now among the top five most influential banks in the country.

With 78 branches operating throughout Mongolia and over 360 ATMs, the bank provides comprehensive financial services to 1 million customers using the latest cutting-edge technology.

• KHAN Bank

KHAN Bank — a leading national commercial bank with 548 branches across the country, providing comprehensive banking and financial services to more than 82% of the population of Mongolia.

The bank was founded in 1991 as the Agricultural Cooperative Bank with branches across the country, after the collapse of the single-tier state banking system. At that time, 100% of the bank's shares belonged to the Japanese company Sawada Holdings, in the same year, the Mongolian company Tavan Bogd Trade LLC acquired 40% of the bank's shares, and in 2006, the Mongolian Agricultural Bank changed its name to KHAAN Bank LLC.

During its 34 years of existence, KHAN Bank has earned the trust of its customers due to its high financial performance and consistent reliability. In addition, it has pioneered the introduction of electronic products and services such as mobile banking, internet banking, apps and kiosks that can be accessed from anywhere, anytime, regardless of time and place, thereby transforming the traditional banking model into an electronic bank based on technological advances. As a result of efforts to expand the use of electronic banking and reduce the burden on cash transactions, an extensive service network has been established, including more than 231 express banks, more than 1,481 ATMs, 340 kiosks, more than 29,000 bank terminals and more than 37,000 POS terminals across the country.

KHAN Bank ranked second in the “Top 100 Enterprises in Mongolia” ranking compiled by the Government of Mongolia and the Mongolian National Chamber of Commerce and Industry. It also regularly receives the awards of “Best Bank in Mongolia”, “Best e-Bank” and “Best Bank for Citizens” from renowned international magazines such as “The Banker”, “Euromoney”, “Asiamoney”, “Global Finance”, “FinanceAsia” and “Global Banking and Finance Review”.

• State bank

State bank operates nationwide through more than 500 branches, 350 ATMs and over 8,698 card service organizations throughout Mongolia, striving to continuously provide modern banking and financial services that meet international standards throughout the country, respect comprehensive cooperation, create conditions for the stable implementation of business activities of its customers and meet their diverse financial needs.

According to the financial indicators of last year, the assets of State bank amounted to 5.4 trillion tugriks, which fully meets the criteria set by the Bank of Mongolia on capital adequacy ratio, liquidity and other indicators. The bank consistently implements risk mitigation measures to ensure the implementation of a sound policy in the banking sector and has entered the top five banks in Mongolia, which confirms its success.

State bank carries out the following activities in accordance with the license issued by the Bank of Mongolia, including:

• Cash saving,
• Loan,
• Billing,
• Purchase, sale, storage and deposit of foreign currency,
• Purchase, sale, storage and transfer for storage of precious metals and precious stones,
• Storage of valuables,
• Implementation of foreign payments,
• Issue, sale, purchase and sale of securities,
• Implementation of international payment transactions,
• Insurance brokerage services,
• Issuance of guarantees and sureties,
• Issuance of unsubstantiated guarantees and sureties.

• National Investment Bank of Mongolia

National Investment Bank of Mongolia was founded in 2006 as a joint-stock limited liability company with foreign investment. It directly and indirectly participates in the domestic and foreign financial markets, forms sources of capital, finances, acts as an intermediary and implements large projects in key sectors of the economy through its own and other sources, provides comprehensive banking services and contributes to economic stability. As a result, the bank has expanded its operations and through its three main branches provides banking and financial products and services that meet the needs of each client based on modern advanced technologies.

National Investment Bank of Mongolia is a member of the Mongolian Banking Association and the Mongolian Mortgage Corporation, and was named the "Fastest Growing Bank in Mongolia by Customer Service 2014" and "Fastest Growing Corporate Bank in Mongolia 2015" by the international organization "Global Banking and Finance Review" respectively.

• Chinggis Khaan Bank

Chinggis Khaan Bank was founded in 2001, becoming the first bank in Mongolia with 100% foreign direct investment. Since 2015, the bank has been wholly owned by a national investor and restructured to expand operations in socio-economically developed regions such as Ulaanbaatar, Selenge and Umnogobi aimags.

The bank finances large industrial, construction and investment projects using its own funds, and provides comprehensive corporate and private banking services, supported by digital banking services based on innovative technologies, adapted to the needs and interests of clients.

Chinggis Khaan Bank has long-standing partnerships with Rosselkhozbank, Transcapitalbank, Sberbank of Russia and cooperates in the field of cross-border money transfers, trade finance, foreign exchange transactions, interbank loans and deposits.

The bank pays special attention to active cooperation with leading banks in China to support bilateral trade and economic cooperation between the two countries. Bank of China, Industrial and Commercial Bank of China, Inner Mongolia Bank, Baoshan Bank and China Construction Bank cooperate with Chinggis Khaan Bank in cross-border remittances, foreign exchange transactions and trade finance products.

The bank also cooperates with Kookmin Bank, a leading bank in South Korea providing services to corporate and individual customers.

• Arig Bank

Arig Bank was founded in 1997 as Erel Bank, one of the oldest commercial banks in Mongolia. In 2014, the bank underwent a major change, changing its name to Arig Bank, which means “clean and transparent”, and started serving customers with new policies and a new design. The bank provides services through our 22 branches in Ulaanbaatar, Darkhan and Erdenet provinces.

In addition, Nomin Holding has gradually invested in Arig Bank, which has been in existence for 28 years, increasing its authorized capital fivefold and improving its management system. Arig Bank is updating its current goals and objectives and aims to become a digital bank in the commercial sector by providing preferential commercial loans and consumer lending services based on fintech technologies.

• TransBank

TransBank (Transport Development Bank) was founded in 1997 and has been steadily operating in the banking and financial system of Mongolia for 28 years. It is the first bank in Mongolia to provide private banking services in accordance with international standards.

TransBank became the first bank in Mongolia and Northeast Asia to receive the “Direct Participant” status CIPS (Cross-Border Interbank Payment System) network for international interbank payments in RMB. As part of the successful implementation of the CIPS system, the bank will carry out transfers in foreign RMB without commission until December 31, 2025, in order to support its customers' foreign trade and business activities.

TransBank has established correspondent relations with 16 world-famous banks in the field of international payments and quickly and securely carries out transfers using 33 Nostro accounts in 9 currencies, including USD, EUR, CNY, JPY, GBP, RUB, SGD, HKD and TRY.

• Bogd Bank

Bogd Bank was founded in 2014 and is the youngest bank in the banking sector of Mongolia. However, in a short time, it has significantly expanded its operations, taken its place in the Mongolian market, introduced modern and innovative products and services, and aims to become a new-age bank known to its customers.

• Capitron Bank

Capitron Bank is a commercial bank from Mongolia, founded in 2001, which operates from Sukhbaatar. It provides mobile banking services that allow customers to manage accounts and make transactions online.

Advantages of Mongolian Banks

High interest rates on deposits is one of the main advantages of Mongolian banks. The country needs money for lending at rates up to 30%, which means they have to pay high interest rates to attract capital, especially in local currency.

In addition, Mongolian banks offer the most diverse list of currencies. Not only can you open an account in Mongolian tugriks and US dollars, but you can also open an account in euros, Chinese yuan, South Korean won, and Russian rubles.

Mongolian banks also accept small deposits, meaning anyone can join them. The lowest minimum deposit is the "local account," which seems to be the default and offers a debit card that can only be used in Mongolia. Other accounts require between $2 and $5 to get started, and debit card fees are not high.

Types of Bank Accounts Available in Mongolia

Standard account types are available in Mongolia, such as current accounts for everyday transactions and savings accounts for savings, as well as fixed-rate term deposits with special savings programs. Banks also offer specialized accounts, such as salary accounts, child accounts, and escrow accounts, to meet the various needs of individuals and businesses. Many banks provide digital banking services, including internet and mobile banking, and issue domestic and international debit and credit cards.

Here are some common types of bank accounts available in Mongolia:

General Account Types

• Current Accounts: are for everyday payments and transactions, often linked to payment cards.
• Savings Accounts: are used to accumulate funds for short-term or long-term financial purposes.
• Time Deposits (Term Deposits): are accounts where money is deposited for a fixed period at a predetermined interest rate.

Specialized Accounts

• Wage Accounts: are accounts for employees, opened under agreements between organizations and banks, often with lower fees or minimum balances.
• Children's accounts: accounts designed for children, such as the Junior package offered by some banks.
• Escrow accounts: used to hold funds until certain conditions are met, usually when transactions are made.

Digital, card, and other services

• Online and Mobile Banking: Access your accounts and banking services online and through mobile apps.
• Cards: Issue both domestic and international debit and credit cards.
• Foreign Currency Accounts: Many banks offer accounts in a variety of currencies, including US dollars, euros, yuan and others, as well as Mongolian tugriks.
• Bundled Products: Banks can bundle accounts and services into bundled offerings.

Most banks in Mongolia provide international money transfer services. The four largest banks maintain correspondent relationships with several foreign banks and hold accounts in major currencies with several of them. Customers can transfer money to and from their domestic accounts, subject to internal reporting requirements. There is no limit on the amount that can be withdrawn from an account. The bank charges a small fee for cash withdrawals in hard currency. There is no fee for cash withdrawals in tugriks at the current buying rate. The bank charges a fee for all hard currency transfers within Mongolia and to banks abroad. International transfers, including interest income and profits, may be subject to a 20 percent withholding tax withheld by the bank on behalf of the Mongolian Tax Administration.

How to Open a Bank Account as a Foreigner

To open a bank account in Mongolia as a foreigner, you will generally need to complete the following steps:

1. Gather the necessary documents

• Passport: Your original passport is your primary identification document.
• Proof of address: A proof of residence document, such as a residence card or other proof of residence, is usually required for non-residents.
• Bank application: You will need to fill out official bank application forms for the type of account you wish to open.

2. Research and contact banks

• There are no foreign banks in Mongolia, so you will need to contact a local Mongolian bank.
• Contact the specific bank: Contact the bank directly to get accurate information about its requirements for foreigners, as requirements may vary depending on the institution.
• Learn about account types: Be clear about the type of account you want (such as a savings account or a checking account) to avoid confusion.

3. Understanding the Process

• In-Person Application: In many cases, you may need to visit a bank branch in person to complete the application process.
• Due Diligence: Banks conduct due diligence on potential clients to ensure they are compliant with regulatory requirements, so be prepared to provide additional information.
• Opening an Account: Once your documents have been reviewed and your application has been approved, the bank will open an account for you.

A foreign company or organization (such as a joint venture or wholly owned firm) can open an account by providing the following information to its bank:

• Company registration with the General Administration of Intellectual Property and Public Registration (GAIPSR).
• Approval from the Ministry of Finance.
• A letter requesting an account.