Academic journal article Management Review : An International Journal

Analysis for Financial Soundness Indicator of Mongolian Financial System

Academic journal article Management Review : An International Journal

Analysis for Financial Soundness Indicator of Mongolian Financial System

Article excerpt

ABSTRACT

We did our research work for sustainability status of Mongolian financial section on the basis of interconnection between financial soundness indicator and financial section corporate governance index. In financial soundness indicator, 40 items of International monetary fund were included and corporate index contained illustrations which can define banks development of the world. From the result view of research done at the end of 2011, it was clear that Mongolian financial section had been unsustainable. In addition evaluation model for Mongolian financial soundness was developed, having taken financial soundness indicators from the first quarter of 2000 to fourth quarter of 2011 and other macro economic variables as well as major indicators, of deposit taking institutions, including capital adequacy, non performing loan, profitability, financial leverage, liquidity, GDP growth into econometric research consideration. From the view of econometric research output, that R squared for capital adequacy is 94% and it is 69 for performing loan, 73% for profitability, 97% for financial leverage, 64% for liquidity, 48% for GDP growth was made definite.

Key word: Mongolian financial system, financial soundness, financial soundness indicator, corporate governance of banking section, corporate governance index, economic growth.

INTRODUCTION

Even though defining and measuring the sustainability status of a country is rather difficult issue, it is not significant when there has been no crises and whereas as financial system is unsustainable, it is quite critical problem. Generally it can be said that sustainability of financial system positively influences on real section. As well, government, real and external sectors have direct impact on financial system sustainability, in opposition to this, financial system sustainability causes these sections development (O.Rourke, 2003).

For the last 20 years, learners and researchers from central banks have been doing analyze and making conclusion on financial system by developing system representing indicators in order to evaluate financial system sustainability, but it is unnecessary to completely do evaluation work through developed indicators and it is considered too that financial system sustainability is dependable to the governance of financial institutions. Bank system governance index needs to be learned to the greater extend taking interconnections among banking system regulation and monitoring practice, banking system developments, effectiveness as well as weakness into essential consideration and these factors are regarded as having capability to correspond to the system enlargement.

Research goal: Do analyze for sustainability of Mongolian financial system by interconnecting the indicators of financial system sustainability and financial section indexes.

LITERATURE RIVIEW Studies have been conducted in most cases on the purpose to define and suppose crises. Havkins. J and M Klau, Nelson made the application of methodology for estimating financial sustainability indicator, developed by the International monetary fund, broadened and they consider by the way of paying reasonable attention to the market pressure, bank and banking system weakness, vulnerability. As financial system sustainability indicators provide vital information necessary for ensuring the performance and flexibility of banking sector on the basis of the circumstance of the market of finance, fixed asset and non bank financial system as well as firms, households, Indicators representing risk, harmful to the whole financial system , must be concentrated on in particular(Girton and Roper, 1977).

Rita Babihuga did research work for defining dependence of financial system core indicators on macroeconomics using the biggest data and then he evaluated financial indicators by getting them interrelated with macro economic variables(Schaeck and Cihák, 2007)..

For our country, there are many small sized research works done for determining relationship between macroeconomics and financial system and PhD Batsukh. …

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