The Monetary Policy Committee of the Bank of Mongolia has adopted a new macroprudential policy measure requiring banks to hold mandatory reserves equal to 25 percent of foreign funding raised for periods ranging from 360 days to three years, starting October 1, 2026.

Previously, the central bank did not impose reserve requirements on funds raised from international markets with maturities exceeding one year. Under the new policy, such funding sources will now be subject to mandatory reserve requirements.

According to the Bank of Mongolia, the measure is intended to reduce liquidity risks associated with banks’ reliance on foreign currency-denominated funding amid heightened uncertainty in the external economic environment.

In recent years, the combined value of bonds and loans raised by Mongolian banks from foreign markets has accounted for around 19% of the banking sector’s total funding sources, while the sector’s loan-to-deposit ratio has reached approximately 138%.

The central bank noted that research on emerging economies shows banking systems need to pay closer attention to balance sheet vulnerabilities, particularly rising currency and maturity mismatches between assets and liabilities, which may increase financial fragility.

The Bank of Mongolia stated that systemic cyclical risks in Mongolia’s banking sector have declined compared to previous periods, while the financial cycle has shifted toward a more balanced level. Stress test results conducted by the central bank also showed that banks would maintain adequate capital buffers and risk-bearing capacity even under major macroeconomic shocks.

Nevertheless, the central bank said the policy was introduced to prevent the accumulation of future risks in the banking sector and encourage banks to secure more long-term funding from international markets.

Published Date:2026-05-27