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Reserve Requirements

Reserve Requirement (RR) ratio set by the BoM is a policy instrument by which the BoM controls the money supply and manages banks’ liquidity.

The BoM updates the RR ratio bi-weekly and supervises the banks’ compliance with the RR. Assessment of the MNT RR and foreign currency RR is made based on the average maintained reserves which allows for banks to comply with the requirement in the beginning or end of the period without an effect on the short term interest rate if the banking system as a whole is at surplus or deficit of reserves.

  • “The BoM shall require banks to maintain a certain percentage of the balance of deposit and current accounts of individuals and legal entities, and other liabilities of the banks indicated by the BoM.
  • The BoM shall require banks to maintain reserves of not more than 30 percent. The BoM may set a varying RR ratio depending on the maturity and type of the liabilities.
  • Reserves of banks may be held in the form of cash holdings or by way of balances in current accounts with the Bank of Mongolia.
  • The Bank of Mongolia may pay interest on reserves which form part of a compulsory reserve.
  • The Bank of Mongolia shall impose a penalty on banks that fail to maintain required reserves. The maximum penalty under this clause shall not exceed the amount equal to highest interest charged by the Bank of Mongolia to the banks plus 5 percentage points.
  • The Bank of Mongolia shall establish a procedure for assessment and supervision of the required reserves of banks.”

Law of Mongolia on Central Bank, Article 12.