Source: Frontier Securities                         Date: 31 August, 2011

Mongolia's banking sector is experiencing enormous growth, reported the source. The growth in banking and credit follows economic growth in Mongolia and the rise in salaries and consumption among Mongolians.

“Nominal interest rates on U.S. dollar deposits are high by international standards,” said Senior Emerging Markets Economist Kenrick Drijkoningen at Frontier Securities. “For certain time deposits they are as high as 14 percent. Such high rates are a cause for concern, as they may reflect liquidity problems rather than an unusually high profitability of project lending. “

The number of outstanding loans grew by 45 percent from the first quarter this summer. Non-performing loans stand at MNT 382 billion, including those of two banks that failed. Although Frontier Securities calculated that the amount of total outstanding loans is relatively low and falling, the number of deposits is rising fast. Presumably, this is because the public believes the Mongolian tugrug will appreciate further against the U.S. dollar.