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Mongolia considers creating asset management company for banks' bad loans

Mongolia is considering setting up an asset management company to help banks offload their nonperforming loans, the Financial Times reported June 12.

The news came after the country secured an International Monetary Fund financial package, which included a requirement for an audit of the domestic banking sector.

Mongolia's parliament is expected to debate the proposed asset management company in its autumn session.

Mongolia's 16 banks pay high deposit rates and are struggling with bad debt built up during the mining industry's previous boom and bust cycle. The asset management company would help banks sell their nonperforming loans and release capital. While the Bank of Mongolia reports that the banking sector's NPL ratio is at 8.6%, some market observers believe the true ratio may be as high as 20%.