OTP Bank Nyurt (OTP.BD), a major Hungarian bank, has officially expressed its willingness to operate in Mongolia if the country’s banking law is revised. The bank has been expanding abroad since 2002 and currently operates in 11 countries in Central and Eastern Europe and Central Asia.
📜 About the bank
OTP was founded in 1949 and was listed on the Budapest Stock Exchange in 1995. It is 54.9% owned by international investors and 45% by domestic shareholders.
🎯 Objective: OTP’s entry into Mongolia is based on the need to reform the banking law to make it more transparent, stable and flexible for strategic investors. How realistic is this requirement?
🔎 Are there any legal problems?
The reason why foreign banks have not entered Mongolia so far is because our country’s investment and business environment and market capacity are too small. If there is competition in the banking sector and when bringing in foreign banks, it means that they must bring in banks that meet the needs of Mongolians, and they must also attract them with regulations and policies.
🪨 Big deal: According to the revised Banking Law of 2023, it is no longer possible for one person or a related party to jointly own 20% or more of a bank’s common shares. So far, only XAC has met the 20% requirement.
🤔 However, when operating abroad, foreign banks are interested in and require their own control portfolio, strategy, and risk. This requirement is not only imposed by OTP, but also by almost all Tier-1 and Tier-2 international banks.
📍 Approval: According to the current Banking Law, the establishment of branches and representative offices of foreign banks is allowed, but it is directly dependent on the approval of the Bank of Mongolia. Even if they buy shares in a domestic bank, they will still face the 20% restriction, so foreign banks are not very interested in this.
In fact, politicians say that if foreign banks enter, lending rates will decrease. However, lending rates will be linked to the policy rate. The policy rate will be linked to inflation. Inflation will also be linked to budget spending. If the root cause is not corrected, who will lend at single-digit interest rates to a country with double-digit inflation? Even if we create competition, it will only be in line with the real conditions.
Finally… In reality, if we do not improve our own markets, policies, and regulations, it is unlikely that foreign banks will come in and do well. However, OTP Bank, a company that owns 98%–100% of its subsidiaries in almost all countries except Uzbekistan, will probably strive to enter Mongolia in the same way.
https://lemonpress.mn/post/NepAZTZyyo0
