The big news in Mongolia is that Mongol Bank has taken control of Anod Bank because it has surfaced that the bank is insolvent. Anod is one of the more prominent mid-tier national banks, and its fall may be a harbinger for other banks like it.
As reported in the UB Post, the accounting reports Anod Bank submitted to Mongol Bank over the last few years appear to have been "cooked" as they say in accounting parlance. The government is now working to ensure that customers with deposits in the bank recover their money. Recently parliament passed a resolution authorizing the government to back all banking deposits in the country with state assets, creating an FDIC like safety net for depositors. Anod will put the validity of this resolution to the test.
The extent to which the global financial crisis has affected the Mongolian economy is still difficult to gauge. The steep decline in copper prices has been a complete game changer for the Mongolian government as huge deficits have appeared in the state budgets and revenue from Erdenet mine has been cut in half. Construction has stopped on many buildings, and it is rumored that this is due to the fact that people simply cannot get mortgage loans to purchase apartments already on the market. Prices on consumer goods appear to be declining, but the last report I saw still showed a very high inflation rate. And, inexplicably the tugrik has depreciated against the dollar by more than 100 tugriks, causing wide speculation about the cause.
The three major Mongolian banks Khan Bank, Xac Bank, and Trade and Development Bank appear to be weathering the storm so far. Most credit has apparently dried up, and loans that are still available are at very high interest rates. According to Khan Bank's PR department these banks hold no international paper, so they are not affected by the subprime mortgage losses directly. However, the overall credit crunch means that it is difficult for them to secure new financing for loans in Mongolia, making it difficult for them to secure new income through interest payments.
Only time will tell if the global economic crisis will claim more financial victims in Mongolia.