Temporary Regulation on Issue of Guarantees by Banks

This document comprises the temporary regulation on the issue of guarantees made by banks in Mongolia.

The regulation discusses:

• The payment guarantees that banks issue for third party persons;
• The different types of guarantees that banks may issue;
• The approval of these guarantees and their registration with the Bank of Mongolia (BOM);
• The terms and definitions that it uses.

The regulation covers the following topics:

• Licensing banks to issue guarantees and revocation of licenses;
• Requirements on bank’s guarantees;
• Issuing guarantees;
• Recording of guarantees and reporting;
• Control and monitoring;
• Responsibility.

Some of the points that the regulation makes are:

• Banks may issue guarantees to its customers based on a license given by the BOM;
• The total amount of guarantees issued to one borrower or a group of borrowers may not exceed 20% of the bank’s capital;
• Banks shall study and discuss issues such as credit worthiness of the borrower, risks, etc. when issuing guarantees;
• Banks shall prepare two copies of the guarantee agreements and each party will keep one copy;
• The banks’ internal control units shall monitor the guarantee operations and report findings to the Board of Directors and the annual meeting of shareholders;
• Guarantors shall be responsible in accordance with the related laws and regulations of the BOM.