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LAW OF MONGOLIA ON CENTRAL BANK (BANK OF MONGOLIA)

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LAW OF MONGOLIA
ON CENTRAL BANK (BANK OF MONGOLIA)
May 13, 2001
Ulaanbaatar
/"Turiin medeelel", 2002, #1/
Chapter One
General
Provisions
Article 1. Purpose of the law
The purpose of this law shall be to establish the legal grounds of the powers of the
Central
Bank of Mongolia, its management, organization and activities, and to regulate
relations concerning the implementation of State monetary
policy undertaken by the
Central Bank of Mongolia ("Bank of Mongolia").
Article 2. Legislation on the Central Bank (Bank of Mongolia)
The legislation on the Central Bank of Mongolia (Bank of Mongolia) shall consist
of the Constitution, this law and other legislative
acts issued in conformity with them.
Article 3. Legal status of the Central Bank of Mongolia
1. The Central Bank of Mongolia shall
be the competent organization
authorised to implement State monetary policy within the territory of Mongolia. The
Central Bank of
Mongolia shall be called the Bank of Mongolia. The headquarters of the
Bank of Mongolia shall be located in the capital city of Mongolia.
2. The Bank of Mongolia is a legal entity established by the State and shall use
the seal, stamp, and official form. The Bank of
Mongolia may have its own symbol.
Article 4. Objective of the Bank of Mongolia
1. The main objective of the Bank of Mongolia shall
be to ensure stability of the
togrog.
2. Within its main objective the Bank of Mongolia shall also promote balanced
and sustained
development of the national economy, through maintaining the stability of
money, financial markets and the banking system.
Article
5. Direction of Bank of Mongolia's activities
In order to implement its objectives as set forth in this law, the Bank of Mongolia
shall conduct the following activities:
1) issuing currencies into transaction;
2) formulation and implementation of monetary policy
by coordinating money
supply in the economy;
3) acting as the Government's fiscal intermediary;
4) supervision of banking activities;
5) organization of inter-bank payments and settlements;
6) holding and management of the State's reserves of foreign currencies.
Chapter Two
Currency of Mongolia
Article 6. Exclusive right to issue currencies into transaction
1. The Bank of Mongolia shall have
the exclusive right to issue the currencies
of Mongolia.
2. It shall be prohibited to issue counterfeit currencies into transaction.
Article 7. Currency unit and its form
1. The official unit of currency of Mongolia shall be the togrog. One togrog is
equal to one
hundred mongo.
2. The currency of Mongolia shall be in the form of banknotes or coin and its
design shall be approved by the State
Ikh Khural.
Article 8. Legal tender
1. Togrogs issued into transaction by the Bank of Mongolia shall, without any
limitation, be
the lawful means of payment for their named amount in every settllement
conducted in the territory of Mongolia.
2. Unless the law
provides otherwise the Bank of Mongolia may authorise the
use of other negotiable instruments in substitution for the togrog.
Article
9. Activities of the Bank of Mongolia related to monetary unit
1. The Bank of Mongolia shall conduct activities to ensure the proper
structure
of the currency by issuing and withdrawing currency from transaction.
2. The Bank of Mongolia shall organise and procure
the production, delivery,
safekeeping and reserve maintenance of the currency and shall determine the validity of
currency and replace
and destroy unfit currency.
3. The Bank of Mongolia shall establish a procedure for replacement of unfit
currency. It is prohibited
to destroy any currency without the approval of the Bank of
Mongolia.
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Chapter Three
Activities of the Mongolbank
Article 10.
Formulation and implementation of monetary policy
1. The Bank of Mongolia shall formulate and implement State monetary policy.
2.
The Bank of Mongolia shall formulate State monetary policy for the next
year, and present that policy to the State Ikh Khural by
October 1 of each year. The policy
shall contain:
1) an assessment of and conclusions on the monetary supply and financial
markets of the economy including factors and
reasons for the assessment and conclusions;
2) target range for monetary indicators, domestic price level and exchange
rate of the
togrog in terms of stable foreign currencies and the application of monetary
policy instruments.
Article 11. Monetary policy instruments
The Bank of Mongolia may use the following instruments to implement State
monetary policy:
1) setting of the amount and proportion
of compulsory reserves to be maintained
by banks;
2) determining the amount of credit granted to banks;
3) pursuing a unified policy
on interest rates by setting the lending rate and
discount rate on credit granted and securities issued by the Bank of Mongolia;
4) conducting open market operations;
5) imposing a ceiling on credit outstanding to be granted by banks.
Article 12. Compulsory
reserves of banks
1. For the purpose of regulating the money supply, the Bank of Mongolia shall
require banks to maintain an amount
of reserves to be determined by the Bank of
Mongolia and calculated as a percentage of the balance of deposit and current accounts
of
individuals and legal entities and other liabilities of the bank.
2. The Bank of Mongolia shall require banks to maintain reserves
of not less
than 5 percent and not more than 30 percent of the liabilities referred to in paragraph 1 of
this article.
3. Reserves
of banks may be held in the form of cash holdings or by way of
balances in current accounts with the Bank of Mongolia.
4. The Bank
of Mongolia may pay interest on reserves which form part of a
compulsory reserve.
5. The Bank of Mongolia shall impose a penalty
on banks that fail to maintain
required reserves. The maximum penalty under this clause shall not exceed the amount
equal to highest
interest charged by the Bank of Mongolia to the banks plus 5 points of a
percent.
6. The Bank of Mongolia shall establish a procedure
for assessment and
supervision of the required reserves of banks.
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Article 13. Granting credit to banks
1. The Bank of Mongolia
may extend credit to banks as a lender of last resort if
the following conditions are met:
1) the loans have a maturity of one year
or less and are secured by way of
Government debt instruments issued by the Bank of Mongolia, by bills of exchange or
promissory
notes bearing signatures recognized by the Bank of Mongolia, by accounts
held with the Bank of Mongolia, or by other eligible assets
and securities acceptable to the
Bank of Mongolia; and
2) the Bank of Mongolia considers that the borrower-bank's liquidity
needs
are of a temporary nature not exceeding three months, and that the borrower-bank is
able to repay the loan and resolve its liquidity
problem itself.
2. The Bank of Mongolia shall have the right to determine the amount of credit
given to banks in accordance with
an indice of the target for money supply and to
determine if the amount of credit given to a particular bank is within the capacity
of that
bank.
3. The Bank of Mongolia shall provide credit on the basis of an agreement and
may set competitive or non-competitive
rates of interest.
4. The Bank of Mongolia shall establish a unified procedure for granting credit
to banks pursuant to this law.
Article 14. Unified interest rate policy
The Bank of Mongolia shall pursue a unified interest rate policy by setting interest
and
discount rates on credits and securities.
Article 15. Open market operations
In order to regulate bank reserves, the Bank of Mongolia
shall have the right to
conduct open market operations by issuing securities with maturities of up to one year and
by purchasing
and selling such securities and Government debt instruments and other
securities accepted by the Bank of Mongolia.
Article 16. Imposing
limits on credit granted by banks
The Bank of Mongolia may impose a ceiling on credit outstanding that may be
extended from banks
to individuals and legal persons if it considers that the instruments
for regulating the money supply provided for in sub-paragraphs 1 to 4 of article 11 of this
law are not sufficient.
Article 17. Acting as fiscal intermediary of the Government
When acting as the Government's fiscal intermediary the Bank of Mongolia
may
conduct the following operations:
1) holding the Government's unified budget account and conducting banking
transactions at the
request of the Minister of Finance in accordance with an agreement
containing the relevant terms;
2) selling bonds and securities
issued by the Government to other persons and
purchasing such bonds and securities in accordance with State monetary policy objective
and current market conditions;
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3) conducting payment transactions with respect to Government loans from
foreign countries
and loans by others to legal persons which the Government has
guaranteed, within the amount of the balance remaining in the State
budget unified
account, in accordance with the schedule of payments for such loans;
4) other intermediary activities in accordance
with legislation.
Article 18. Extension of credit to the Government
1. The Bank of Mongolia may agree to grant temporary credit to
meet seasonal
liquidity needs, subject to repayment before the end of the financial year in accordance
with the terms of an agreement.
2. The total amount of the balance of temporary credits shall not exceed 10
percent of domestic budget revenue accumulated during
the immediately preceding three
years. Domestic budget revenue shall not include income from selling Government assets
or domestic
securities.
3. If the Bank of Mongolia has bought obligations issued by the Government, it
shall be added to the total of advances
made to the Government. The balance of the
Government long term securities purchased by the Bank of Mongolia will not be included
in the total amount of the balance of temporary credits stated in paragraph 2 in this Article.
4. The Bank of Mongolia shall establish
the procedure for granting credit to the
Government in accordance with this law.
Article 19. Supervision of bank activities
1. For
the purpose of protecting the interests of depositors and customers, the
Bank of Mongolia shall establish a procedure for and issue
regulations and instructions,
and make decision, undertake supervision and enforcement activities relating to: the
licensing of banks;
the requirements of banks; the maintenance of adequate paid in capital
and liquidity assets; improving the security of the banking
system; and regulation of
banking activities.
2. The Bank of Mongolia shall regulate relations concerning activities such as
the
establishment of banks, reconciliation and limitation, providing requirements,
conducting examinations, supervision of legislation
and enforcement, the establishment of
emergency status with respect to a bank, transmission of banking rights by the relevant
law.
Article 20. Facilitation of interbank settlements
1. The Bank of Mongolia shall arrange the clearing and settlement of interbank
payments and shall make payments through each bank's current account with the Bank of
Mongolia.
2. The Bank of Mongolia may open
branches for settlement of interbank
payments.
3. The Bank of Mongolia shall issue regulations on settlement of interbank
payments.
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Article 21. Disposal and management of the State reserves of foreign
currency
1. The Bank of Mongolia shall ensure prompt
payment and security of those
foreign currency reserves of the State which it disposes of and manages. Only after these
obligations
are fulfiled may the Bank of Mongolia conduct income earning operations
using the foreign currency reserves of the State to invest
in instruments tradeable in the
financial markets.
2. Foreign currency reserves of the State held by the Bank of Mongolia shall
consist
of the following assets:
1) monetary gold held in foreign banks and with financial institutions;
2) cash or non-cash convertible
foreign currencies;
3) bills of exchange and promissory notes, freely payable in convertible
foreign currencies;
4) any type of obligation issued or guaranteed by the Government or
central bank of foreign countries or international financial institutions which is
denominated and is to be paid in convertible foreign
currencies;
5) other assets internationally recognized as foreign currency reserve.
3. When managing foreign currency reserves of
the State the Bank of Mongolia
may conduct operations to freely convert, purchase and sell the assets set out in paragraph
2 of this
article.
4. The Bank of Mongolia shall ensure the stability of the togrog when it
purchases or sells foreign currencies and similar
assets in exchange for the togrog.
5. If foreign currency reserves of the State have declined below the level
determined by the State
Ikh Khural or if the Bank of Mongolia has established that it has
become impossible to implement foreign currency policy and to promptly
execute foreign
payments of the State, the Bank of Mongolia shall officially inform the Government and
shall take pertinent measures
jointly with the Government.
Article 22. Regulation of foreign currencies
1. The Bank of Mongolia shall regulate foreign currencies
in accordance with
the law.
2. When determining foreign currency policy and the togrog exchange rate the
Bank of Mongolia shall follow
the principles of keeping the exchange rate free and
realistically determined, of maintaining the stability of the togrog, and of
the need for
balanced development of the national economy.
Article 23. Activities prohibited for the Bank of Mongolia
1. It is prohibited
for the Bank of Mongolia to undertake the following
activities:
1) provision of any financial grant to individuals or legal persons;
2) purchasing and selling movable or immovable property for profit;
3) taking deposits from or extending credit or providing settlement
services to individuals or legal persons other than the Government and banks;
4) holding shares in legal entities or purchasing and
selling.
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2. Paragraph 1 of this article shall not apply to the following activities
undertaken by the Bank of Mongolia:
1)
receiving any property or securities referred to in sub-paragraphs 2 and
4 of paragraph 1 of this article for the purpose of debt
settlement, provided that they are
disposed of within a feasible period;
2) acquiring and holding shares in legal entities that have
direct relevance
to deposit insurance, export finance, clearing and automation of payments, monetary
policy implementation and banking
data processing, provided that the aggregate value of
such shares does not exceed three percent of its capital.
3) extending financial
aid to and covering the expenses of its employees in
accordance with legislation.
4) imposition of conservatorship by the Bank of
Mongolia on the grounds
that insolvency of a bank is considered to affect the stability of the banking system and the
national payment
system
Chapter Four
Supervision of Banks by Bank of Mongolia
Article 24. Powers of the Bank of Mongolia to implement supervision
of
banks
1. The Bank of Mongolia shall have the power to supervise banks and of
enforcement which are granted to it under this law.
2. The supervision by the Bank of Mongolia shall be carried out by the
supervisor and controller appointed by the President of the
Bank of Mongolia.
Article 25. Powers of supervisor
1. The supervisor appointed by the Bank of Mongolia shall review and examine
banks
with regard to the implementation of and compliance of individual and legal person
with the banking legislation, State monetary policy,
the rules and regulations of the Bank
of Mongolia, and the decisions of the President of the Bank of Mongolia. The supervisor
shall
have the powers of a State inspector.
2. The supervisor appointed by the Bank of Mongolia shall have the following
additional powers:
1) to enter into the premises of banks and other relevant institutions;
2) to examine a bank's accounts, books, balance sheets and
financial
statements, to require preparation of explanations and information, and to have questions
answered;
3) to receive free of charge
from a bank's customers, including individual
and legal entities, banks and financial and other institutions, copies of evidence
and
documentation that is required;
4) to examine documents of legal entities, institutions and individuals
which relate to bank
activities;
5) to impose administrative sanctions on persons or entities who violate
the banking legislation;
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6) to transfer
the relevant documents to the competent organizations if a
violation of the law represents a criminal offence;
7) to stop payment
of dividends to the shareholders of a bank if that bank
has failed to comply with the requirements concerning the criteria set for
banks or the
requirement to maintain a compulsory reserve fund to cover possible losses on loan
payments.
Article 251
. Controller
appointed by the Bank of Mongolia.
1. The controller appointed by the Bank of Mongolia shall have the following
powers:
1/ To control
and supervise daily activities of the bank and its management and
to report on these to the Bank of Mongolia during their period
of appointment;
2/ To participate, without voting rights, in meetings of the Board of Directors
and meeting of shareholders, and
provide advice on these issues;
3/ In case of non-compliance of legislation is revealed, to give an assignment to
take corresponding
actions within a specific time period and to control its implementation.
4/ The powers of the supervisor, stated in this law."
Chapter
Five
Management of the Bank of Mongolia
Article 26. Management of the Bank of Mongolia
1. The Bank of Mongolia shall be headed by
the President appointed by the
State Ikh Khural and he/she shall be accountable and shall report to the State Ikh Khural.
The appointment
of the President of the Bank of Mongolia by the State Ikh Khural shall
be made at the proposal of the Chairman of the State Ikh Khural
and be for a period of six
years.
2. The First Deputy President and the Deputy President of the Bank of
Mongolia shall be appointed
by the State Ikh Khural for six years at the proposal of the
President of the Bank of Mongolia.
3. When appointing the President
and First Deputy President of the Bank of
Mongolia the State Ikh Khural shall take into consideration each candidate's knowledge
of
economics, banking, finance and management, and his/her professional skills, ethics and
work experience.
4. In the absence of
the President of the Bank of Mongolia, the First Deputy
President and in absence of the first Deputy President, the Deputy President
shall have the
full authority of the President of the Bank of Mongolia.
5. The State Ikh Khural shall determine the salary of the
President of the Bank
of Mongolia.
6. The State Ikh Khural may discharge the President, First Deputy President or
Deputy President
of the Bank of Mongolia from their posts in the following
circumstances:
1) if he/she becomes a shareholder of a commercial bank;
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2) if he/she did (or did not) take action against (or for) the interests of the
Bank of Mongolia;
3) at his/her own request
for discharge due to inability to fulfil official
duties because of ill-health or for other serious reason;
4) the unsatisfactory
fulfilment of duties;
5) he/she is convicted of a criminal offence by a Court;
6) if some other conflict of interest arises.
7. It
is prohibited for Presidents, First Deputy Presidents and Deputy Presidents
of the Bank of Mongolia to occupy management posts in
banks for a period of one year
after they are released from their posts.
Article 27. The Council of the Bank of Mongolia
1. The Council
of the Bank of Mongolia shall be established at the President's
office.
2. The Council of the Bank of Mongolia may make recommendations
on issues
relating to the authority of the President of the Bank of Mongolia.
3. The composition and rules of the Council shall be
approved by the order of
the President of the Bank of Mongolia.
Article 28. Powers of the President of the Bank of Mongolia and guarantees
for exercising such powers
1. The President of
the Bank of Mongolia shall have following powers:
1) to manage and regulate the activities of the Bank of Mongolia, its
branches
and representative offices;
2) to issue rules, regulations, instructions, and orders on policy reflecting
norms and needs and in
relation to financial, accounting, information management and
organizational matters;
3) to address directly the Standing Committees
of the State Ikh Khural, the
Government, and other relevant institutions and to express his/her opinion at sessions of
State Ikh
Khural, Standing Committees and Cabinet meetings;
4) to issue guarantee(s) on behalf of the Bank of Mongolia to the
Government or
banks, the total value of which is not to exceed the paid in capital of the
Bank of Mongolia;
5) to set fees for services provided
by the Bank of Mongolia and interest
rates on loans made;
6) to determine the organizational structure of the Bank of Mongolia;
7)
to consult with shareholders of a bank on the appointment and
discharge of the bank's executive director with respect to his/her
professional ethics and
competence, and if it is deemed necessary to recommend to shareholders to replace,
suspend or discharge an
executive director for the reasons provided for in the banking
legislation;
8) to inform the Government about measures required for
the
implementation of State monetary policy, and to make decisions in consultation with the
Government;
9) to inform the State Ikh
Khural and Government of the conclusions and
recommendations of the Bank of Mongolia on the implementation of State monetary
policy
and the state of the financial markets on a regular basis every quarter;
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10) to cancel the licence of any bank which is in
breach of the banking
legislation or the decisions of the Bank of Mongolia;
11) to take appropriate measures to train and retrain
banking professional
personnel;
12) to investigate the implementation of this law, the banking legislation
and his/her own decisions
by individual and legal entities, and to take lawful measures
and issue orders to ensure complete implementation;
13) to exercise
other powers provided for in the legislation.
14) any other rights specified in legislations.
2. In exercising his/her powers the
President of the Bank of Mongolia shall have
the following guarantees:
1) the salary and other benefits appropriate for high-ranking
State
officials;
2) a vehicle and communications equipment;
3) diplomatic immunity and privileges while traveling abroad;
4) any
other rights provided for in the law.
3. The Chairman of the State Ikh Khural shall be notified within twenty four
hours if the President
of Bank of Mongolia is caught committing a crime or in possession
of evidence of a crime. Except in the abovementioned cases it is
prohibited to detain,
impose administrative penalty by Court order or to search the residence, vehicle, office or
the person of the
him/her without the authorisation of the State Ikh Khural.
4. During his/her term the President of the Bank of Mongolia shall be
free from
national or local mobilisation.
5. It is prohibited for the President of the Bank of Mongolia to hold
concurrently any
other post or employment which is not related to his/her duties under this
law.
6. At the end of his/her term, the State Ikh Khural
shall take measures to
provide the President with a particular post or employment, and in absence of this,
measures to ensure he/she
does not suffer a reduction in standard of living for a one year
period from the date of termination of his/her duties.
Article 281
. Powers of the General Manager of the Bank of Mongolia
1. The General Manager of the Bank of Mongolia shall exercise the following
powers.
1) To determine personnel's and salary fund of the Bank of Mongolia and
appoint, release, reward, and impose disciplinary
punishments to employees;
2) Other powers specified in legilation.
Article 29. Prohibited activities for Bank of Mongolia employees
1. It is prohibited for employees of the Bank of Mongolia to engage
in the
following activities:
1) representing the interests of any individual and legal entities;
2) procuring advantageous or preferred
conditions for him/herself or family
members, relatives, business counterparts or other acquaintances;
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3) disclosing to others
official information relating to accounts, account
transactions or payments of any bank, legal person or individual, or relating
to any
agreement or contract on banking activities, unless the law provides otherwise;
4) to pursue any other activities prohibited
by legislation.
2. Unless the law provides otherwise, employees of the Bank of Mongolia shall
maintain the confidentiality of documents
and information obtained during the course of
their duty and for a period of one year after being discharged from duty.
Chapter Six
Relations of the Bank of Mongolia with Others
Article 30. Relations of the Bank of Mongolia with the State Ikh Khural
1. The Bank
of Mongolia shall report to the State Ikh Khural on the State
monetary policy, implementation of relevant legislation and the money
and credit situation
every quarter.
2. The Bank of Mongolia shall report and provide explanations to the State Ikh
Khural if the
targets set in monetary policy guidelines have not been achieved due to the
condition of economy being beyond the control of the
activities of the Bank of Mongolia.
3. The Bank of Mongolia shall submit its annual financial report to the State Ikh
Khural.
4.
The State Ikh Khural shall monitor whether the activities of the Bank of
Mongolia are consistent with legislation but shall not interfere
in activities relating to the
implementation of State monetary policy by the Bank of Mongolia.
Article 31. Relations of the Bank
of Mongolia with the Government
1. Relations of the Bank of Mongolia with the Government shall be regulated in
accordance with the
provisions of articles 17, 18, and paragraph 5 of article 21 of this law.
2. The Bank of Mongolia shall be independent from the Government.
3. If a decision taken by the Government is contradictory to State monetary
policy, the Bank of Mongolia shall inform the Government
of the conflict.
4. The President of the Bank of Mongolia may attend Cabinet meetings and
consult on issues relating to the Bank
of Mongolia and banking activities.
5. The Bank of Mongolia shall submit information on monetary statistics and its
annual report
to the Government.
Article 311
. The Bank of Mongolia's Interaction with the Financial Regulation
Committee
1. The Bank of Mongolia
shall produce a tripartite memorandum of
understanding on collaboration with the Financial Regulation Committee and Central State
Administrative organization in charge of financial issues.
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2. The Bank of Mongolia shall abide by a memorandum of understanding
specified in Article 31.1 of this law when it interacts with the Financial Regulation
Committee.
Article 32. Relations of the Bank
of Mongolia with banks
1. The Bank of Mongolia shall communicate with banks in accordance with the
provisions of articles 12, 13,
16, 19 and 20 of this law and the banking legislation.
2. When carrying out its monitoring functions the Bank of Mongolia shall not
interfere with the internal affairs of any bank which is conducting its operations in
compliance with the law.
Article 33. Foreign
relations of the Bank of Mongolia
1. The Bank of Mongolia shall maintain relationships with international and
foreign banks and financial
and credit institutions in relation to State monetary policy and
banking activities in compliance with the interests of Mongolia
and with the laws and
international treaties of Mongolia.
2. The Bank of Mongolia may represent the State on matters related to its
full
powers at inter-Governmental meetings and/or consultations.
3. The Bank of Mongolia may provide banking services to foreign
Governments, central banks and international organizations of which Mongolia is a
member on the basis of relevant agreements reached with such bodies.
4. The Bank
of Mongolia may become a member of and co-operate with foreign
banking and financial organizations.
5. When acting as a fiscal intermediary
of the Government, the Bank of
Mongolia shall perform transactions with the international organizations of which
Mongolia is a member
in accordance with paragraph 3 of article 17 of this law.
Article 34. Statements of the Bank of Mongolia
1. The Bank of Mongolia
shall publicize information on changes in the
implementation and instruments of monetary policy, and on the state of monetary
developments
and the financial markets every quarter.
2. The Bank of Mongolia shall issue a monthly bulletin on monetary statistics.
3. The Bank
of Mongolia shall have the right to require information, reports and
indices from banks, individual and legal entities in order to
compile the information it
must provide under paragraphs of 1 and 2 of this article.
4. The Bank of Mongolia may publish statistical
information and reports in
compliance with the laws.
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Chapter Seven
Paid in Capital of Bank of Mongolia and Allocation of
Income
Article 35. Paid in Capital
1. The Bank of Mongolia shall have paid in capital to allow it to perform its
activities. The
paid in capital shall consist of an share capital, a general reserve fund,
other funds and net income.
2. If there is a deficit between
the sum of the Bank of Mongolia's assets and the
sum of its liabilities its paid in capital, the Government shall, within two months
of the
announcement of such deficit by the Bank of Mongolia, take measures to cover that deficit
by issuing obligations at market
interest rates for the amount of the deficit and placing
them in the Bank of Mongolia.
Article 36. Share capital
1. The share capital
of the Bank of Mongolia shall be no less than five billion
togrogs and any changes in the share capital shall be introduced solely
by law.
2. The State Ikh Khural shall set the amount of the equity of the Bank of
Mongolia in accordance with paragraph 1 of this
article and at the proposal of the Bank of
Mongolia.
Article 37. Determination of net income
1. In determining the net income of
the Bank of Mongolia for a financial year
the following principles shall be observed:
1) total income and expenditure shall be accrued
and estimated in
accordance with the relevant procedure;
2) a reserve fund shall be established for bad debts, asset depreciation
and
for measures of social development;
3) the valuation of assets and liabilities shall be reassessed according to
the relevant
methodology.
2. The Bank of Mongolia shall determine rules which shall apply to the
estimation of accrued income and expenditure,
the establishment of a general reserve and
the revaluation of assets and liabilities for the purposes of paragraph 1 of this article.
3. In determining the revaluation of assets and liabilities the Bank of Mongolia
shall be guided by the following principles:
1)
if there is a difference between the value of the assets and precious
metals of the State foreign currency reserve and the value
of the equity fund after the
revaluation of those funds that difference shall be made up from assets in the revaluation
fund;
2)
if by the end of the financial year it is not possible to make up such
difference from the revaluation fund and the general reserve
fund the Government shall,
within four months after the end of that financial year, issue obligations at market interest
rates and
place them with the Bank of Mongolia.
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4. The net difference between the revaluation of assets and liabilities and any
investment
income earned by the Bank of Mongolia by issuing State foreign currency
reserves shall be included in the computation of net income
of the Bank of Mongolia.
Article 38. Allocation of net income of the Bank of Mongolia
1. The net income of the Bank of Mongolia shall
be allocated according to the
following priorities:
1) no less than 40 percent of net income shall go to the General Reserve
fund;
2) repayment of Government obligations
which have been transferred
pursuant to paragraph 2 of article 35 of this law;
3) any remaining balance of net income after deducting
the amounts
provided for in paragraphs 1 and 2 of this article shall be transferred to the State budget.
2. Deleted.
Chapter Eight
Financial Statements and Accounts of the Bank of Mongolia
Article 39. Financial year of the Bank of Mongolia
The financial year of
the Bank of Mongolia shall be the calendar year.
Article 40. Financial report of the Bank of Mongolia
1. The financial report of
the Bank of Mongolia shall be completed in
accordance with generally accepted accounting rules.
2. Every year the financial statements
of the Bank of Mongolia shall be certified
by an auditing organization and presented to the State Ikh Khural.
Article 41. Financial
statements
The financial statements of the Bank of Mongolia shall consist of balance sheet,
income and expenditures and other relevant
reports and additional explanatory and
clarification notes.
Chapter Nine
Miscellaneous Provisions
Article 42. Liabilities
If a violation
of the Law on the Central Bank does not constitute a criminal
offence, the supervisor appointed by the Bank of Mongolia shall impose
administrative
sanctions on the guilty party in accordance with legislation.
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Article 43. Coming into force
This law shall
come into force on 1 October, 1996.
VICE-CHAIRMAN OF THE STATE
IKH KHURAL OF MONGOLIA TS.ELBEGDORJ
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