A. BACKGROUND OF THE PROJECT AND THE ASSIGNMENT

Mongolia has received a credit from the International Development Association (IDA) for the implementation of the Strengthening Fiscal and Financial Stability (SFFS) project. The Financial Regulatory Commission (FRC) is a beneficiary of the Project and is implementing activities under sub-component #C4. The main objective of the Sub-component is to strengthen the institutional capacity of the FRC. 

The Commission is Mongolia’s non-bank financial markets regulator. It is mandated to supervise and regulate the non-bank financial sector, including real estate brokers, and dealers in precious metals and stones. According to the Law on Virtual Asset Service Providers, the Commission will register and monitor virtual asset service providers (from June 2022). 

In recent years, shareholders and ultimate owners of companies engaged in one type of financial activity in the financial market have begun to provide other types of financial services. In accordance with joint inspection guidelines stated in the Financial Action Task Force’s (FATF’s) recommendations, the Commission and the Bank of Mongolia conducted on-site consolidated supervision of 46 financial groups in 2019. The objective was to identify their organizational structures and beneficial owners, assess the implementation of the Law on Combating Money Laundering and the Financing of Terrorism - and related regulations - and evaluate the associated risks. In addition, in 2020, the Commission conducted a survey of 12 types of groups; operating in financial markets and registered with the Commission. The survey revealed their assets accounted for more than 85% of total market capitalization, and capital concentration was high. All this shows that there is a risk is in the financial system, due to the financial groups’ interdependence and the high concentration of capital and turnover.  

Therefore, a comprehensive study to measure and manage risks arising in connection with financial groups - and the identification of appropriate supervision – is required. It is also important to create a legal environment and develop regulation of appropriate calculation methods; for the determination of required capital of the financial group/s, and on-site and off-site supervision. 

Figure 1. Asset relationships of financial groups 

Based on the above, the Commission is seeking to hire an experienced national consultant to provide technical assistance to provide policy recommendation/s and develop a regulation for on-site and off-site supervision. Also required is a guideline, or a manual, for supervision; based on international best practices. 

B. OBJECTIVE OF THE ASSIGNMENT 

The main objectives of this assignment are to: 

• conduct research on international best practices related to supervision of financial groups,
• provide policy recommendation/s based on research,
• develop a regulation on supervision for the Commission, and
• prepare a guideline or manual for supervision. 

C. SCOPE OF THE WORK 

The tasks of the Consultant include, but are not limited to, the following:

Task 1. Pre-drafting technical recommendation 

1. Inception report along with a Contract Implementation Plan; 
2. Hold meetings and discuss frequently with Commission’s personnel, the subject matters to provide for insight;
3. Review related legislation on supervision of financial groups, and existing regulations approved by the Commission; 
4. Conduct research on international best practices related to supervision of financial groups; 
5. Prepare a draft regulation (along with a guideline and/or manual) and present it to the Commission for comments; 
6. Prepare training materials for Commission’s personnel; 

Task 2. Preparation of technical recommendation

1. Develop policy recommendation/s based on research (Task 1.3-1.4); 
   
2. Develop a regulation on supervision for the Commission;
3. Prepare a guideline and/or manual on supervision; 
4. Conduct training and workshops for the Commission; 
5. Perform other tasks as reasonably requested by the Commission.

D. DELIVERABLES

The Consultant shall prepare and present the following deliverables to the Commission.

1. Contract Implementation Plan; 
   
2. Inception report including research results (Tasks 1.3-1.4);
3. Policy recommendation/s; 
4. A guideline and/or manual on supervision for the Commission; 
5. Training materials;  
6. Draft regulation describing on-site and off-site supervision by the Commission; 
7. Final report 

E. CONSULTANT’S QUALIFICATIONS/ SELECTION CRITERIA

The Consultant shall satisfy the following requirements and skills:

Education: The Consultant should have a postgraduate or higher degree in Finance and Economics, or Business management and Law.

Experience: The Consultant should have at least ten years’ experience in the financial sector; at least half of which (five years) in a supervisory authority or equivalent. Previous experience in a similar consultancy works/projects working with partnership of government or government agencies will be an advantage. Knowledge of methods and techniques required for developing policy documents (preferably with evidence of previous related work). 

Language skills: The Consultant shall be fluent in Mongolian and English. 

Other skills: 

• Familiarity with the financial market legal framework;
• Advanced analytical skills and research ability;
• Well-organized and able to work independently; 
• Ability to advise others, and work collaboratively within a team environment; 
• Proficient in PC-based applications and data management, with excellent web research and navigation skills; 
• Ethical (confidentiality of information, governance and privacy).

F. SUPERVISION AND REPORTING 

The Consultant will report directly to the Director of the International Cooperation Department of the Commission. The Consultant will work on a day-to-day basis with officials appointed by the Director of the Commission’s Market Research and Development Department (on technical matters related to the assignment). 

The following reporting requirements apply:

• Contract Implementation Plan: submitted to the Client within five working days of the contract being signed; 
• Progress Reports: monthly, once the contract has been signed; describing accomplishments and progress, and to be accompanied by the developed materials; 
• Final Report: not later than 10 working days after the contract is completed; describing accomplishments in full, and to be accompanied by the completed version of the developed materials. 

All reports and deliverables shall be reviewed and approved by the Commission. The approval of the deliverables shall be a basis for the payments. 

G. CONTRACT DURATION 

The duration of the consultancy will be two (2) months and will start in May 2022. The Consultant is expected to work on-site during the consultancy period. Upon signing the contract, the selected consultant will start the provision of services and will complete their duties within the period specified in the contract. In accordance with the agreement between the parties, the work specified in the terms of reference shall be completed and presented to the Client. Payments will be released upon satisfactory completion of all deliverables according to the following schedule: 

• Deliverables 1-4: 50% of total contract amount;  
  
• Deliverables 5-7: 50% of total contract amount.  

H. INSTITUTIONAL ARRANGEMENTS

The Commission will provide office space (work desk, meeting room, etc.) and assign a coordinator to work with the Consultant to facilitate their work at the Commission. The Commission's Market Research and Development Department will provide management and organizational support for the day-to-day work of the Consultant. 

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