Mongolia’s fairytale economic boom is developing cracks. The failure of the country’s fifth-largest bank and delays to the development of its giant copper mine underscores fears that its growth potential is built on shaky foundations. Yet greater economic realism may ultimately be welcome.
The surprise insolvency of Savings Bank, which controlled about 8 per cent of Mongolia’s banking assets, has rattled the country’s economic cheerleaders. The central bank closed down the lender and transferred its deposits to a state-owned rival after it ran up bad loans worth $109-million (U.S.) – more than twice its capital, according to Fitch Ratings. Some of these loans appear to have been made to Just Group, controlling corporate shareholder in Savings Bank, despite regulations designed to limit such exposures. Continue reading