Hong Kong, June 28, 2018 -- Moody's Investors Service, ("Moody's") has today assigned Counterparty Risk Ratings (CRRs) to 9 banks in Mongolia.

The 9 banks affected are: 1) Bogd Bank LLC (Bogd Bank), 2) Capital Bank LLC (Capital Bank), 3) Development Bank of Mongolia LLC (DBM), 4) Golomt Bank LLC (Golomt Bank), 5) Khan Bank LLC (Khan Bank), 6) State Bank LLC (State Bank), 7) Trade and Development Bank of Mongolia LLC (TDBM), 8) Transport and Development Bank LLC (TransBank), and 9) XacBank LLC (XacBank).

Moody's Counterparty Risk Ratings are opinions of the ability of entities to honour the uncollateralized portion of non-debt counterparty financial liabilities (CRR liabilities) and also reflect the expected financial losses in the event such liabilities are not honoured. CRR liabilities typically relate to transactions with unrelated parties. Examples of CRR liabilities include the uncollateralized portion of payables arising from derivatives transactions and the uncollateralized portion of liabilities under sale and repurchase agreements. CRRs are not applicable to funding commitments or other obligations associated with covered bonds, letters of credit, guarantees, servicer and trustee obligations, and other similar obligations that arise from a bank performing its essential operating functions.

At the same time, Moody's downgraded the Counterparty Risk Assessment (CR Assessment) of DBM to B3(cr) from B2(cr) to be consistent with the government support notching guidance per the Banks methodology.

RATINGS RATIONALE

The CRRs assigned to the 9 Mongolian banks are in line with the CR Assessment assigned.

Because Moody's considers that Mongolia does not have an operational resolution regime, in assigning CRRs to the Mongolian banks subject to this rating action, the rating agency applies its basic Loss Given Failure (LGF) approach. Moody's basic LGF analysis positions CRRs in line with the banks' CR Assessment, one notch above their adjusted BCAs.

None of the 9 Mongolian Banks' CRR incorporate any uplift from government support.

OUTLOOK

CRRs do not carry outlooks.

FACTORS THAT COULD LEAD TO AN UPGRADE/DOWNGRADE

Bogd Bank LLC -- WHAT COULD CHANGE THE RATING UP

Bogd Bank's b3 baseline credit assessment (BCA) is at the same level as Mongolia's sovereign rating, and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

Bogd Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating, or (2) a downgrade of the bank's BCA.

Bogd Bank's BCA could be downgraded if the bank's (1) asset quality deteriorates significantly (for example, with problem loans/gross loans exceeding 9% on a sustained basis); (2) tangible common equity falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

Capital Bank LLC -- WHAT COULD CHANGE THE RATING UP

We will upgrade Capital Bank's BCA and long-term ratings if the asset-quality review (AQR) and additional funding from an international fund result in asset quality and capitalization levels consistent with a BCA of b3.

Capital Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

The outlook on Capital Bank's domestic currency long-term rating could be changed to stable from positive if the bank is unable to secure additional capital to improve its capitalization. Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating, and (2) a downgrade of the bank's BCA.

The bank's BCA could be downgraded if its (1) asset quality deteriorates significantly, for example, with problem loans/gross loans exceeding 9.0% for a sustained period; (2) tangible common equity falls below 8.0%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING UP

DBM's long-term rating incorporates a one-notch uplift from its BCA and is at the same level as the sovereign rating. A positive rating action is unlikely in the absence of an upgrade of Mongolia's sovereign rating.

We will consider upgrading DBM's BCA if the bank's asset quality and profitability improve to levels consistent with a BCA of b3 while maintaining sound capitalization.

Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating; or (2) a weakening in the strategic importance of DBM to the government, as a result of which we would change our assessment of government support.

Golomt Bank LLC -- WHAT COULD CHANGE THE RATING UP

Golomt Bank's b3 BCA is at the same level as Mongolia's sovereign rating and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

Golomt Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating, or (2) a downgrade of the bank's BCA.

Golomt Bank's BCA could be downgraded if the bank's (1) asset quality deteriorates significantly with its problem loans/gross loans exceeding 9% on a sustained basis; (2) tangible common equity ratio falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

Khan Bank LLC -- WHAT COULD CHANGE THE RATING UP

Khan Bank's b3 BCA is at the same level as Mongolia's sovereign rating, and as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

Khan Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include a downgrade of (1) Mongolia's sovereign rating; or (2) the bank's BCA.

The bank's BCA could be downgraded if its (1) asset quality deteriorates significantly (for example, if problem loans/gross loans exceeds 9% for a sustained period); (2) tangible common equity falls below 8%; or (3) profitability deteriorates significantly, leading to sustained annual net losses.

State Bank LLC -- WHAT COULD CHANGE THE RATING UP

State Bank's b3 BCA is at the same level as Mongolia's sovereign rating, and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

State Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating; or (2) a downgrade of the bank's BCA.

State Bank's BCA could be downgraded if the bank's (1) asset quality deteriorates significantly, for example, with problem loans/gross loans exceeding 9% on a sustained basis; (2) tangible common equity falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

Trade and Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING UP

TDBM's b3 BCA is at the same level as Mongolia's sovereign rating, and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

Trade and Development Bank of Mongolia LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating, or (2) a downgrade of the bank's BCA.

TDBM's BCA could be downgraded if the bank's (1) asset quality deteriorates significantly (for example, if problem loans/gross loans exceeds 9% on a sustained basis); (2) tangible common equity ratio falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

Transport and Development Bank LLC -- WHAT COULD CHANGE THE RATING UP

TransBank's b3 BCA is at the same level as Mongolia's sovereign rating, and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

Transport and Development Bank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include: (1) a downgrade of Mongolia's sovereign rating, or (2) a downgrade of the bank's BCA.

TransBank's BCA could be downgraded if the bank's: (1) tangible common equity falls below 8%; (2) profitability deteriorates significantly, leading to annual net losses on a sustained basis; or (3) asset quality deteriorates, with its problem loans ratio rising above 9%.

XacBank LLC -- WHAT COULD CHANGE THE RATING UP

XacBank's b3 BCA is at the same level as Mongolia's sovereign rating and, as such, a positive rating action is unlikely in the absence of an upgrade of the sovereign rating.

XacBank LLC -- WHAT COULD CHANGE THE RATING DOWN

Factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating, or (2) a downgrade of the bank's BCA.

XacBank's BCA could be downgraded if the bank's (1) asset quality deteriorates significantly, for example, with problem loans/gross loans exceeding 9% on a sustained basis; (2) tangible common equity falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.

The principal methodology used in these ratings was Banks published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

All entities are headquartered in Ulaanbaatar.

Bogd Bank LLC reported total assets of MNT74.4 billion ($30.6 million) as of 31 December 2017.

Capital Bank LLC reported total assets of MNT745.6 billion ($374.1 million) as of 31 December 2015.

Development Bank of Mongolia LLC reported total assets of MNT3.74 trillion ($1.54 billion) as of 31 December 2017.

Golomt Bank LLC reported total assets of MNT5.21 trillion ($2.14 billion) as of 31 December 2017.

Khan Bank LLC reported total assets of MNT7.27 trillion ($2.99 billion) as of 31 December 2017.

State Bank LLC reported total assets of MNT2.34 trillion ($962.5 million) as of 31 December 2017.

Trade and Development Bank of Mongolia LLC reported total assets of MNT6.87 trillion ($2.83 billion) as of 31 December 2017.

Transport and Development Bank LLC reported total assets of MNT203 billion ($84 million) as of 31 December 2017.

XacBank LLC reported total assets of MNT3.04 trillion ($1.25 billion) as of 31 December 2017.

LIST OF AFFECTED RATINGS

Bogd Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Capital Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B3

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Development Bank of Mongolia LLC

Long-term Counterparty Risk Assessment downgraded to B3(cr) from B2(cr)

Assigned local and foreign currency long-term Counterparty Risk Ratings of B3

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Golomt Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Khan Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

State Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Trade and Development Bank of Mongolia LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

Transport and Development Bank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

XacBank LLC

Assigned local and foreign currency long-term Counterparty Risk Ratings of B2

Assigned local and foreign currency short-term Counterparty Risk Ratings of NP

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

Tae Jong Ok
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Minyan Liu
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Published Date:2018-06-29