INFORMATION ON THE DEPOSIT INSURANCE CORPORATION OF MONGOLIA AND THE COMPENSATION SYSTEM DEVELOPMENT

6/15/2022

The Deposit Insurance Corporation of Mongolia is a non-profit legal entity which was established under “The Bank Deposit Insurance Law,” and one of its main functions is to provide compensation to insured depositors. With support from the Strengthening Fiscal and Financial Stability project, jointly funded by the World Bank and the Ministry of Finance, the development of the compensation system is in its preparatory stages. With the implementation of the system, it will become possible to access depositor information and make calculations based on the information. Also, it will be possible for the reimbursing bank to connect to the system and make compensations, exchange reports and information, and file complaints.


Globally, compensation systems are based on the banking and financial system, economic state, and deposit insurance scope of the country. Being able to develop the system with the help of the Strengthening Fiscal and Financial Stability project group is significant because it creates a chance to complete the project at a level that matches international standards and to implement it with technical specifications and under multiple levels of supervision.

THE COMPENSATION PROCESS

Current state

Because the corporation does not have its own compensation system in place, when an insurance case occurs and compensation is made to the liquidated bank, functions like getting information from the bank cessionary and reimursement calculations are all done manually. When verfication of information is completed manually by dividing it amongst the working group, the chance of error is high and much time goes into re-calculating and editing. In addition, it becomes impossible to supervise both complaints received during the compensation process and compensation reports.

Since there is a possibility that in the next case of insurance there may be an error in compensation calculation and it will take a long time to check for the error and re-calculate, there is also a risk that compensation will not be made in the time frame specified in The Bank Deposit Insurance Law.

With the implementation of the system

By introducing this compensation system to its operations, the Deposit Insurance Corporation will make it possible to improve the grade given by The International Association of Deposit Insurers to the sections relating to deposit insurance compensation, which was “materially non-compliant.” Additionally, it will become necessary to complete the following steps within the 10 days specified in the law:
  • Obtaining depositors' information of liquidated banks;
  • Data-clearing of ineligible depository information;
  • Distinguish uninsured depositors' information;
  • Calculate the amount of insurance indemnity for each depositor;
  • Create a list of insurance claims;
  • Insurance coverage;
  • Customer complaint resolution.
The compensation process of the Deposit Insurance Corporation of Mongolia will be arranged according to The Bank Deposit Insurance Law. The regulation on providing deposit insurance compensation, The regulation on the selection of the reimbursing bank, and any other related rules and regulations. The National Committee will begin the compensation process within 10 working days of the Bank of Mongolia making the decision to liquidate the bank. When a bank is liquidated, the Deposit Insurance Corporation of Mongolia will calculate the compensation amount based on the information given by the bank cessionary, and provide compensation to insured depositors of the liquidated bank through the reimbursing bank.

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