(2022.10.11-ний өдрийн орчуулга)                                                   Unofficial translation

LAW OF MONGOLIA

January 28, 2010           Government Palace, Ulaanbaatar city

ON BANKING

(Revised version)

CHAPTER ONE

GENERAL PROVISIONS

Article 1.Purpose of the law

1.1.The purpose of this law shall be the regulation of relations concerning granting permits of banks, the revocation of permits, the establishment of general principles of a bank's management, organization and activities, supervision of operations of banks and banking conglomerates, and taking enforcement measures against them.

Article 2.Legislation on banking

2.1.The legislation on banking is comprised of the Constitution of Mongolia, the Law of Mongolia on Central Bank (Bank of Mongolia), the Law of Mongolia on Ensuring Stability of the Banking Sector, the Law of Mongolia on State Registration of Legal Entities, this law, and other legislative acts enacted in conformity with them.

/This paragraph was amended by the law as of January 29, 2015/

/This paragraph was amended by the law as of June 22, 2018/

2.2.If an international treaty to which Mongolia is a party stipulates otherwise than the legislation on Banking, then the provisions of the international treaty shall prevail.

Article 21.Scope of the Law

21.1.Other relations except specifically specified in the Law on Development Bank of Mongolia shall be governed by this Law.

/This paragraph was modified by the law as of February 10, 2017/

Article 3.Definitions of legal terms

3.1.The terms used in this law shall have the following definitions:

3.1.1."Bank" is a profit seeking legal entity which has paid in capital consisting of cash funds invested by shareholders, and the shareholders of which bear financial liability to the extent of their invested capital, and is engaged in financial intermediary services such as taking deposits, extending loans on its own behalf and executing payments and settlements under a permit from the Bank of Mongolia.

/The word "license" in this sub-paragraph was replaced to "permit" by to the law as of June 17, 2022 and it shall come into force on January 1, 2023/

3.1.2."Related person" means the following person:

/This sub-paragraph was modified by the law as of January 18, 2018/

     3.1.2.а member of the banking conglomerate;

3.1.2.b natural or legal person which holds 5 percent or more of shares of the bank or a member of the banking conglomerate, their competent official, and the spouse, parent, sibling or child of those persons;

3.1.2.c legal person in whom a bank holds 5 percent or more of shares;

3.1.2.d legal person in which a competent official of the bank, and the spouse, parent, sibling or child of those persons, hold 5 percent or more of the bank shares;

3.1.2.e.competent official of the bank and a member of the banking conglomerate, and the spouse, parent, sibling or child of those persons;

3.1.2.f. person who has common interests with the bank which enables such persons to exert significant influence on the operations of the bank;

3.1.2.g.legal person whose competent official is at the same time is a competent official of the bank;

3.1.2.h.legal person whose competent official holds 10 percent or more of the bank's voting shares;

3.1.2.i.other natural and legal persons with common interests with persons specified in this provision;

3.1.2.j.other persons considered by the Bank of Mongolia as related persons.

3.1.3."Bank resolution" means the comprehensive management, organizational, financial and other relevant measures taken to improve the financial position and reduce the bank's loss by making changes in the composition of paid-in capital and organizational structure of a bank, or by increasing or decreasing the paid-in capital.

3.1.4."Bank reorganization" means the merger, acquisition, pision, separation, and transformation in accordance with procedures set forth in the legislation.

3.1.5."Assets, liabilities and equity of a bank" are terms defined in the accounting regulation adopted by the Bank of Mongolia in accordance with international standards.

3.1.6."Banking conglomerate" means separate entities which are related parties to each other and one of which is a bank.

3.1.7."Member of a banking conglomerate" means a legal entity which fulfills the requirements stated in provision 3.1.6 of this Law.

3.1.8."Consolidated supervision" means the assessment of a financial position of members a banking conglomerate on a stand-alone and consolidated basis.

3.1.9."Capital adequacy" means the assessment of adequacy of the bank's capital base to cover losses caused by financial and operational risks.

3.1.10."Regulatory capital" means the minimum level of capital adequacy set by the Bank of Mongolia and specified in 3.1.9 of this Law.

3.1.11."Financial regulatory authority" means the Bank of Mongolia, Financial Regulatory Commission and foreign organizations that have similar functions.

3.1.12."Qualifying shareholder" means a person holding 5 or more percent of the bank shares solely or together with a related person and its beneficial owner inpidual, or a shareholder and its beneficial owner inpidual that can influence the policy, decision and management of the bank;

/This sub-paragraph was modified by the law as of January 29, 2021/

/This sub-paragraph was modified by the law as of January 18, 2018/

3.1.13."Bank unit" means the bank branch, representative office, settlement center, and settlement cash counter that do not have a legal entity mandate.

3.1.14."A parent company in a banking conglomerate" means a company which controls the banking conglomerate and its members;

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.15."Unsound operations" means operations that may expose the bank to excessive risks as defined in a regulation adopted by the Bank of Mongolia;

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.16."Provisional administration of bank" refers to comprehensive management, organizational, financial and operational measures taken by the Bank of Mongolia according to the law with objectives to ensure normal functioning and to improve the financial position of the bank that was identified as its proper governance has been lost, or the bank has become unable to carry out normal operations in a short period of time, or serious violations of the law by the persons or officials exercising the management of the bank have created conditions that will impair the bank's operations, or the risk of the bank incurring a large loss has increased and its solvency position deteriorated during a supervision carried out by the Bank of Mongolia;

/This sub-paragraph was modified by the law as of January 29, 2021/

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.17."Ultimate beneficial owner" refers to a natural person with ownership right who directs the bank operations, or exercises that right by delegating to others, or owns the bank shares through a chain of one or more legal persons, established the legal person and who has the right to make earning from the bank shares and operations;

/This sub-paragraph was amended by the law as of January 29, 2021/

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.18."Key function of a Bank" shall be understood to mean the bank operations whose interruption would probably lead to the threat to banking system stability or pose real adverse impact to the country's economy, due to the market share and the linkages of the operation.

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.19."Connected/affiliated person" means a natural or legal person which Bank of Mongolia determines so in accordance with such attributes of direct or indirect participation in the equity ownership, management, control and operations of a legal entity, and with common business interest.

/This sub-paragraph was added by the law as of January 18, 2018/

3.1.20."The systematically important bank" means a bank which was determined by the Bank of Mongolia as the systematically important in banking system by considering the criteria including the bank's assets, debt ratio, total transaction flow holding in the payment system, banking key activities and the state of relevancy in the finance system as a whole.

/This sub-paragraph was added by the law as of January 29, 2021/

Article 4.Types and forms of bank

/The title of this Article was changed by the law as of January 29, 2021/

4.1.A bank can be state, privately or jointly owned, depending on ownership of its paid in capital; and a general or specialized bank, depending on the type of banking activities it performs.

/This paragraph was amended by the law as of January 29, 2021/

4.2.A systematically important bank can have a form of the open joint-stock company, and other banks can have a form of the joint-stock company.

/This sub-paragraph was added by the law as of January 29, 2021/

Article 5.Non-interference with bank activities

5.1.Unless otherwise provided by law, the Bank of Mongolia and/or state administrative body shall not interfere with activities of a bank and illegitimately influence the bank's management and/or decisions.

5.2.A bank shall not bear responsibility for obligations undertaken by the State, and the State shall not bear responsibility for obligations undertaken by a bank unless the State specifically assumes that responsibility.

CHAPTER TWO

BANKING ACTIVITIES

Article 6.Banking activities

6.1.Banks shall carry out the following activities under a permit from the Bank of Mongolia:

/The word "license" in this paragraph was replaced to "permit" by to the law as of June 17, 2022 and it shall come into force on January 1, 2023/

  6.1.1.Accepting deposits;

  6.1.2.Disbursing loans;

  6.1.3.Payments and settlements services;

6.1.4.Providing payment guarantees and warranties to third parties on its own behalf;

6.1.5.Purchasing, selling, and accepting and placing deposits in foreign currency;

6.1.6.Purchasing, selling, and accepting and placing safety deposits of precious metals and stones;

6.1.7.Receiving valuables into custody;

6.1.8.Conducting foreign remittance services;

6.1.9.Issuing, buying and selling securities;

6.1.10.Dealing in financial leasing transactions;

6.1.11.Selling and buying loan portfolios and other financial instruments;

6.1.12.Other financial transactions and services by the laws and regulations and authorized by the Bank of Mongolia.

/The addendum to this sub-paragraph was made by the law as of January 29, 2021/

/This sub-paragraph was annulled by the law as of June 17, 2022, and it shall come into force on January 1, 2023/

6.2.Banks shall carry out the following activities under a permit from the Financial Regulatory Commission:

/The word "license" in this paragraph was replaced to "permit" by to the law as of June 17, 2022 and it shall come into force on January 01, 2023/

/The words "its subsidiary and daughter company" in this paragraph was deleted by to the law as of January 18, 2018, and it shall come into force on January 01, 2023/

6.2.1.Providing consultancy services and information regarding investment and finance;

6.2.2.Conducting trust operations;

6.2.3.Insurance intermediation;

6.2.4.Underwriting;

6.2.5.Custodian;

6.2.6.Factoring.

/This sub-paragraph 6.2.7 was deleted by the law as of January 18, 2018/

6.3.The bank shall furnish the following documents to the Bank of Mongolia while applying for a permit to engage in activities specified in Articles 6.1 and 6.2 of this Law:

/The word "license" in this paragraph was replaced to "permit" by to the law as of June 17, 2022 and it shall come into force on January 1, 2023/

/This paragraph was modified by the law as of January 18, 2018/

6.3.1.which type of the activities specified in Articles 6.1 and 6.2 of this Law it intends to engage in;

6.3.2.funding sources required for the selected type of activities and proof of origin;

6.3.3.availability of an office space and technical equipment;

6.3.4.software to be used in the activities;

6.3.5.documents proving that the office space, technical equipment, and software meet security and safety requirements;

6.3.6.business plan.

6.4.The Financial Regulatory Commission shall seek the Bank of Mongolia's consent prior to issuing a permit for financial services to other members of a bank conglomerate.

/The word "license" in this paragraph was replaced to "permit" by to the law as of June 17, 2022 and it shall come into force on January 1, 2023/

/This paragraph was modified by the law as of January 18, 2018/

Article 7.Prohibited activities for bank

/The title of this Article was amended by the law as of January 18, 2018/

7.1.No bank shall engage in any activities other than the activities set forth in provisions 6.1, 6.2.1-6.2.6 of Article 6 of this Law. This provision shall exclude the temporary possession or ownership and sale of any property taken as collateral for purposes of recovering the loan or liquidation of debts; and leasing, renting or selling of any property for the purposes of recovering operational costs.

/This paragraph was modified by the law as of January 18, 2018/

7.2.Shareholders, chairman and members of the Board of Directors, the Executive Director, Supervision Board, and officers of a bank shall not release and disclose to others, or use any information which is considered by the bank, its customers, and/or third parties as confidential, except in the following cases:

/This paragraph was amended by the law as of October 6, 2011/

7.2.1.the inpidual to whom confidential information relates agreed in writing to disclosure;

7.2.2.the Bank of Mongolia, its supervisors and State Inspector of the Bank of Mongolia demanded in relation to performing their legitimate duties;

/The addendum to this paragraph was made by the law as of January 18, 2018/

7.2.3.the court and prosecutor's office management lodged a request and/or the prosecutor's office accepted investigator's position of the anti-corruption authority and police department due to their case registration and investigation work requirements, as well as of the intelligence organization's requirement to check information related to money laundering and terrorist financing;

/The addendum to this paragraph was made by the law as of June 10, 2011/

/The amendment to this paragraph was made by the law as of January 18, 2018/

7.2.4.if the violation of laws of Mongolia is proven, at the request of an international law enforcement institution or Government of a foreign country which has concluded with Mongolia an Agreement on Legal Assistance;

7.2.5.the Financial Regulatory Commission demanded for supervising permitted activities and/or financial regulatory authority of a foreign country requested in line with the Financial Regulatory Commission's obligation under an international treaty;

/The word "licensed" in this sub-paragraph was replaced to "permitted" by to the law as of June 17, 2022 and it shall come into force on January 1, 2023/

7.2.6.provided information to the credit information database in accordance with law;

7.2.7.The chairman of the court decision enforcement office or pision approved the request of the bailiff to obtain the bank account information on debtors;

/This sub-paragraph was made by the law as of December 5, 2014/

/This sub-paragraph was modified by the law as of January 10, 2020/

7.2.8.Tax and customs administration demanded with purpose of collecting customs and tax debts from specific debtors, in relation to performing their legitimate duties.

/This sub-paragraph was added by the law as of December 18, 2015/

/The addendum to this sub-paragraph was made by the law as of January 18, 2018/

 /The addendum to this sub-paragraph was made by the law as of March 22, 2019/

   7.2.9.supervisor of Deposit Insurance Corporation demanded in relation to performing duties specified in Banking Deposit Insurance law;

 /This sub-paragraph was added by the law as of February 8, 2018/

   7.2.10.Information required by the tax authorities in accordance with Mongolia's international agreement on the exchange of information for tax purposes, specified in Article 18.1.2 of the General Taxation Law;

 /This sub-paragraph was added by the law as of March 22, 2019/

   7.2.11.The state audit organization demanded in connection with the  implementation of its auditing functions stipulated by the law.

 /This sub-paragraph was added by the law as of May 1, 2020/

7.3.Confidentially requirements described in Article 7.2 of this Law shall not apply to inter-bank data on bank lending, information to be furnished under the law and agreement on credit bureau, reports and data set forth in Articles 37 and 38 of this Law, and information exchanged between the bank and the issuer of asset-backed securities.

7.4.In addition to prohibitions as defined in Article 7.1 of this Law, the bank shall be prohibited to engage in the following activities:

/This paragraph was modified by the law as of January 18, 2018/

  7.4.1 to carry out or participate in activities aimed at providing the bank, alone or together with others, a dominant position in the financial markets, or creating unfair preferential position to itself or any third party;

  7.4.2 to offer underwriting services to a bearer of financial obligation or its related party if its loan and/or other financial obligation to the bank and/or a member of the banking conglomerate is in default on the period agreed under the first agreement;

 7.4.3 while offering underwriting services, to extend a loan or equivalent financial services and/or issue a guarantee and/or warranty to the issuer and/or its related party;

 7.4.4 to purchase securities underwritten by a member of the banking  conglomerate;

 7.4.5 to sell securities underwritten by itself directly or indirectly to members of the banking conglomerate and/or engage in related activities;

 7.4.6 to provide underwriting services to a legal entity that have overdue loans with a bank or non-banking financial institution;

 7.4.7 to execute transactions other than payment of financial obligations to entities which are unable to meet requirements specified in Article 19.1 of this Law in circumstances other than permitted by the Bank of Mongolia;

 7.4.8 to make false or misleading advertisements or statements relating to its activities;

 7.4.9 to make donations to political parties and coalitions.

Article 8.Bank advertisement

8.1.Advertisements by the bank shall truly reflect its activities at a given time and shall be in conformity with the legislation.

8.2.The Bank of Mongolia shall prohibit advertisement of the bank if it is considered to have the following contents:

 8.2.1 If the bank's financial statements disclosed to the public contradict the actual financial position of the bank;

 8.2.2 are not consistent with the legislation.

Article 9.Savings

9.1.A bank may accept savings from citizens of Mongolia or foreign citizens, or stateless persons (hereinafter referred to as "inpiduals") and/or legal entities at their request, hold on a contractual basis and pay an interest.

9.2.Any relations pertaining to accepting savings and savings insurance shall be regulated by a law.

Article 10.Loans

10.1.A bank may extend loans to inpiduals or legal entities on its terms and conditions. The bank shall set lending rates on its own.

10.2.A bank may accept, under an agreement with the borrower and/or based on a court decision, the borrower's property, shares, and their pidends for payments of overdue loan principal and interest. This provision shall not apply to the case provided in Article 17.4 of this Law.

10.3.Lending activities of banks shall be regulated by a law.

Article 11.Payments and settlements services

11.1.A bank shall offer all types of payments and settlements services to its customers on the basis of an agreement signed with the customer.

11.2.A bank shall transfer funds from the customer's account upon the latter's order and within the limits of remaining account balance. Transactions executed pursuant to a decision by the court and/or bank receiver, or a contract or payment order signed by the customer and in which the customer agrees to pay the debt without any dispute shall be regarded as transactions executed upon the customer's order.

11.3.Banks shall determine their fees and commissions for payments and settlements services.

11.4.Inter-bank settlements by banks shall be conducted through their accounts at the Bank of Mongolia. If permitted by the Bank of Mongolia, the bank may transfer the fund via its settlement account held in settlement agent in accordance with the Law on National Payment System.

/This paragraph was modified by the law as of May 31, 2017/

11.5.Payments and settlements activities of the bank shall be regulated by a law.

11.6.The fee for payment of value-added tax incentives is not included.

/This paragraph was added by the law as of July 9, 2015/

11.7.The commercial bank shall not deduct service fee on the transaction collecting taxes, payments and duties stated in the Article 7 of the Law on General Taxation.

/This paragraph was added by the law as of March 22, 2019/

Article 12.Issuance of warranty and guarantee

12.1.A bank may issue a guarantee and warranty to third parties on a contractual basis within the restrictions set out in provision 17.1-17.3 of this Law.

Article 13.Custody of valuables

13.1.In rendering services for custody of valuables of citizens and legal entities (valuables as regarded by customers); a Bank shall determine terms for the custody contract in accordance with the legislation.

Article 14.Foreign exchange payments and settlements

14.1.Bank activities relating to the purchase and sale of foreign currencies and other financial instruments denominated in such currencies shall be regulated by a law.

Article 15.Issuing, purchasing and selling securities

15.1.Bank activities relating to the issuance, acceptance as collateral, sale and/or purchase of securities to be traded on the capital market the constraints described in provision 17.4 of this Law shall be regulated by an applicable law.

15.2.With the authorization of the Bank of Mongolia, a bank may issue, buy, sell or accept as collateral securities to be traded on the money market and maturing within one year. These securities shall not be classified as asset-backed securities.

Article 16.Criteria for banks

16.1.A bank shall comply with the following requirements:

 16.1.1.to maintain its reserve requirement and liquidity in the form and amount required pursuant to the regulations issued by the Bank of Mongolia and to safeguard customers' deposits and pay out and transfer funds on the first demand by a customer;

 16.1.2.to comply with paid in-capital amount, capital adequacy, asset risk, loan loss provisioning, collection of the source of fund, foreign currency exposure and other prudential requirements set by the regulation of Bank of Mongolia;

 /The addendum and amendment to this sub-paragraph was made by the law as of  January 29, 2021/

16.1.3.not to restrict customers from being customers of several banks;

 16.1.4.not to make debit transactions from a customer's current account without the customer's consent. This provision shall not apply to a transaction for the payment of tax debt, through undisputable procedures, from the current account of a taxpayer who failed to pay taxes within the timeline set by the law;

 /The amendment to this sub-paragraph was made by the law as of January 29, 2021/

 16.1.5.shall not demand the client to be serviced by other members of the bank conglomerate, its branch and representative office and obtain other services as a pre-condition for the bank's services.

 /This sub-paragraph was modified by the law as of January 18, 2018/

16.2.A bank shall provide its customers with accurate information on its activities in accordance with accounting procedures and standard practices set by the Bank of Mongolia.

/This paragraph 16.3 was deleted by the law as of January 18, 2018/

Article 17.Restrictions on banking activities

/This Article was modified by the law as of January 18, 2018/

17.1.The total value of loans, loan equivalent assets, guarantees, warranties and other contracts provided to one person and/or his/her related or connected persons shall not exceed 20 percent of the capital of the bank.

17.2.The total value of guarantees and warranties issued by a bank shall not exceed the value of the equity of the bank.

17.3.The amount of loans, loan equivalent assets, guarantees, warranties and other contracts to be issued to the bank's related party shall not exceed 5 percent of the bank's equity, and the total amount of such loans etc. not exceed 20 percent of the bank's equity. The following requirements must be met:

 17.3.1.requirements to, interest rate and terms and conditions of loans, loan equivalent assets, guarantees, warranties and other contracts shall not be concessional as compared with those of the bank's normal operations;

 17.3.2.no loans shall be written, no loan equivalent assets formed, and no  guarantees and warranties issued on the pledge of the bank's shares;

 17.3.3.if the repayment of loans and loan equivalent assets and expiry of  guarantees, warranties and other contracts were past-due for more than six months, or the total amount of loans, loan equivalent assets, guarantees, warranties and other contracts issued to the given related party exceeded 5 percent of the bank's equity, the related party shall not take part in the bank's management in any form.

17.4.Except for circumstances set forth in Article 17.5 of this Law, the total amount of securities a bank can purchase shall not exceed 20 percent of the capital of the bank and 10 percent of the total amount of the shares issued by one company. This shall not apply to securities issued by the Government and the Central Bank and shares of legal entities engaged in credit information business.

17.5.The total amount of asset-backed securities a bank can purchase shall not exceed 50 percent of the bank's equity capital.

17.6.In estimating the limitation specified in Article 17.1 of this Law, the Bank of Mongolia may exclude assets guaranteed and warranted by and secured under a risk sharing agreement with a financial institution with credit rating of "A" or higher level set forth by an international credit rating institution.

17.7.The Bank of Mongolia shall adopt the regulation on computing, ensuring, reporting and monitoring the limits stipulated in Articles 17.1-17.5 of this Law.

17.8.Extending a loan to the qualifying shareholder of the bank within a period of one year after starting of bank operations shall be prohibited.

/The addendum to this paragraph was made by the law as of January 29, 2021/

17.9.Any transaction the bank entered into with a related person shall not have concessions compared to normal transactions with other persons, and transactions with conflict of interests shall be performed under the requirements and procedures stipulated in the relevant law.

17.10.Transactions which violated the Articles 17.8 and 17.9 of this Law shall be invalid.

17.11.If the bank exceeded the limit specified in Articles 17.1-17.5 of this Law, the Bank of Mongolia shall deduct that amount in calculating the capital adequacy ratio of the bank.

CHAPTER THREE

INCORPORATING AND RE-ORGANIZING A BANK

Article 18.Incorporating a bank

18.1.Any legal entity and inpidual except state and local government-owned legal entities (legal entities partially owned by the central and/or local government), non-governmental organizations, and their related parties shall be allowed to establish a bank. This provision does not apply to the Government's setting up a bank.

18.2.An approval is required from the Bank of Mongolia to establish a bank or its branch domestically and abroad.

Article 19.Criteria for bank founders

19.1.Founders of a bank shall satisfy the following criteria:

 19.1.1.If the founder of a bank is a legal entity, it shall report financial statements on an annual basis and/or shorter frequency in accordance with the legislation of the given jurisdiction;

 19.1.2.the given legal entity's financial operations must be subject to regular supervision by the state competent authorities in accordance with relevant legislation;

 19.1.3.financial statements and reports should be subject to external audit by an audit firm, licensed under the legislation of Mongolia or by audit firm recognized by Bank of Mongolia or internationally reputable, at least once a year;

 19.1.4.the monetary asset to be invested in the bank's paid-in capital shall be the income from legal activities of the founder and/or its related party and shall be determined in their financial statements and reports;

 19.1.5 meet the criteria set forth in Article 361 of this law.

 /This sub-paragraph was annulled by the law as of January 29, 2021/

 /This sub-paragraph was modified by the law as of January 18, 2018/

Article 20.Documents to be furnished for incorporating a bank

20.1.In addition to documents required under Articles 16.1 and 20 of the Law on State Registration of Legal Entities, founders and shareholders of a bank shall furnish the following documents:

/The amendment to this paragraph was made by the law as of October 6, 2011/

/The amendment to this paragraph was made by the law as of January 29, 2015/

/The amendment to this paragraph was made by the law as of June 21, 2018/

 20.1.1.an application for license for incorporating a bank;

 20.1.2.founding agreement for incorporating a bank (not applicable in case of one founder);

 20.1.3.the charter of the bank to be incorporated;

 20.1.4.feasibility study for the bank to be incorporated;

 20.1.5.name and address of founders and qualifying shareholders, and financial statements of last three years of their related parties audited by firms that meet the requirements stipulated in this Law;

 20.1.6.detailed description of competent officials, personnel, technical facilities and premises of the bank in the templates set by the Bank of Mongolia;

 20.1.7.proof of the amount of capital invested in the bank, sources, and origin of the funds.

20.2.The Bank of Mongolia shall be entitled to request to submit additional documents within the framework of the required documents, if it considers the documents submitted pursuant to Article 20.1 of this Law are incomplete or unclear. The Bank of Mongolia may approach law enforcement agencies for reference and/or enquiry regarding the founders, shareholders, and competent officials of the bank.

/The amendment to this paragraph was made by the law as of October 6, 2011/

20.3.Documents proving the fulfillment of the requirements stated in this law by bank founders, shareholders and their related parties must be certified by competent authorities of the jurisdiction of registration and internationally recognized bodies. These documents shall be a part of the founding/constitutive documents of a bank.

/The amendment to this paragraph was made by the law as of October 6, 2011/

20.4.Relations of establishing, reorganizing, dissolving a bank, and authorizing an equity investment in a bank, calculating and determining limit on holding shares of the bank shall be regulated by a regulation issued by the Bank of Mongolia in conformity with this Law and other relevant laws.

/The addendum to this paragraph was made by the law as of January 29, 2021/

Article 21.Bank Charter

21.1.The Charter of an entity to be engaged in banking activities shall be incorporated the following items in addition to the items set forth in Article 16.2 of the Company Law:

 21.1.1.the amount of paid-in capital;

 21.1.2.bank management and organizational structure;

 21.1.3.regulation on holding a shareholders' meeting and regulation on operation of the Board of Directors.

 /The amendment to this sub-paragraph was made by the law as of October 6, 2011/

21.2.Any amendments to the Charter of the bank shall be registered with the Bank of Mongolia within 14 days after a decision on such amendments was made.

Article 22.Establishing a bank, branch or representative office of a bank with foreign investment and requirements for its activities

22.1.A legal entity seeking a banking license for a foreign-invested bank and its branch and/or representative office shall furnish the following documents to the Bank of Mongolia in addition to those set forth in Article 20 of this Law while meeting the requirements described in Article 19 of this Law:

 22.1.1.the decision of a foreign bank or financial institution to establish a bank, a bank branch or a representative office within the territory of Mongolia;

 22.1.2.the permission from a competent authority of the jurisdiction to operate on the  territory of Mongolia;

 22.1.3.other documents required by other relevant legislation.

21.2.Additional requirements on operations of a foreign-invested bank, bank branch and/or representative office established in accordance with law shall be set under a regulation of the Bank of Mongolia.

Article 23.Granting a license for incorporating a bank

23.1.While reviewing an application for a license for incorporating a bank and other supporting documents, the Bank of Mongolia shall verify whether the following requirements are met:

 23.1.1.whether the bank has capital paid in cash sufficient to run stable and efficient banking operations;

 23.1.2.whether knowledge, education and experience of the Executive Director, members of the Board of Directors and other competent officials are sufficient for conducting fair and profitable operations of a bank, and whether the Executive Director and members of the Board of Directors satisfy the criteria set out in Articles 32.1, 33.3, and 34.2 of this Law;

 23.1.3.whether the bank will have an adverse impact on the country's economic security;

 23.1.4.whether there is sufficient documentation to prove that monetary asset invested in the bank's capital is fulfilled the requirements stated in the Law on combating money laundering and financing terrorism and obtained from legal activities;

 /This sub-paragraph was modified by the law as of January 18, 2018/

 23.1.5.whether the establishment of the bank is in any way related to money laundering and terrorism financing, or is to increase the risk of money laundering and terrorism financing.

 /This sub-paragraph was added by the law as of January 18, 2018/

23.2.The Bank of Mongolia shall accept an application for a license for incorporating a bank after verifying that the criteria specified in Article 19 and documentation requirements specified in Article 20 of this Law have been fully met. If additional information is required, the date on which the additional documents are submitted shall be deemed to be the date of receipt of the application for a license for incorporating a bank .

23.3.The Bank of Mongolia shall accept the application for a license for incorporating a bank and make its decision within 60 days after receiving the application specified in 20.1 of this Law on whether to issue a license and give a written notice about its decision to the founder within 3 days.

23.4The Bank of Mongolia may grant additional permissions described in Article 6 of this Law to the bank if the bank has soundly conducted operations granted by the license after receipt of the license for incorporating a bank.

Article 24.Refusal to grant a license for incorporating a bank

24.1.The Bank of Mongolia shall refuse to grant a license for incorporating a bank and to authorize capital investment in the following circumstances:

 24.1.1.the requirements set forth in Articles 18-22, 23.1 and 36 of this Law are not met; 

 /The amendment to this sub-paragraph was made by the law as of January 18,2018/

 24.1.2.the charter of a bank is in contradiction with the legislation;

 24.1.5.it is established that a bank that is to be incorporated is not able to have sufficient capital to comply with the requirements, or failed to submit proof of source and origin for capital completely in accordance with the requirements, or the materials submitted were false, or the capital was provided from a banking loan, or inpiduals to be worked as the competent officials of the bank do not satisfy the criteria set by this Law;

 24.1.6.contradicts with relevant laws and decisions of financial regulatory  authorities;

 24.1.7.a bank has not informed the Bank of Mongolia of the identities of its qualifying shareholders, if there are no qualifying shareholders, identities of the largest up to twenty shareholders; their shareholdings amount, total amount and size of those holdings.

 /The amendment to this sub-paragraph was made by the law as of January 29, 2021/

 /This sub-paragraph was added by the law as of January 18, 2018/

Article 25.Registration of banks

25.1.Pursuant to articles 18-22 of this law, banks licensed by the Bank of Mongolia shall be registered in the state registry.

25.2.To establish a bank branch the approval from the Bank of Mongolia shall be obtained. Approval for establishing a bank branch shall be recorded on the banking license of the head bank without issuing a separate registration.

25.3.Registration of a bank in the State Registry shall be announced publicly.

Article 26.Name of a bank

26.1.The name of a bank shall consist of its own name and the word "bank".

26.2.It is prohibited for entities not holding a banking license to use the word "bank" in its name.

26.3.The name and the location of a bank shall only be changed with the consent of the Bank of Mongolia.

26.4.A bank unit shall use the name of the head bank.

Article 27.Revocation of a license for incorporating a bank

27.1.The Bank of Mongolia shall revoke a license for incorporating a bank on the following grounds and announce it publicly:

/This paragraph was modified by the law as of January 18, 2018/

 27.1.1.upon a decision of bank liquidation is issued by competent authority in accordance with law;

 27.1.2.unless otherwise stated in this Law, upon the bank has become insolvent, or a decision of the Bank of Mongolia was issued in respect to unavoidable situation to become insolvent has been occurred to the bank, or the bank failed to meet minimum requirement of share capital;

 /This sub-paragraph was modified by the law as of January 29, 2021/

 27.1.3.it was revealed after the registration of the bank that false documents have been submitted to obtain a license for incorporating a bank;

 27.1.4.the bank did not engage in any banking activities for more than one year after its registration;

 27.1.5.submitted false documents while making changes to the structure and paid-in capital;

 27.1.6.failure of the bank to implement the measures and fulfill the requirements specified in Article 48 of this Law created a serious condition that may hinder the operations and solvency of the bank;

 27.1.7.it was determined that the bank's action to fail to provide the customer's information to the tax office as specified in Articles 7.2.8 and 7.2.10 of this Law has become a condition for the customer to avoid or escape paying taxes, and this violation was repeated two or more times.

 /This sub-paragraph was added by the law as of March 22, 2019/

27.2.By revoking the license for incorporating a bank, all permissions for banking activities shall become invalid automatically.

27.3.If a license for incorporating a bank has been revoked or an application has been refused, the Bank of Mongolia shall not accept documents on a new application for a license within one year.

27.4.If the Bank of Mongolia has revoked a license for incorporating a bank due to reasons other than stated in Article 27.1 of this Law, the Board of Directors of the bank shall, within 30 days after and on the basis of such decision by the Bank of Mongolia, call for a shareholders meeting and shall issue a decision on liquidation of the bank by such meeting.

27.5.The Bank of Mongolia shall consider as the bank became insolvent or unavoidable situation to become insolvent has been arisen to the bank if any of the following situations was occurred:

 27.5.1.the bank is no longer able to provide monetary asset to depositors,  customers, or other persons authorized to demand the performance of the obligations at their first request, or it has been determined by the supervision that it is impossible to issue it;

 27.5.2.due to non-fulfillment of appropriate ratio criteria, it is no longer possible to carry out activities by the bank;

 27.5.3.the bank's liabilities exceed its assets, or it has been determined by the supervision that it will exceed within reasonable normal period.

 /This paragraph was added by the law as of January 29, 2021/

Article 28.Primary conditions for reorganizing and liquidating a bank under shareholders meeting decision

/The title of this Article was amended by the law as of October 06, 2011/

28.1.If the Bank of Mongolia authorizes, the bank can be reorganized and/or liquidated upon a decision by the shareholders meeting.

/This paragraph was amended by the law as of October 06, 2011/

28.2.The decision to reorganize and/or liquidate a bank shall contain the establishment of a reorganization and/or liquidation committee, inspections committee charged with the duty to review property and valuables in the bank's books, appointment of members of these committees, and selection of an audit firm.

28.3.To obtain an authorization to reorganize and/or liquidate the bank, the following documents shall be furnished to the Bank of Mongolia within 3 days after the shareholders meeting issued such decision:

 28.3.1.shareholders meeting resolution on bank reorganization and/or liquidation;

 28.3.2.document indicating the need, modality, conditions, and timeline of bank

 reorganization and/or liquidation, actions to be taken by the bank in relation to cease of its operations, corresponding timelines and stages, audited financial statements reviewed at the shareholders meeting;

 28.3.3.organizational structure, legal status, and location of the entity to be formed after the reorganization, types of operation and business plan of the bank, implementation plan of reorganization, other information on proforma balance sheet;

 28.3.4.estimates of the financial outcome of the proposed bank reorganization and beginning balance sheet of the reorganized bank.

 /This paragraph was amended by the law as of October 6, 2011/

28.4.The Bank of Mongolia shall issue and disclose to the public its decision on the proposed bank reorganization and/or liquidation within 60 days after receiving the relevant documents.

28.5.In establishing the date of receiving the documents set forth in Article 28.3 of this Law, the Bank of Mongolia shall follow Article 23.2 of this Law.

28.6.The bank reorganization shall be commissioned once the Bank of Mongolia issues its authorization on the matter.

28.7.The bank shall notify its depositors, customers, and borrowers of the reorganization decision within 3 days after obtaining an authorization from the Bank of Mongolia.

28.8.The Bank of Mongolia may take part in as an intermediary role in bank reorganization such as merger and acquisition.

28.9.The Bank of Mongolia shall refuse to issue its authorization if any of the following circumstances materializes:

 28.9.1.the documents set forth in Article 28.3 of this Law were incomplete;

 28.9.2.the documents set forth in Article 28.3 of this Law were in violation of the legislation;

 28.9.3.the criteria set forth in Articles 19, 20 and 36 of this Law were not met;

 28.9.4.the Bank of Mongolia deemed that the proposed reorganization/liquidation might negatively affect the customers' interests and financial sector stability.

28.10.The shareholders' meeting resolution shall be deemed void if the Bank of Mongolia refused to issue an authorization to reorganization and/or liquidation.

/This paragraph was amended by the law as of October 6, 2011/

28.11.The bank shall be liquidated in accordance with relevant procedures stated in the legislation pursuant to the Bank of Mongolia's authorization of the liquidation.

CHAPTER FOUR

BANK MANAGEMENT AND ORGANIZATIONAL STRUCTURE

Article 29.Shareholders meeting of the bank

/The title of this Article was amended by the law as of October 6, 2011/

29.1.The shareholders meeting shall be the supreme governing body of a bank. In case of a state-owned bank, the powers of the shareholders meeting shall be exercised by the Government and a body authorized by the Government.

/This paragraph was amended by the law as of January 29, 2021/

/This paragraph was amended by the law as of October 6, 2011/

29.2.The shareholders meeting shall discuss and resolve the following matters:

/This paragraph was amended by the law as of October 6, 2011/

 29.2.1.To approve the bank charter, its amendments and revisions;

 29.2.2.To change the structure and size of equity;

 29.2.3.To reorganize the bank;

 29.2.4.To liquidate the bank;

 29.2.5.To review and approve the Board of Directors' annual report on bank operations;

 29.2.6.To review and approve the Board of Directors opinion regarding audited  financial statements;

 29.2.7.To appoint, terminate the appointment of, and dismiss members of the Board of Directors upon receipt of Bank of Mongolia notice indicated in the Article 32.3 of this Law;

 /This paragraph was modified by the law as of January 18, 2018/

 29.2.8.To set out powers of the Chairman and members of the Board of Directors, institute the responsibility framework, remuneration, and terms of reference of the Board of Directors;

 29.2.9.matters pertaining to the bank supervisor (Supervisory Board) shall be governed under Article 92 of the Company Law.

29.3.Votes of a legal entity and/or inpidual that do not meet the criteria set forth in Articles 19 and 36 of this Law at a shareholders meeting shall be deemed void. In this case, a decision from the shareholders meeting shall be deemed effective by majority of votes of other shareholders.

/This paragraph was amended by the law as of October 6, 2011/

29.4.Other matters pertaining to calling for a shareholders meeting, delivering a notice, and the shareholders meeting decision entering into force shall be governed under Articles 60-74 of the Company Law.

Article 30. Procedure for convening a shareholders meeting of the bank at the initiative of the Bank of Mongolia

/The title of this Article was amended by the law as of October 6, 2011/

30.1.If enforcement measures are being undertaken under the banking legislation, the Bank of Mongolia or its Conservator may call for an extraordinary shareholders meeting of the bank, if necessary.

/This paragraph was amended by the law as of October 6, 2011/

30.2.The date and time of a shareholders meeting of the bank shall be announced 30 days prior to the meeting day, in case of a provisional administration, the meeting can be convened prior to the date provided above.

/This paragraph was amended by the law as of October 6, 2011/

/This paragraph was amended by the law as of June 22, 2018/

30.3.In case of a provisional administration, a decision of the shareholders meeting shall enter into effect by the conservator's vote regardless of power of the shareholders.

/This paragraph was amended by the law as of October 6, 2011/

/This paragraph was amended by the law as of June 22, 2018/

30.4.No shareholders meeting shall be convened if the bank is under Bank of Mongolia receivership.

/This paragraph was amended by the law as of October 6, 2011/

Article 31.Board of Directors of the bank

31.1.A bank shall have a Board of Directors.

31.2.The Board of Directors of a bank shall have nine and more members.

/This paragraph was modified by the law as of January 29, 2021/

31.3.The Board of Directors of the bank shall exercise the following powers:

 31.3.1.To set out, review, and amend the bank strategy, to approve the  organizational structure, risk management policy, annual budget, business plan, and performance targets;

 31.3.2.To appoint executive management of the bank upon authorization of the Bank of Mongolia;

 /This sub-paragraph was amended by the law as of January 29, 2021/

 31.3.3.To define the powers and responsibilities of executive management, oversee its activities and approve its compensation package;

 31.3.4.To call for regular and extraordinary shareholders meetings;

 /This paragraph was amended by the law as of October 6, 2011/

 31.3.5.To issue an opinion regarding the matters set forth in Articles 29.2.6 and 29.2.7 of this Law and present it to the shareholders meeting for consideration;

 /This paragraph was amended by the law as of October 6, 2011/

 31.3.6.To form an internal audit unit in the bank independent from executive management, to approve its budget and staffing, to appoint its managers and staff, to outline its terms of reference, and to approve salaries and bonuses;

 31.3.7.to outline prudent governance policies and procedures of the bank and oversee their enforcement;

 31.3.8.to establish proper controls encompassing the bank's accounting, financial reporting, external and internal audit, risk management, financial and operational control, and compliance;

 31.3.9.to oversee the disclosure of financial statements specified in Articles 37 and 38 of this Law and other information.

31.4.The terms of reference of the Board of Directors shall be governed under the charter of the bank and should incorporate the following duties of the Chairman and members of the Board of Directors:

 31.4.1.To perform duties duly within the powers established in the legislation and the charter;

 31.4.2.To prioritize the bank's and bank costumer's interests over one's private and that of the body that appointed;

 /This sub-paragraph was amended by the law as of January 29, 2021/

 31.4.3.not to benefit from profits secretly;

 31.4.4.to avoid a conflict of interest and inform the Board of Directors in case of the occurrence of a conflict of interest;

 31.4.5.not to interfere with daily operations of the bank.

31.5.Unless otherwise stipulated in this Law, issues pertaining to other matters such as convening a Board of Directors' meeting and resolutions from the Board of Directors meeting entering into effect shall be governed under Articles 76-79 of the Company Law.

31.6.The Bank shall deliver to the Bank of Mongolia certified copies of minutes and resolutions of shareholders and Board of Directors meetings, and documents capturing the count of votes at a shareholders meeting within 45 days from the decision of shareholders and Board of Directors meetings.

/This paragraph was amended by the law as of October 6, 2011/

31.7.The internal audit unit's basic functions shall be to oversee the implementation of policies adopted by bank management, business plan and budget of the current year, and operational guidelines, and the accuracy of bookkeeping and financial statements, to safeguard assets, and to improve asset efficiency. It shall report its activities to the Board of Directors.

Article 32.Members of the Board of Directors of the bank

32.1.Members of the Board of Directors shall meet the following criteria:

 32.1.1.no overdue debt under a loan, warranty, and/or guarantee agreement;

 32.1.2.no criminal record on crimes against economy and ownership right, public safety and interest, corruption, national and mankind security and safety, or peace;

 /The amendment to this sub-paragraph was made by the law as of January 29,               2021/

 /The word "anti-government and economic" in this sub-paragraph was removed by the law as of January 18, 2018/

 32.1.3.no conflict of ethical and business reputation with regard to overseeing the bank;

 32.1.4.not have conflict of interest, and not adversely affect to the decision-making process of the bank if in a competent official position at professional institutions in the financial sector;

 /This sub-paragraph was modified by the law as of January 18, 2018/

 32.1.5.if the candidate was in a competent official position at a bank and/or non- banking financial institution when its permit was revoked due to the violation, three years should be passed;

 /The word "license" in this sub-paragraph was replaced by the word "permit" by the law as of June 17, 2022 and it shall come into force on January 1, 2023/

 32.1.6.if the candidate was subjected to the liability stated in the Law on Violation while being in a competent official position at an entity engaged in professional business on the financial market, three years should be passed.

 /The amendment to this sub-paragraph was made by the law as of December 04, 2015/

 32.1.7.have a degree, specialized in banking, finance, economics, law, information technology or corporate governance, and at least ten years of professional experience, five years of which worked in a competent official position at a bank and/or financial institution.

 /This sub-paragraph was added by the law as of January 18, 2018/

32.2.A member of the Board of Directors can be a shareholder of the bank.

/The amendment to this paragraph was made by the law as of October 06, 2011/

32.3.The Bank of Mongolia shall determine and inform to the bank whether the person applying for the position of a member of the Board of Directors of the bank meets the criteria stipulated in the Article 32.1 of this Law based on information in written form delivered by the bank in advance.

/This paragraph was added by the law as of January 18, 2018/

Article 33.Independent members of the Board of Directors

33.1.At least one third of total members of the Board of Directors of the bank shall be the independent members.

/This paragraph was modified by the law as of January 29, 2021/

33.2.The regulation on nominating, appointing, and dismissing an independent member of the Board of Director of the bank shall be adopted by the Bank of Mongolia.

/The amendment to this paragraph was made by the law as of January 18, 2018/

33.3.An independent member of the Board of Directors of a bank shall meet the following criteria in addition to the ones specified in Articles 32.1.1-32.1.6 of this law:

/This paragraph was modified by the law as of January 18, 2018/

 33.3.1.has a degree in banking, finance, economics and law, specialized and at least ten years of professional experience, five years of which worked in a competent official position at a bank and/or financial institution;

 33.3.2.has no qualified participation in the ownership of the bank or in a member of the banking conglomerate to which the bank belongs;

 33.3.3.has not been in a competent official position other than independent member of the Board of Directors of the bank or a banking conglomerate to which the bank belongs in the past five years; or has not been an employee of those in the past three years;

 /The addendum to this sub-paragraph was made by the law as of January 29, 2021/

 33.3.4.does not receive and has not received remuneration related to the bank's performance;

 33.3.5.is not connected to the bank on any other ground which could prevent her or him from objectively and impartially supervising the operations of the bank and the work of management;

 33.3.6.is not in a political or core public servant's position;

 33.3.7.it is proven that bankruptcy or insolvency of a legal entity for which the person worked as a competent official, was not caused in any form by the person;

 33.3.8.is not a related person with the persons specified in Articles 33.3.2-33.3.3 of this Law.

 /The amendment to this sub-paragraph was made by the law as of October 06, 2011/

33.4.The Bank of Mongolia shall adopt the regulation on establishing the status of a large client.

33.5.An independent member of the Board of Directors of the bank shall be on the audit and risk management committee and obliged to participate in approval of and vote on matters under the jurisdiction of these committees and conflict of interest deals stipulated in the Company Law.

33.6.The Board of Directors shall adopt the terms of reference of the audit and risk management committees.

Article 34.Executive Management of the bank

34.1.Executive management of the bank shall work under a contract and adhere to the following operational requirements:

 34.1.1.эo give precedence to the bank's and its customers' interests over  his/her own personal interests;

 34.1.2.not to use any information about the bank and its customers, which is obtained during his/her service in the bank, for the benefit of personal or third party's interest;

 34.1.3.to make a written disclosure to the Board of any conflict of interest as soon as a conflict of interest becomes apparent. A conflict of interest shall exist whenever the Executive director or any of his/her related party has a direct interest about knowing financial situation of an entity that has business with the bank;

 34.1.4.to refrain from attending any discussions concerning his/her personal matters and interests;

 34.1.5.to manage the bank's day-to-day operations within his/her powers set by legislation and the Charter of the bank;

 34.1.6.provide for conditions for bank staff to perform their duties without any conflict of interest;

 34.1.7.establish and assess the performance of an internal control framework that ensures normal operations of the bank.

34.2.In addition to criteria provided in Articles 32.1.1-32.1.6 of this Law, the Executive Management shall meet the followings:

/This paragraph was modified by the law as of January 18, 2018/

 34.2.1.have a degree in banking, finance, and economics, at least ten years of professional experience, five years of which worked in a competent official position at a bank and/or financial institution and have technical skills and experience;

 34.2.2.not to have a conflict of interest or common interest with the bank,  shareholder of the bank or a member of the Board of Directors of the bank;

 34.2.3.shall not be a senior official of a legal entity that is engaged in non-financial activities and have a relation to other banks, banking conglomerate or the bank;

 34.2.4.not worked in a competent official position of the Bank of Mongolia in the last two years;

 34.2.5.not forfeited the right to run professional operations;

 34.2.6.not seriously violated the banking legislation and any decision of the Bank of Mongolia.

34.3.Executive management members must not be a member of the Board of Director's audit, remuneration, or nomination committee, nor shall have a voting right for decisions to select, appoint, dismiss the executive director, to define and monitor the power of the executive director.

/This paragraph wad added by the law as of January 18, 2018/

34.4.The competent official of the bank shall bear the liabilities specified in Articles 84 and 85 of the Company Law.

/This paragraph was added by the law as of January 29, 2021/

CHAPTER FIVE

BANK CAPITAL AND SUPERVISION

/The word "Consolidated" in the title of this article was deleted by the law as of January 18, 2018/

Subchapter One

Bank equity, financial statements

Article 35.Bank equity

35.1.The bank shall have its own equity, which shall be defined in accordance with the accounting regulation approved jointly by the Bank of Mongolia and state central administrative body in charge of finance and registration matters.

/The amendment to this paragraph was made by the law as of June 24, 2010/

35.2.Paid-in capital of the bank shall consist of cash contributions by bank Shareholders; its minimum amount shall be set by the Bank of Mongolia taking into consideration the country's economic situation, inflation developments, bank solvency, importance in the banking system, and peculiarities of bank operations.

/The addendum to this paragraph was made by the law as of January 29, 2021/

35.3.Unless otherwise stated in this law, the bank may pay pidends only if it continues to meet prudential requirements set by the Bank of Mongolia after the distribution of pidends.

/This paragraph was amended by the law as of January 18, 2018/

35.4.The Bank shall determine the amount of its equity by its profit or loss or by increasing or amortizing the excess or shortfall of the fund for protecting from asset risk and loan loss provisioning.

/This paragraph was amended by the law as of January 29, 2021/

35.5.The regulation on classification of bank assets, establishing and disposing of asset risk fund shall be set by the Bank of Mongolia jointly with the central state administrative body in charge of financial matters. Bank shall classify its asset in accordance with such regulation and establish asset risk fund.

/This paragraph was modified by the law as of January 18, 2018/

35.6.The regulation on provisioning and disposal of provisions for possible losses of other assets and activities except those specified in 35.5 of this Law shall be set by the Bank of Mongolia.

35.7.Procedures for setting up other funds except those stated in 35.5 and 35.6 of this Law shall be set by each bank.

35.8.Shareholders of the bank shall be liable for the bank's loss and other liability to the amount of their contribution to the bank capital.

/This paragraph was amended by the law as of October 6, 2011/

Article 36.Issuing an authorization on holding a share of the Bank

/This Article was modified by the law as of January 29, 2021/

36.1.The amounts of shares and other securities classified as shares to be held by any person inpidually or jointly with the relevant persons shall not exceed more than 20 per cent of the total issued shares of such bank.

/This paragraph was modified by the law as of January 29, 2021/

/This paragraph was amended by the law as of January 18, 2018/

36.2.The restriction stated in the paragraph 36.1 of this Law shall not apply to the following cases:

/This paragraph was modified by the law as of January 29, 2021/

 36.2.1. a special purpose bank established in accordance with Article 58 of this Law;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.2.2. For state ownership of banks recapitalized by the state in accordance with the Law on ensuring the stability of the banking sector.

 /This sub-paragraph was added by the law as of January 29, 2021/

36.3.The bank shall obtain an authorization from the Bank of Mongolia when issuing the shares and other securities classified as shares newly, changing the amount and the structure of the paid in capital, and becoming any person as a qualifying shareholder, and the relations related to notifying and obtaining an authorization by the Bank of Mongolia based on the criteria set by it when making changes in the amount and structures of the shares of the qualifying shareholder shall be regulated by the procedure set forth in Article 36.11 of this Law.

/This paragraph was modified by the law as of January 29, 2021/

/This paragraph was amended by the law as of January 18, 2018/

36.4.In order to obtain an authorization, set forth in the Article 36.3 of this Law, the bank shall prove the origin of the paid in capital and such person have met the requirements set forth in the law and regulations by the evidences, and this requirement shall be met constantly during the shareholding period.

/This paragraph was modified by the law as of January 29, 2021/

36.5.The evidences set forth in the Article 36.4 of this Law shall be required to be in compliance with accuracy and reality, and if this requirement is failed to be met, the grounds stated in the Article 27.1.5 of this Law shall be occurred.

/This paragraph was modified by the law as of January 29, 2021/

/This paragraph was amended by the law as of January 18, 2018/

36.6.The Bank of Mongolia shall accept a request for an authorization of changes in the amount and structure of shares owned by qualifying shareholders and issuance of additional shares and other securities classified as shares and issue a decision on whether to issue the authorization or not within 60 days after all documents are furnished completely which are satisfied the requirements and the criteria set forth in this Law. The bank shall be notified of the decision thereof.

/This paragraph was modified by the law as of January 29, 2021/

36.7.If the Bank of Mongolia did not authorize to become a qualifying shareholder or to change amount and structure of the shares of the qualifying shareholder, or it is failed to be satisfied requirements and criteria set forth in this Law, such shares shall not have the voting and pidend rights.

/This paragraph was modified by the law as of January 29, 2021/

36.8.The number of shares and other securities classified as shares issued without obtaining the authorization as stated in the Article 36.7 of this Law shall be deducted from the bank's own capital by the Bank of Mongolia, and the shareholders shall have an obligation to sell or transfer the shares in the order when they were last acquired within 30 days until the legal limits are met.

/This paragraph was modified by the law as of January 29, 2021/

36.9.This Article shall equally apply to an inpidual, legal entity, and their related parties specified in Articles 19 and 20 of this Law, who are incorporating a bank and/or owning bank shares and other securities classified as shares.

/This paragraph was modified by the law as of January 29, 2021/

36.10.An entity engaged in securities ownership right registration and depository of securities shall deliver a detailed information on shareholder registration of a bank to the Bank of Mongolia.

/This paragraph was modified by the law as of January 29, 2021/

36.11.A regulation on notifying and obtaining an authorization based on the criteria set forth in accordance with Article 36.3 of this Law when changing the amount and structure of the bank's equity, and issuing newly shares and other securities classified as shares, initial public offering of the bank's shares, selling and transferring bank shares and making other transactions similar thereto, as well as any person becoming as a qualifying shareholder, and making changes in the amount and structures of the shares of the qualifying shareholder shall be adopted jointly by the Bank of Mongolia and the Financial Regulatory Commission.

/This paragraph was modified by the law as of January 29, 2021/

36.12.A bank shareholder shall be prohibited from pledging its shares and other securities classified as the shares, and selling them back to the bank without the authorization of the Bank of Mongolia.

/This paragraph was modified by the law as of January 29, 2021/

36.13.It shall be prohibited for an inpidual and legal entity to own bank shares indirectly by using others' name.

/This paragraph was modified by the law as of January 29, 2021/

36.14.It shall be prohibited to sell shares of a bank incorporated in accordance with Article 22 of this Law to others unless it was authorized by the Bank of Mongolia.

/This paragraph was modified by the law as of January 29, 2021/

36.15.It shall be prohibited for a qualifying shareholder of the bank to be a qualifying shareholder of another bank.

/This paragraph was added by the law as of January 29, 2021/

36.16.Shares issued by a bank shall be acquired by cash only; and this requirement shall not apply in conversion of liabilities, subordinated debt and other equity securities into shares according to this law.

/This paragraph was added by the law as of January 29, 2021/

36.17.A bank shall submit to the Bank of Mongolia the information and related documents identifying the ultimate beneficial owner of shares of the qualifying shareholder; and this information shall be updated each time when the ultimate beneficial owner is replaced.

/This paragraph was added by the law as of January 29, 2021/

36.18.Based on the supervision of the information on the ultimate beneficial owner of the bank's shares, the Bank of Mongolia shall determine the person to be obtained an authorization as stated in the Article 36.3 of this Law and notify the bank.

/This paragraph was added by the law as of January 29, 2021/

36.19.A qualifying shareholder of the bank shall meet the following criteria:

/This paragraph was added by the law as of January 29, 2021/

 36.19.1. the person in question shall not be a respondent or a competent official of a respondent legal entity of a bankruptcy case;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.19.2. has not committed crimes against the economy, ownership rights, public security and interests, corruption, national and mankind security and peace;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.19.3. to have financial capacity;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.19.4. if a qualifying shareholder is a legal entity, the banking conglomerate should have a structure that allows for examination by the Bank of Mongolia;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.19.5. to have proven the ultimate beneficial owner of such shares;

 /This sub-paragraph was added by the law as of January 29, 2021/

 36.19.6. The qualifying shareholder him/herself and the ultimate beneficial owner shall not be a high public official.

 /This sub-paragraph was added by the law as of January 29, 2021/

Article 361.Suitability for qualifying shareholder

/This Article was annulled by the law as of January 29, 2021/

/This Article was added by the law as of January 18, 2018/

361.1.A qualifying bank shareholder shall meet the following criteria:

 361.1.1.the person shall not be a respondent, or a competent official of a  respondent legal person of a bankruptcy case;

 361.1.2.has not been sentenced or convicted for crimes against the economy, ownership rights, public security, vested interests, corruption, national and mankind security and peace;

 361.1.3.have financial capacity and not to cause conditions that would adversely impact the operations of the bank;

 361.1.4.where the qualifying shareholder is a legal person, it is structured to allow the banking conglomerate to be examined by the Bank of Mongolia;

 361.1.5.has submitted sufficient amount of evidence proving the ultimate owner of the shares.

Article 37.Financial statements

37.1.Financial statements of a bank shall have compositions stated in the Article 8.1 of the Law on Accounting.

/This paragraph was modified by the law as of June 19, 2015/

37.2.Financial statements of a bank and other members of the banking conglomerate, and consolidated financial statement of the banking conglomerate shall meet the following requirements:

/This paragraph was amended by the law as of January 18, 2018/

 37.2.1.financial statement indicators shall be in compliance with accounting principles adopted by the Bank of Mongolia in accordance with international standards;

 37.2.2.a document with dates officially certifying that the financial statements are prepared accurately in accordance with Article 37.2.1 of this Law and stamped and signed by the Chairman of the Board of Directors, executive management and other relevant officials.

37.3.The bank shall submit to the Bank of Mongolia its monthly financial statements by the 10th of succeeding month and the bank, members of the bank conglomerate or parent company their quarterly financial statements on a consolidated and inpidual basis by the end of the first month of succeeding quarter.

/This paragraph was modified by the law as of January 18, 2018/

37.3.The Bank of Mongolia shall have a right to request any additional evidence and documents related to financial statements of a bank, and other members of the bank conglomerate.

/This paragraph was amended by the law as of January 18, 2018/

/This paragraph was amended by the law as of June 22, 2018/

37.4.A regulation on preparing consolidated financial statements of banking conglomerates shall be adopted by the Bank of Mongolia jointly with the Financial Regulatory Commission and the state central administrative body in charge of financial matters.

37.5.The bank shall maintain a standard back-up system with archives of physical and electronic data for protecting its banking and financial operations database from force majeure factors and other threats.

Article 38.Disclosure of financial statements and other information of a bank to the public

38.1.The bank shall disclose to the public through the media, its quarterly financial statements that meet the requirements set forth in Article 37.2 of this Law within the first month of the succeeding quarter, and audited annual financial statements within the first quarter of the next year.

38.2.In addition to the statements stated in Article 38.1 this Law, the bank shall disclose the following information to the public through publication and/or posting on the website within five days after the decision was made:

 38.2.1.performance report certified by the signature of Chairman of the Board of Directors and executive management of the bank;

 38.2.2.organizational structure and legal status of the legal entity, structure and composition of shareholders;

 /This sub-paragraph was amended by the law as of October 06, 2011/

 38.2.3.financial and accounting systems, and internal audit framework;

 38.2.4.names of qualifying shareholders, members of the Board of Directors, executive director and its deputy, chief accountant, managers of bank units, and members of the Supervisory Board;

 38.2.5.form, timeframe, and implementation approach of reorganizing the bank, organizational structure, legal status, and location of the legal entity to be formed, types of activities the bank will engage in, primary documents related to financial operations;

 38.2.6.loans, letter of credit, other liabilities, works and services provided to the bank's related parties;

 38.2.7.other information deemed necessary by the Bank of Mongolia to assess the  bank's risks.

38.3.The Bank of Mongolia shall monitor the accuracy of the bank's financial statements and information disclosed to the public and/or posted on the website and require the bank to correct the financial statements and information if they were not disclosed in accordance with the relevant regulations or incorrect and/or with mistakes.

38.4.The information set forth in Article 38.2.5 of this Law shall be disclosed to the public upon the Bank of Mongolia's authorization of the reorganization.

38.5.The bank shall disclose information determined by the Financial Regulatory Commission and organization engaged in security trade in accordance with the relevant legislation.

/This paragraph was added by the law as of January 29, 2021/

Article 39.Reporting of the bank's financial statements and other necessary information

39.1.The bank, member of a banking conglomerate, their competent officials and employees are obligated to disclose in a unobstructed, complete and accurate manner to the Bank of Mongolia and supervisors of the Bank of Mongolia their financial statements, primary financial documents and their verifying documents, information, data and documents regarding management of the bank that are required to be compiled as stated in the relevant legislation, and the comprehensive list which details the equipment, tools, software and sub-software used in their financial operations, their precise locations as well as their passwords for access to ensure to provide an environment to conduct a supervision independently and impartially.

39.2.Bank management, its related party and its competent officials and staff shall make every effort to allow supervisors of the Bank of Mongolia to exercise their regulatory duties.

39.3.If documents, information and data requested by the Bank of Mongolia and its supervisors under relevant legislation are deemed unavailable, the bank's related parties, competent officials and employees shall be obliged to send a written notification in regards to it.

Article 40.Auditing financial statements

40.1.A bank, and other members of the bank conglomerate shall have their financial statements and other required documents audited and verified by an audit firm (auditor) at least once a year.

/This paragraph was amended by the law as of January 18, 2018/

40.2.The audit firm (auditor) shall present its audit opinion on certified financial statements and documents to the Board of Directors and Supervisory Board of the given bank.

Article 41.Submission of an auditor's opinion to the financial regulatory authority

41.1.An audit firm (auditor) shall submit the certified detailed financial statement and the original copy of its final opinion thereof to the audited bank and the Bank of Mongolia within the first half of a year.

41.2.An audit firm (auditor) shall inform the Bank of Mongolia of its opinion within five days if the following conclusions are made based on documents provided by the bank:

 41.2.1.the bank may experience a serious financial difficulty soon due to  insolvency or  possible insolvency;

 41.2.2.if it considers that the bank staff was engaged in unfair, illegal operations,  which  had an adverse impact on the financial situation of the bank.

41.3.An audit firm (auditor) shall inform in writing the Bank of Mongolia and the Financial Regulatory Commission within five days if it reveals the situation that a bank faces a provision specified in Article 41.2 of this Law and/or bank violated a regulation on large and/or conflict of interest deals specified in the Law on Company when exercising its duties.

/This paragraph was amended by the law as of January 29, 2021/

Article 42.Tax payment

42.1.Banks shall pay taxes according to relevant legislation.

Subchapter Two

Supervision

/The word "Consolidated" in the title of this article was deleted by the law as of January 18, 2018/

Article 43.Bank Supervisory powers of the Bank of Mongolia

/This Article was added by the law as of January 18, 2018/

43.1.Related bank, financial institution, inpidual or legal person shall be obligated to provide all materials, records, books, reports, information, data and other documentation relevant to their activities and financial situation as demanded by the Bank of Mongolia.

43.2.The Bank of Mongolia shall have the following powers:

/This paragraph was amended by the law as of January 29, 2021/

 43.2.1.to determine and to be maintained requirements on bank's equity;

 /This sub-paragraph was modified by the law as of January 29, 2021/

 /This sub-paragraph was amended by the law as of June 22, 2018/

 43.2.2.to apply a specific procedure on classification of bank assets, provisioning and disposal of provision funds in terms of own funds to type and level of exposures;

 43.2.3.to hold additional capital above the regulatory minimum capital set by the Bank of Mongolia and this law and increasing provisions;

 /This sub-paragraph was amended by the law as of June 22, 2018/

 43.2.4.to adopt regulation on, make respective decision and realize  implementation of the measures specified in Article 48 of this Law;

 43.2.5.to restrict and terminate operations of the bank, dissolve a bank unit that poses excessive risks to the soundness of a bank, and give recommendation to transfer some functions of the bank to others;

 43.2.6.to take measures to reduce the risk level of the bank;

 43.2.7.to use net profits to increase bank equity;

 43.2.8.to impose specific liquidity requirements;

 43.2.9.to report all information and data as required and according to a time schedule specified;

 43.2.10.to meet conditions, requirements and criteria specified in the laws and regulations;

 43.2.11.to apply corporate governance principles specified in a regulation issued by the Bank of Mongolia;

 43.4.12.to assign a duty with specific time period to Board of Directors to suspend or dismiss executive management in the event of a violation by the bank of this law, regulation or other decision adopted by the Bank of Mongolia, and if the obligations were not fulfilled by the fixed date, to dismiss executive management from office;

 /This sub-paragraph was amended by the law as of June 22, 2018/

 43.2.13. when deemed as necessary, to conduct an inspection in the bank by cooperating with other specialized persons.

 /This sub-paragraph was added by the law as of January 29, 2021/

43.3.When deemed as necessary, the Bank of Mongolia may carry out a review of the quality of banks' assets and run stress test, and, based on result of which, take the necessary measures to increase equity capital and or to require to provide additional provisions.

43.4.The Bank of Mongolia shall cover the costs associated with review and test specified in Article 43.3 of this Law for assessing the bank operations.

43.5.The Bank of Mongolia together with the Financial Regulatory Commission shall determine criteria for prudential ratio on financial capacity and solvency and requirements for management of the banking conglomerate.

43.6.The Bank of Mongolia shall adopt a regulation on taking enforcement measures and conducting a supervision.

/This paragraph was added by the law as of June 22, 2018/

Article 44.Conducting consolidated supervision

/The numbering of this Article was amended by the law as of January 18, 2018/

44.1.While conducting specific supervision of operations of a member of the banking conglomerate, the Bank of Mongolia shall perform consolidated supervision jointly with the state central administrative body in charge of financial matters and Financial Regulatory Commission, and consolidate and assess financial statements of entities involved.

44.2.Relations pertaining to the commissioning of consolidated supervision on members of a banking conglomerate, preparation and reporting of their financial statements and other relevant information, and performing examination shall be regulated under a regulation adopted by the Bank of Mongolia jointly with the Financial Regulatory Commission and state central administrative body in charge of financial matters.

44.3.In case where a member of the banking conglomerate is registered and/or domiciled abroad, the Bank of Mongolia, for conducting consolidated supervision and exchange of necessary information, may cooperate effectively by concluding an agreement and/or memorandum of understanding with financial regulatory authority of that country.

44.4.The consolidated supervision specified in Article 44.1 of this law shall be performed in the following manner:

/This paragraph was modified by the law as of June 22, 2018/

 44.4.1.members of banking conglomerate subject to consolidated supervisions shall be selected.

 44.4.2.financial capacity and solvency of members of the banking conglomerate subject to Article 44.4.1 of this law, flow of funds between them, investments, liabilities, receivables, and loans between them, relationship of their other financial obligations and transactions, and exposure at the banking conglomerate level, shall be assessed based on the operational reports, financial statement and other information.

 44.4.3.compliance with prudential ratios and other requirements on the financial capacity and solvency of the bank and members of the banking conglomerate enforced by the financial regulator shall be assessed inpidually and in consolidated manner and reported.

 44.4.4.A member of the banking conglomerate shall be obliged to submit the information required by the Bank of Mongolia, within the pre-determined date, through its bank member.

Article 45.Records on related parties and banking conglomerates

/The numbering of this Article was amended by the law as of January 18, 2018/

45.1.The bank shall maintain a database on its related parties, their loans, loan equivalent assets, guarantee, and warranty.

45.2.The bank shall furnish to the Bank of Mongolia the information in the database set forth in Article 45.1 of this Law within five days after the bank incorporation, and shall deliver the changes in the database in accordance with relevant regulations set by the Bank of Mongolia within three days.

/This paragraph was amended by the law as of January 18, 2018/

45.3.Information on a member of the banking conglomerate and the bank's related party and changes thereof shall be furnished to the Bank of Mongolia by the bank in accordance with relevant regulations within a week after the changes were made.

45.4.A state central administrative body in charge of state registration matters shall furnish at request of the Bank of Mongolia and the bank with information to identify related party of a participant in conglomerate in accordance with this Law.

/This paragraph was modified by the law as of January 18, 2018/

/This paragraph was amended by the law as of June 22, 2018/

Article 46.Exclusion from consolidated supervision

/The numbering of this Article was amended by the law as of January 18, 2018/

46.1.The Bank of Mongolia may exclude a member of the banking conglomerate from consolidated supervision in the following cases:

 46.1.1.type and size of operations is deemed to be minimal or no effect to the bank's  financials and solvency;

 46.1.2.exclusion of that legal entity causes no hindrance to appropriate  implementation of consolidated supervision.

46.2.The Bank of Mongolia shall notify of its decision to exclude from consolidated supervision to the bank, its parent company and the member of the banking conglomerate.

/The word "CHAPTER SIX. ENFORCEMENT MEASURE" in the title of this Chapter was deleted by the law as of January 18, 2018/

/The word "Subchapter One. Enforcement measures to be imposed to the bank" in the title of this Chapter was deleted by the law as of January 18, 2018/

Article 46.Some enforcement measures to be imposed to the bank

/This article was annulled by the law as of January 18, 2018/

CHAPTER SIX

ENFORCEMENT MEASURE

Subchapter One

Bank stabilization and resolution plan

/The title of this Chapter was added by the law as of January 18, 2018/

Article 47.Bank stabilization and resolution measure plan

/This article was modified by the law as of January 18, 2018/

47.1.All banks shall prepare and submit to the Bank of Mongolia, within the deadlines specified by the latter, a recovery plan approved by the Board of Directors. The recovery plan shall include a range of scenarios of severe macroeconomic and financial stress relevant to the bank's specific conditions and identify measures to correct under each scenario.

47.2.The plan specified in Article 47.1 of this Law shall cover the banking conglomerate to which the bank belongs to, and its headquarter and operations.

47.3.Where the recovery plan submitted by the bank does not meet the requirements stated in Article 47.1 of this Law, the Bank of Mongolia shall demand an amendment to the plan from the bank.

47.4.If the bank fails to amend the recovery plan in line with the Article 47.3 of this Law, or if the Bank of Mongolia considers the plan unimplementable, the Bank of Mongolia may in particular instruct the bank to:

 47.4.1.reduce the risk profile of the bank;

 47.4.2.implement timely measures to recapitalize by issuing shares and  convertible  securities and providing loans and to improve liquidity;

 47.4.3.review the bank strategy and business plan and strengthen key function of the bank;

 47.4.4.review the bank management and organization structure;

 47.4.5.adopt any other course of action as the Bank of Mongolia may deem necessary.

47.5.The Bank of Mongolia shall prepare and approve bank's resolution plan.

47.6.Bank resolution plan shall have contents as follows:

 47.6.1.relevant scenarios including that the event of failure may be either limited to the relevant bank, as well as system wide events;

 47.6.2.appropriate resolution measures to address events specified in Article 47.6.1 of this law.

47.7.The Bank of Mongolia shall set the procedure pertaining to preparation, approval and implementation of the plans stated in articles 47.1 and 47.5 of this Article.

/This paragraph was amended by the law as of January 29, 2021/

Subchapter Two

Early Intervention

/This title was added by the law as of January 18, 2018/

Article 48.Early Intervention

/This article was modified by the law as of January 18, 2018/

48.1.The Bank of Mongolia shall take following measures against a bank that violates or is likely to violate legislation on Banking, regulation, rule or instruction issued by the Bank of Mongolia, or fails to meet the requirements of banking license and engages in unsafe or unsound banking operations:

 48.1.1.require the bank to implement remedial measures to address the non-compliance  and make a reminder;

 48.1.2.assign timed tasks to address the non-compliance;

 48.1.3.require implementation of the bank's recovery plan and restoration of liquidity levels considered appropriate;

 48.1.4.require the bank to obtain additional capital funds within a time period specified;

 48.1.5.require the reinforcement of the bank's measures for the purposes of corporate governance, organization, operations, risk management and internal control;

 48.1.6.require a bank to limit the variable remuneration for its senior managers, when this compensation is inconsistent with the maintenance of a sound capital base, as determined by the Bank of Mongolia;

 48.1.7.subject certain transactions or certain activities to the prior approval of the Bank of Mongolia;

 48.1.8.restrict amount and change of the bank assets and liabilities, or to assign to classify assets;

 /This sub-paragraph was modified by the law as of January 29, 2021/

 48.1.9.prevent the bank from acquiring a capital or starting a bank branch;

 48.1.10.require the bank partially or fully restrict or suspend banking operations;

 48.1.11.require to sale property or to liquidate bank unit;

 48.1.12.suspend or dismiss from office the Executive Manager;

 48.1.13.suspend, terminate and/or dismiss the member of the Board of Directors;

 48.1.14.suspend voting rights of qualifying shareholders if the bank fails to implement the measures set forth in Articles 48.1.1-48.1.13 of this Law.

 48.1.15.take provisional administration measures;

 48.1.16.other measures deemed as necessary by the Bank of Mongolia.

 48.1.17.revoke a license on incorporating a bank upon the ground stated in the Article 27 of this Law.

 /This sub-paragraph was added by the law as of January 29, 2021/

48.2.When taking the measures provided in this Article, the Bank of Mongolia shall take into account the principles of treatment that adequately suits the non-compliance, circumstance or need.

48.3.The adoption of the measures as established in this Article is without prejudice of the Bank of Mongolia's power to impose a financial penalty provided for in this or another law.

48.4.The Bank of Mongolia shall inform the Deposit Insurance Corporation of the adoption of any early intervention stated in this Article.

Subchapter Three

Provisional administration

/This title was added by the law as of January 18, 2018/

Article 49.Imposition of provisional administration

/This article was modified by the law as of January 18, 2018/

49.1.Where the Bank of Mongolia considers that preventative measures prescribed in article 48 of this law are not adequate for fulfilling the objectives of enhancing the operations and recovering reliable and sustainable governance of the bank, or in the case of a circumstance stated in article 3.1.16 of this law, the Bank of Mongolia may resolve to implement provisional administration at the bank and appoint a commissioner to manage the provisional administration.

49.2.The Bank of Mongolia shall appoint a commissioner to manage the bank /hereinafter referred to as "commissioner"/ for a term of up-to one year and the operational guideline of the commissioner shall be established by the Bank of Mongolia in conformity with this law.

49.3.Bank shall cover operational expenses incurred by implementation of the provisional administration of the bank.

/The word "Subchapter Two. Setting special regime to the bank" in the title of this Chapter was deleted by the law as of January 18, 2018/

Article 50.Decision on provisional administration

/This article was modified by the law as of January 18, 2018/

50.1.The Bank of Mongolia's decision on imposing a provisional administration on the bank shall include the following matters:

 50.1.1.the name, location and address of the bank;

 50.1.2.the grounds for imposing a provisional administration;

 50.1.3.the date of commencement and the duration of the provisional  administration;

 50.1.4.a list of restrictions to be imposed on bank operations;

 50.1.5.the full name of the commissioner.

 50.1.6.The Bank of Mongolia may disclose to the public its decision on imposing a provisional administration.

Article 51.Appointment of a commissioner

/This article was modified by the law as of January 18, 2018/

51.1.The Bank of Mongolia may appoint its employee and/or other bodies as a commissioner to manage the bank during the provisional administration.

51.2.Remuneration of the commissioner shall be determined by the Bank of Mongolia and covered by the bank under provisional administration.

51.3.The commissioner shall conduct his/her activities in compliance with legislation and regulations, rules and guidelines issued by the Bank of Mongolia pursuant to this Law.

51.4.The Bank of Mongolia shall have the right to replace the commissioner.

Article 52.Actions to be taken during provisional administration, rights and duties of commissioner

/This article was modified by the law as of January 18, 2018/

52.1.During the provisional administration, the following actions shall be taken by the Bank of Mongolia:

 52.1.1.temporarily transfer of bank management rights to the commissioner;

 /This sub-paragraph was amended by the law as of June 22, 2018/

 52.1.2.take measures for supervising and verifying indicators of accounting records and financial statements of the bank's operation.

 /This sub-paragraph was amended by the law as of January 29, 2021/

 52.1.3.when deemed as necessary, to suspend voting rights of the bank  shareholders.

 /This sub-paragraph was added by the law as of January 29, 2021/

52.2.The commissioner shall have the following rights and duties:

 52.2.1.make an independent decision with respect to matters related to all activities of the bank;

 52.2.2.if necessary, partially or completely suspend fulfillment of obligations with respect to assets to be collected from others during the period of provisional administration;

 /This sub-paragraph was amended by the law as of January 29, 2021/

 /This sub-paragraph was amended by the law as of January 29, 2021/

 52.2.3.amend or terminate loan, deposit or other agreements made previously between the bank and its customers that contain conditions that are not consistent with general terms and conditions and which have had an adverse impact on the bank interests;

 52.2.4.conclude agreements on behalf of the bank;

 52.2.5.lodge a claim on behalf of the bank;

 52.2.6.terminate and/or amend employment contracts, and if necessary, hire temporary employees;

 52.2.7.change the bank's equity size and structure to comply with capital adequacy requirements;

 52.2.8.change amount and structure of the paid in capital of the bank;

 /This sub-paragraph was added by the law as of January 29, 2021/

 5.2.9.others in compliance with law.

 /This sub-paragraph was added by the law as of January 29, 2021/

52.3.The bank and its branches and units shall be obliged to implement decisions of the commissioner.

52.4.Executive management of the bank under provisional administration shall report his/her performance and income disclosure to the commissioner in accordance with relevant regulations.

52.5.All transactions made on behalf of the bank and at the expense of the bank without the formal consent of the commissioner shall be considered invalid.

52.6.The Bank of Mongolia shall terminate the provisional administration and lift all or part of restrictions imposed on the bank's activities when the bank is recovered.

52.7.Amendments made to the charter of the bank during the provisional administration shall remain in force.

52.8.The commissioner shall be liable for any losses arising from his/her wrongful acts and not be liable for losses related to common bank risks.

52.9.The bank and its branches and units shall be obliged to implement decisions of the commissioner. The Bank of Mongolia shall be responsible for liabilities arising from the compliance of such a decision.

Subchapter four

Bank resolution

/This title was added by the law as of January 18, 2018/

Article 53.Power to adopt resolution measures, and principles

/This article was modified by the law as of January 18, 2018/

53.1.The Bank of Mongolia shall have a power to adopt a decision to carry out a resolution of a systematically important bank in the banking system, subject to the grounds and regulations provided in this law.

/This paragraph was amended by the law as of January 29, 2021/

/This paragraph was amended by the law as of June 24, 2010/

53.2.In implementation of resolution measures of a bank, the Bank of Mongolia shall adhere to the principles of securing financial stability, prompt and effective actions, minimizing government expenses and safeguarding the interests of depositors and customers.

53.3.Bank resolution measure, its implementation and preventative measures and its implementation shall be analyzed and overseen separately from the supervisory functions and measures of the Bank of Mongolia.

Article 54.Scope and conditions for the taking of resolution measures

54.1.For any of the following grounds is occurred; the Bank of Mongolia is authorized to adopt the measures specified in Article 55 of this Law:

/This paragraph was amended by the law as of January 29, 2021/

 54.1.1.the situation of the bank is such that it is in insolvency or likely to go insolvent;

54.1.2.supervision report of the Bank of Mongolia indicated that the bank cannot further function normally.

54.1.3.adopting such resolution measures is essential to the public interest;

/This sub-paragraph was annulled by the law as of January 29, 2021/

54.2.Scope of bank resolution regime shall comprise of the bank and the conglomerate to which the bank belongs to.

54.3.When implementing the bank resolution measure, the Bank of Mongolia shall not revoke a license for incorporating the bank:

/This paragraph was modified by the law as of January 29, 2021/

54.3.1.the bank is incapable, or the supervision report supports a determination that the bank will, in the near future, be incapable of satisfying its depositors or other creditors as their claims fall due;

54.3.2.the bank is incapable to further continue its operations due to breach of the prudential ratios;

54.3.3.the supervision report supports that assets of the bank are less than its liabilities or will exceed in reasonable time of period.

54.4.The Bank of Mongolia shall inform the Deposit Insurance Corporation and the Members of the Financial Stability Board whenever a decision is taken to apply the provisions of this Article.

/This paragraph was amended by the law as of January 29, 2021/

/The word "Subchapter Three. Bank Receivership" in the title of this Chapter was deleted by the law as of January 18, 2018/

Article 55.Instruments for bank resolution measures

/This Article was modified by the law as of January 18, 2018/

55.1.The Bank of Mongolia shall use the following instruments for implementing resolution measures.

55.1.1.transfer of the assets, and liabilities of a bank;

55.1.2.establish a special purpose bank;

55.1.3.change the structure and size of equity;

55.1.4.convert debts into shares.

55.2.No shareholders meeting and authorization from bank shareholders and creditors shall be required for taking bank resolution measures and use of instruments specified in Article 55.1 of this Law.

55.3.When taking bank resolution measures, the instruments specified in Article 55.1.3 of this Law shall be taken into account as a priority consideration.

55.4.The Bank of Mongolia shall adopt a procedure on taking and implementation of bank resolution measures pursuant to this Law.

Article 56.Implementation of resolution measures

/This Article was modified by the law as of January 18, 2018/

56.1.Bank resolution measures shall be implemented by an External administrator appointed by the Bank of Mongolia.

56.2.External administrator shall meet the following requirements:

56.2.1.possessing professional knowledge and experience as well as professional ethics and proficiency in area of banking operations;

  56.2.2.no criminal record;

  56.2.3.no overdue loan from this bank;

56.2.4.no related party relation with the bank shareholders, chairman and members of the Board of Directors, executive management or other employees;

45.2.5.if the External administrator is a legal entity, should have property and financial resources sufficient for fulfilling its duties.

56.3.The remuneration of the External administrator shall be set by the Bank of Mongolia.

56.4.The External administrator shall comply with decisions issued by the Bank of Mongolia.

56.5.Upon the appointment of an External administrator, full powers of the bank, its management and competent official and disposal right of the bank's assets shall be assigned to the External administrator.

56.6.Duration of bank resolution shall be ninety (90) days, which may be extended two times for equal periods.

56.7.External administrator may facilitate valuation of assets and liabilities by external, impartial and professional body according to respective standards and requirements.

/This paragraph was amended by the law as of January 29, 2021/

56.8.External administrator shall in addition to implement the resolution measures pursuant to this Law, have the following full powers:

  56.8.1.to change or suspend payback period of bank liabilities;

  56.8.2.to terminate financial contracts and agreements made by the bank;

56.8.3.to demand the parent company of the banking conglomerate to which the bank belongs to invest into the bank;

  56.8.4.other powers stated in Article 69.1 of this Law.

56.1.External administrator shall be accountable and report to the Bank of Mongolia. 56.10.Compensation of an administrator and related expenses incurred by him or her shall be paid by the bank, or when necessary paid by the Bank of Mongolia that shall recuperate such compensation from the relevant bank.

Article 57.Transfer of the bank assets and liabilities

/This Article was modified by the law as of January 18, 2018/

57.1.The External administrator may transfer the bank assets and liabilities to an authorized bank.

57.2.For the purposes of realizing the transfer specified in Article 57.1 of this Law, valuation conducted under this law shall be used.

57.3.The Bank of Mongolia shall determine the nature, form and amount of financing necessary to realize the transfer of the bank by taking into account the administrator's position.

57.4.The decision that determines the transfer the bank produces effects regardless of any prior contractual agreements or decisions made with respect to assets, liabilities, off-balance sheet items and instruments of ownership of the bank.

57.5.Transfer of the bank may not constitute grounds for exercising any early termination or suspension by the bank of contractual agreements established with other parties.

57.6.Following conditions shall be met in exercising the measures stated in Article 57.1 of this law:

57.6.1.transfer collaterals securing liabilities together with other rights accompanied to secure payback of the liabilities;

57.6.2.transfer all of the rights and liabilities protected under a netting clause contained in an eligible financial contract such as interest rate swaps, foreign exchange swaps and foreign exchange options, in addition to any other instruments specified by the Bank of Mongolia.

57.7.When assets of a bank are transferred under measures specified in this article, creditors of the bank under resolution whose claims are not transferred and who will receive less than they would have received if the bank under resolution had been liquidated without transferring assets or liabilities as determined by the Bank of Mongolia, shall have a right to claim compensation for the difference.

Article 58.Special purpose bank

/This Article was modified by the law as of January 18, 2018/

58.1.External administrator is authorized to establish a special purpose bank under conditions and requirements of the law for the purposes of implementing the resolution process.

58.2.Term of permit to establish a special purpose bank shall be up to 3 years.

Article 59.Change equity structure and size

/This Article was modified by the law as of January 18, 2018/

59.1.External administrator may issue following measures to decrease bank losses and debts and increase equity:

  59.1.1.convert capital instruments into shares;

  59.1.2.Revise the bank equity structure and size;

  59.1.3.merge and allot shares;

59.1.4.other measures required to reduce the bank losses and debts and increase equity capital.

59.2.Where the principal amount of a relevant capital instrument is written down under Article 59.1 of this law, the reduction of that principal amount shall be permanent and the holder of the relevant capital instrument that is written down shall not have any claim over such reduction.

Article 60.Bail-in

/This Article was modified by the law as of January 18, 2018/

60.1.External administrator may convert non-equity liabilities of the bank under resolution into shares for the purposes to recapitalize a bank or implement measures specified in articles 59.2 and 57.1;

60.2.The following categories of non-equity liabilities of the bank may not be included in the conversion specified in Article 60.1 of this Law:

  60.2.1.insured deposits;

  60.2.2.secured liabilities;

60.2.3.claims arising from the holding of client assets or client money that are segregated by Articles 6.1.6 and 6.1.7 of this Law from the remainder of the bank's assets;

60.2.4.claims with an original maturity of less than seven days owed to banks that are not part of the same conglomerate;

60.2.5.claims with a remaining maturity of less than seven days owed to payments and  settlement systems or their operators;

60.2.6.claims to employees in relation to accrued salary, pension benefits or other fixed remuneration;

60.2.7.claims to providers of goods or services that are critical to the functioning of the bank;

  60.2.8.payables to tax and social security contributions;

  60.2.9.payables to the Deposit Insurance Corporation;

  60.2.10.Other debts, the Bank of Mongolia sets not to convert.

60.3.Bail-in circumstances, criteria, requirements and guidelines shall be prescribed by the procedure specified in Article 55.4 of this Law.

Article 61.Funding sources of resolution measures

/This Article was modified by the law as of January 18, 2018/

61.1.The Government, to preserve stability of the banking and financial system, may grant funding necessary for implementation of resolution measures by means such as refinancing the bank; provisioning shareholding capital of a special purpose bank; acquiring debt instruments of the bank; issuing a loan, or guarantee; or investing in bank stabilization fund.

61.2.Regulation on terms and conditions, amount and granting of the funding specified in the Article 61.1 of this Law shall be adopted by the Cabinet based on the proposal of the Bank of Mongolia and State central administrative body in charge of financial matters.

61.3.Loan with following conditions may be granted where the Bank of Mongolia considers that issuance of such loans will not have contrary effect against its main objectives:

  61.3.1.with special terms of interest;

61.3.2.for a period of ninety (90) calendar days that may be renewed once for the same period;

  61.3.3.against adequate collateral as defined by the Bank of Mongolia; and;

  61.3.4.secured by guarantee issued by the Government.

Article 62.Bank Stabilization Fund

/This Article was modified by the law as of January 18, 2018/

62.1.The Bank of Mongolia may provision a fund of monetary assets, necessary for improving and stabilizing financial capacity of bank and implementing resolution measures (hereinafter referred to as "Fund") and dispose in the following manner under relevant regulations.

62.1.1.providing guarantees relevant to resolution measures;

  62.1.2.extend loans;

  62.1.3.purchase assets;

  62.1.4.making investment to the special purpose bank;

62.1.5.payment of compensation to shareholders or creditors in accordance with this Law;

62.1.6.payment of capital shortage and difference required for realization of the resolution measures.

62.2.Idle capital of the Fund may be invested.

62.3.The Bank of Mongolia may delegate management of the assets of the Fund to a legal entity, authorized in or outside of Mongolia for business operations on securities market and performance of such affairs, that has a proven creditworthiness, specifically the extensive experience and achievements in managing such funds.

62.4.Assets of the Fund shall be separately managed from other assets and funds of the Bank of Mongolia.

62.5.The funds of the Fund shall be managed in a way that ensures permanent and immediate availability of funds for financing of resolution measures undertaken against the banks.

Article 63.Assets and liabilities of the Fund

/This Article was modified by the law as of January 18, 2018/

63.1.The assets of the Fund shall comprise of contributions provided by the banks and other investments.

/This paragraph was amended by the law as of January 29, 2021/

63.2.The Bank of Mongolia shall lay down the amount and deadlines for the payment of contributions stated in Article 63.1 of this Law.

63.3.The target amount of Fund's assets shall be equal to 1.3% of total covered deposits of banks, of which 1% of total covered deposits of banks will be raised by cash contributions of banks and 0.3% of total covered deposits of banks with raised by liquid funds of the banks for the purpose of extraordinary payment of funds (guarantee fund).

63.4.The liabilities of the funds shall be paid from the proceeds of the Fund.

63.5.The Bank of Mongolia may change the amount and deadlines for the payment of contributions referred to in Article 63.2 provided that in six months after commencement of payments of the contributions by banks, the funds are not sufficient to meet the adequate level of equity and liquidity requirements.

Article 64.Extraordinary payment of contributions of banks

/This Article was modified by the law as of January 18, 2018/

64.1.Where the funds of the Fund are not sufficient to cover the bank resolution financing, the Bank of Mongolia shall be authorized to request extraordinary payment of contributions from the banks which shall not exceed the amount of the fund stated in Article 63.3 of this Law.

Article 65.Foreign Cooperation

/This Article was modified by the law as of January 18, 2018/

65.1.The Bank of Mongolia may conclude cooperation agreements or transactions with relevant foreign country authorities which are responsible for the resolution of a bank which has a branch, or is part of a conglomerate, that operates in Mongolia, or in the respective foreign country, in order to establish the scope and manner of deciding and implementing resolution measures in case of a conglomerate resolution.

65.2.The agreement, or transactions specified in Article 65.1 of this Law may include:

65.2.1.timely exchange of information regarding early intervention measures and resolution measures;

  65.2.2.timely sharing of recovery plans and the analysis of the recovery plans;

65.2.3.coordination of the administration, resolution, and disposition of the assets and liabilities of the branches or subsidiaries in Mongolia of the foreign bank;

65.2.4.development of a joint resolution plan for measures to be taken under this law.

65.3.The data or information stipulated in Article 65.2 of this Law may be exchanged with the provided that:

65.3.1.the purpose for which the data or information is to be used has been ascertained;

65.3.2.Bank of Mongolia's prior consent has been obtained for use of the data or information for purpose other than those specified in Article 65.3.1 of this Law;

65.3.3.the requirements for the treatment of confidential data or information exchanged  specified in the law are fulfilled;

65.4.The Bank of Mongolia is authorized to apply the resolution measures to entities that are not established in Mongolia but which carry on the business of a bank in Mongolia via one or more branches through the resolution authority of the relevant foreign country.

65.5.Where the Bank of Mongolia considers that the resolution measures stated in Article 65.4 of this Law is insufficient for ensuring financial stability of Mongolia, the Bank of Mongolia shall have the power to take measures to increase equity of the branch in Mongolia and other compliance measures specified in this law."

Article 66.Temporary prohibition of an activity

/This Article was modified by the law as of January 18, 2018/

66.1.The Bank of Mongolia may order the following temporary prohibition of an activity with respect to the bank under resolution:

66.1.1.waiver, stay, suspension or limitation of prompt compliance by the bank under resolution with previously contracted obligations; and

66.1.2.full or partial suspension of the execution by the bank under resolution's creditors over the assets of the bank under resolution.

66.2.The Bank of Mongolia may order the following measures:

66.2.1.temporary waiver of compliance by a bank under resolution with its provisions on prudential supervision;

66.2.2.temporary closing of counters and other facilities of the bank under resolution where transactions are carried out with the public;

66.2.3.temporary stay for exercising any early termination rights by the counterparts of a bank under resolution as stipulated in financial contracts entered into by them.

66.3.The measures referred to in Article 66.2 shall have a maximum duration of ninety (90) days, which may be extended twice for equal periods.

/This paragraph was amended by the law as of June 22, 2018/

/This paragraph was amended by the law as of June 22, 2018/

66.4.The commencement of any resolution decision or resolution measure shall not in and of itself give rise to any right of any other person to terminate any contract with the bank under resolution, and no right or obligation of a lender to make additional loans to a bank under resolution may be terminated, suspended, or modified solely because of the commencement of the resolution decision.

66.5.The measures implemented and provided in this Article shall be immediately made public by the Bank of Mongolia.

66.6.No person shall, without the consent of the Bank of Mongolia take any action to sell, transfer, assign or dispose of any property of a bank under resolution.

66.7.Where the Bank of Mongolia has reasonable facts to believe that the conditions of the assets of the shareholders and creditors of the bank under resolution are to worsen as a result of liquidation, such persons shall have a right to claim recovery of the conditions of their assets."

Article 67.Termination of the resolution decision

/This Article was modified by the law as of January 18, 2018/

67.1.The resolution decision shall be terminated when the Bank of Mongolia determines that:

  67.1.1.there are no more grounds to implement resolution measures; or

  67.1.2.the resolution measures are no longer necessary.

67.2.When the resolution measures terminate the Bank of Mongolia shall revoke the license of the bank, unless the bank under resolution is sufficiently recapitalized in accordance with the Bank of Mongolia's Regulations.

67.3.When resolution measures terminate the Bank of Mongolia shall revoke the license of the bank, unless the if the bank under resolution is sufficiently recapitalized as a result of resolution measures under Article 67.1 of this Law, the Bank of Mongolia shall issue a decision to shift full power of the management to the bank's shareholders and the Bank of Mongolia shall carry out the duties of the relevant bank's Board of Directors until the election of new Board of Directors.

67.4.A report prepared by the administrator reflecting resolution instruments, and records of incurred expenses shall be attached to the decision issued under the Article 67.2 of this Law.

Subchapter Five

 Bank liquidation

/This title was added by the law as of January 18, 2018/

/The word "Chapter Seven. Miscellaneous" in the title of this Chapter was deleted by the law as of January 18, 2018/

Article 68.Appointment of the liquidator

/This Article was modified by the law as of January 18, 2018/

68.1.The Bank of Mongolia is authorized to issue a decision to liquidate a bank and appoint a liquidator for a bank when:

68.1.1.the Bank of Mongolia has revoked the license of the bank as part of complian ce measures prescribed in this law;

68.1.2.the resolution measures provided for in this law are not possible in the reasoned opinion of the Bank of Mongolia.

68.2.No one other than the Bank of Mongolia shall have a right to commence bank liquidation or bankruptcy proceedings.

/This paragraph was amended by the law as of January 29, 2021/

68.3.The liquidator shall take the full powers of the bank and its management of the relevant bank and administer the liquidation of assets of the bank, the recovery on any claims of the bank, and the distribution of the proceeds to its creditors.

68.4.The Bank of Mongolia shall appoint an official of the Bank of Mongolia or any other person meets qualifications as prescribed in Article 56.2 of this Law.

68.5.Compensation of the liquidator shall be set by the Bank of Mongolia and expenses incurred due to liquidation of the bank shall be covered by the respective bank.

68.6.The liquidator shall immediately post in each office and branch of the bank a notice announcing the liquidation of the bank, specifying the effective date of possession by the liquidator. That notice will state, among other things identified by the liquidator, that no additional deposits will be accepted by the bank.

Article 69. Powers of the bank liquidator

/This Article was modified by the law as of January 18, 2018/

69.1.Rights and powers of the liquidator shall include:

  69.1.1.disposing assets of the bank;

  69.1.2.managing, and representing the bank;

  69.1.3.limiting, transferring or ceasing the payment of debts;

  69.1.4.borrowing loan if bank asset is not enough to cover operational cost;

/This sub-paragraph was amended by the law as of January 29, 2021/

69.1.5.canceling employment agreements and other agreements established by the bank;

  69.1.6.hiring or dismissing employees as necessary;

  69.1.7.concluding contracts on behalf of the bank;

69.1.8.making payments on behalf of the bank within a limit of payment set by the Bank of Mongolia;

69.1.9.continue or suspend some operations within the framework of bank liquidation measures;

  69.1.10.resetting deposit rate not less than the current minimum deposit rate;

69.1.11.cancelling bank investment agreements and revise interest rate, service fee and term.

69.1.12.netting off payables and loan interest receivables on the depositors and customers of the bank;

69.1.13.having assessment on bank assets and liabilities by impartial, external, and professional person in accordance with standard and requirements;

/This sub-paragraph was modified by the law as of January 29, 2021/

69.1.14.imposing liability to shareholders and covering the loss to the amount of their  contributions to the bank capital in accordance of Article 35.8 of this Law.

69.2.The liquidator shall provide any information with respect to the liquidation upon the request of the Bank of Mongolia and shall report regularly to the Bank of Mongolia within the deadlines specified by the latter.

69.3.The liquidator shall be obliged to take all necessary measures to ensure safety and soundness of the assets of the bank.

69.4.Within sixty [60] days after his appointment, the liquidator shall prepare and submit to the Bank of Mongolia a financial statement, other statements, records and list of assets of the bank.

69.5.If the liquidator has reasonable cause to believe that the shareholders, directors, senior managers, and other employees have engaged or are engaging in fraudulent activities with respect to the bank, the liquidator shall immediately notify the Bank of Mongolia; and when appropriate, refer the matter to the law enforcement organization.

69.6.If the liquidator has reasonable cause to believe that some payments or transfers made by the bank within a period of three (3) months were based on preferential treatment of certain persons interests; and all payments and transfers, within a period of twelve (12) months prior to the liquidator's appointment, to shareholders, the chairman or members of the Board of Directors, Executive Management, employee or related persons of those, the liquidator shall petition to declare such payments or transactions void, except in following cases:

69.6.1.The payment made to a depositor did not exceed the limit of payment to a depositor set by the Bank of Mongolia;

69.6.2.property transferred to others was paid market price at the time of the transfer;

69.6.3.Compensation paid to the chairman or members of the Board of Directors, Executive Management, or employee did not exceed the normal level of previously paid compensation /bonuses and other additions do not apply here/;

69.6.4.transfer of property to special purpose company for the purposes to issue asset-backed securities in cases other than with nature of fraud.

Article 70.Condition for implementing bank liquidation measures

/This Article was added by the law as of January 18, 2018/

70.1.If a receivership was appointed to the bank, the liquidation measures will be implemented in accordance with the following conditions:

70.1.1.after the decision to liquidate the bank, the calculation of interest, penalties and fines on un-fulfilled obligations of the bank shall be discontinued and shall not accrued;

70.1.2.court proceedings of a civil case pertaining to the bank shall be suspended as per Article 80.1.1 of the Law on Court Proceedings of Civil Cases;

70.1.3.All parties except for the bank receiver shall not have the right to satisfy any claims from the bank assets under non-dispute procedure;

70.1.4.during the bank receivership, it shall be prohibited to make payments, on a non- dispute basis, from proceeds of sales of the bank's collateral and assets seized as per a court decision made earlier;

70.2.The bank receiver shall have the right to reject the bank's un-fulfilled obligations that may cause a complication to the bank receivership, gives preference to vested interests of some parties, and have negative implications for management of the bank activities and for the protection of interests of the bank clients, depositors and creditors.

Article 71.Filing and notice of claims

/This Article was added by the law as of January 18, 2018/

71.1.Within 2 months after its appointment, the liquidator shall determine the time to accept a claim of creditors within sixty days [60] from the date of notice or publication and deliver a notice to all creditors on the bank book and publishing a notice.

71.2.Not later than ninety [90] days after the due date for filing claims under paragraph 71.1, the liquidator shall:

  71.2.1.reject any claim of which the liquidator doubts the validity;

71.2.2.determine the amount owing to each creditor, and the priority of his claim under this law;

71.2.3.approve a plan of liquidation actions contains the remuneration payable to the liquidator, the names of the creditors, together with details of the validated amount of each claim and the payment to be received thereunder.

  71.2.4.notify each creditor of its claim and validated amount.

71.3.The bank liquidator shall have a right to reject claims of creditors who failed to file their claim in timeframe specified in article 71.1 of this law.

Article 72.Transactions subject to null and void

/This Article was added by the law as of January 18, 2018/

72.1.Within one year after its appointment, the liquidator may propose to the authorized body to declare void the following transactions:

72.1.1.transactions detrimental to bank, made within one year prior to the date of the appointment of the liquidator;

72.1.2.a sum of transaction that the bank entered into within six months prior to the date of the appointment of the liquidator, increases the amount that the creditor would receive in the liquidation procedures; and

72.1.3.transactions with related parties of the bank, if such transactions affected the bank become insolvent and were made within one years prior to the date of the appointment of the liquidator.

Article 73.Priorities in payment of claims

/This Article was modified by the law as of January 29, 2021/

/This Article was added by the law as of January 18, 2018/

73.1.The proceeds realized from the sale and disposal of bank assets and received payments shall be distributed to pay claims in the following order by the Bank receiver:

/This paragraph was amended by the law as of January 29, 2021/

73.1.1.completion of payments have been made by the bank based the court decision on compensating to others for damage caused to their life or health;

/This sub-paragraph was amended by the law as of January 29, 2021/

73.1.2.wages and salaries of employees, but not competent officials, provided that such amount does not exceed five times higher than the minimum wage;

/This sub-paragraph was modified by the law as of January 29, 2021/

  73.1.3.expenses incurred by the bank receiver's operation;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.4.citizen's deposit payment except insured deposits to be paid a compensation in accordance with Deposit Insurance law;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.5.citizen's current account payment except insured deposits to be paid a compensation in accordance with Deposit Insurance law;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.6.legal entity's deposit payment except insured deposits to be paid a compensation in accordance with Deposit Insurance law;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.7.legal entity's current account payment except insured deposits to be paid a compensation in accordance with Deposit Insurance law;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.8.claims of the Deposit Insurance Company arising from subrogation in the rights of insured depositors in accordance with Deposit Insurance law;

/This sub-paragraph was modified by the law as of January 29, 2021/

73.1.9.Deposit payments not reflected to the Articles 7.2.1, 7.2.2, and 7.2.3 of the Law on Deposit Insurance Law;

/This sub-paragraph was modified by the law as of January 29, 2021/

  73.1.10.Payments and taxes owed to the Government;

/This sub-paragraph was amended by the law as of January 29, 2021/

  73.1.11.Deposit Insurance Fund asset;

/This sub-paragraph was added by the law as of January 29, 2021/

  73.1.12.Payment claims with right to be claimed by the Bank of Mongolia;

/This sub-paragraph was added by the law as of January 29, 2021/

73.1.13.Deposit payments not reflected to the Articles 7.2.4, 7.2.5, and 7.2.6 of the Law on Deposit Insurance Law;

/This sub-paragraph was added by the law as of January 29, 2021/

73.1.14.Loans and similar liabilities specified in the loan and debt instruments agreement to be prior to other debt and subordinated debt of the bank;

/This sub-paragraph was added by the law as of January 29, 2021/

  73.1.15.other debts;

/This sub-paragraph was added by the law as of January 29, 2021/

  73.1.16.Subordinated debt.

/This sub-paragraph was added by the law as of January 29, 2021/

73.2.When recovering the payments, the bank receiver may, in accordance with the agreement, transfer all or part of the bank's debt along with its assets in accordance with the order specified in Article 73.1 of this Law to others.

/This sub-paragraph was added by the law as of January 29, 2021/

73.3.If the amount from the sale of the bank asset is insufficient to provide payment in full of allowed claims, such claims shall be paid in a manner to pay in full the first claim in the list before the next.

/This sub-paragraph was added by the law as of January 29, 2021/

73.4.If amount available to pay claims is insufficient to pay in full the allowed claims in any class at the same time, amount shall be paid pro rata in each payment.

/This sub-paragraph was added by the law as of January 29, 2021/

73.5.Any proceeds remaining after payment of all claims under Article 73.1 of this law, shall be distributed among the shareholders of the bank in accordance with their rights.

/This sub-paragraph was added by the law as of January 29, 2021/

Article 74.Terminating and final reporting on liquidation

/This Article was added by the law as of January 18, 2018/

74.1.When all assets of a bank have been sold, distributed or transferred, the liquidator shall submit to the Bank of Mongolia a report of the liquidation.

74.2.If the Bank of Mongolia discusses and approves the report and completed the liquidation process, a notice of the completion of the liquidation shall be sent to the court, published, and the Bank of Mongolia shall file a request to the Registrar authority who shall strike the name of the bank from the Companies Register.

74.3.Upon publication of the notice referred to in Article 74.2 of this Law, the liquidator shall be relieved of any further obligation in connection with her or his activities with respect to the liquidation of the bank.

Article 75.Legal protection

/This Article was added by the law as of January 18, 2018/

75.1.Any person subject to a decision of the Bank of Mongolia and other competent authority to take compulsory measures considers as groundless of it, shall have the right to lodge an appeal to the court.

/This paragraph was amended by the law as of January 29, 2021/

75.2.The lodging of a judicial appeal shall not suspend the implementation of the relevant decision and measures of the Bank of Mongolia and other competent authority.

/This paragraph was amended by the law as of January 29, 2021/

75.3.A court shall settle the appeal lodged under the Article 75.1 of this Law according to the special procedure stated in the Article 112.1 of the Law on Administrative Court Procedure.

75.4.If the court concludes that the decisions of the Bank of Mongolia, an authorized representative, external administrator and Liquidator who took compulsory measures against the bank under resolution are unlawful, and therefore violate the legitimate rights and interests of the appealing party, it shall not be a ground to invalidate, amend or suspend such decision and other decisions issued based on it, and only compensation for the real damages shall be awarded in monetary form under relevant law.

 

 

CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA D.DEMBEREL