2

2014

2014

ANNUAL REPORT
2014
THE FIRST COMMERCIAL BANK OF MONGOLIA


2014

C O N T E N T
Vision, Mission and Value 05-06
Shareholders 07
Board of directors 08-11
Chief Executive officer 12-20
Corporate governance 21-22
Statement of economic environment and macro economy

23-24

Financial performance and results 25

Human resource management 26-28
Risk management 29-32
Information technology 33
Treasury management 34-35
Capital bank in 2014 36-40
- Highlights of 2014 - Social responsibility - Our customers Our mission for 2015 41-42
International cooperating organizations 43
Branches and ATM locations 44-50
Audited financial statement 51-84

2014

OUR VISION
To be nature-friendly Green E-Bank that supports
small and medium sized enterprises (SMEs)

OUR MISSION
To be the efficient bank with solid growth, potentially providing
reliable service with respect, business ethics and responsibility.


2014

CAPITAL BANKS IDEOLOGY AND VALUES

Banks business activity shall adhere to the acknowledged principles of legal acts, ethical
requirements to maintain preferable strong and stable business ideology.
To honor the rights of our correspondent parties, abide by the principles of fair
competition, respect their core values, and implement the companys social responsibility
program in order to contribute the development of Mongolia.
Shareholder, Board of Directors and executive management team shall implement the
corporate governance, proper management rule and ensure transparency and openness.
To respect rights and freedom of employees by implementing a proper human resource
policy, compound conditions to work in healthy, safe environment, and esteem
opinions and desires of the collective and individuals.
To accept all the esteemed customers request with kindness, and fulfill it promptly and
expediently.
All employees of the bank shall work honestly for their company, and work inventively
by searching for opportunities and get their work results appraised sincerely.
To support by a policy the trends to deliver financial services to organization and
individuals who deal with activities that do not cause negative impact to the environment
and population health, as well as propagating this idea to the public and to appeal
others.
To follow the law against money laundering and terrorism financing to prevent such
kind of corruption, organized crime, drug, weapon and human trafficking, plus not to
take part in non humanitarian activity and any illegal activities also stand out against
such crimes.
To develop bank and financial services with worldwide and international standard in
accordance with modern information and technology to serve our customer forthwith,
in addition, to become a leading bank in the financial sector of Mongolia with
e-banking service.

2014

STAKEHOLDERS

The main stakeholder of the bank is Bishrelt Group LLC, one of the Mongolian largest
conglomerates, operating 15 subsidiary companies with 1700 employees and active operation
in business sectors including banking and finance, investment, securities, real state, trade and
service, manufacture, health, construction and infrastructure division.
Groups vision:

To be the company that contributes in Mongolian development, noticeably efficient to
Mongolian nations, fruitful to our shareholders, to be the strongest competitor and the best
partner of leading corporations of Asia Pacific countries. This is Bishrelt Groups main ambition
and aspiration for the future mission. They have reached todays place by defining our new
ideas to implement our dream as our mission, by announcing the method to fulfill our mission
as our slogan and by working honestly and actively. Further to fulfill the vision with the best
management solution to control the speed of economic development, connection of theory and
practice, activation of creative ideas.
Groups mission:

To honor the consumers, to introduce a new service and product that fulfill the customers
satisfaction, and to contribute the development of Mongolian economy and social treasury by
enterprising a promising manufactory based on intellectual advanced technology.

The company keeping pace with the global information era by using the best administrative
management in production and service, giving accelerated and quality service, preferring the
knowledge-based environment of transparency, paying special attention to the development of
companys infrastructure and information technology, using the worldwide brand technologies
and software in our activities.

As the Group defines its social responsibility policy, it is to protect the mother earth and
environment, and to solve the issues facing the society, such as: poverty, unemployment and
ecological problems.

Bishrelt Group LLC joined to the United Nation`s Global Compact in 2004 and has
started to work in compliance with its pre-figurative visions, informing them to public. As a
result of its business achievements and contribution of tax payments in state budget in 2004,
2005, 2006, 2008, 2010, 2011, 2012 and 2013 Bishrelt Group LLC has awarded by
honorary title Best Entity of Mongolia issued by Government of Mongolia and Mongolian
Chamber of Commerce, in 2007 awarded by title Best of the Best entities of Mongolia, in
2013 awarded by title CACCI Golden award cup of Asia and Pacific region best entities,
and listed as an one of TOP- 100 entities of Mongolia for last 10 years which demonstrate its
stable effort as being one of best entities of Mongolia.

BOARD OF
DIRECTORS

2014

09

CAPITAL BANK
ANNUAL REPORT 2014

GREETING FROM THE CHAIRMAN

First and foremost, at this time of performance review of 2014 of our bank, I would like to express my sincere gratitude
and greetings to our esteemed customers, deposit holders, international and domestic partners and colleagues for the continuous
support and cooperation. And wish you all great success on your future creative work on behalf of the Board of Directors and
its members. While I believe that our team can accomplish the objectives and goals of business plan and expand our efficient
collaboration in the coming year 2015.

The goal for the year 2014 was to Improve the skill and capacity of human resource and to become the leading entity
with good corporate governance. As a result of our community directing their efforts and implementing certain organizational
measures, we were able to expand the scope of banking activities, actively engage in a number of projects implemented by the
Government as well as other projects and programs within the framework of social responsibility policy. We have commended
on experiencing a higher growth rate of the key indicators compared to the previous year as a result of successful collaboration
with our customers, clients, business partners. Here I would like to underline that we are duly proud to be the only bank with
domestic investment.

I believe that you all will be satisfied to see the banks 2014 annual report and its major indicators performances.

The challenges we have faced during the implementation of our principal objectives in 2014 were the devaluation of
MNT rate in relation to foreign currencies and the sharp slowdown of economic growth which began since the second half of
2013. We have operated focusing on overcoming the challenges with less loss and failure.

Thus, our banks success, marched together with social development and successfully accomplished the goal set by, attained
a progress, are a direct expression of our joint efforts despite the influence of the countys social and economic crisis situation.

CAPITAL BANK
ANNUAL REPORT 2014

10

Last year, although it was under unfavorable situations, such as, our countrys economic growth has experienced slowdown,
inflation rate has increased compared to the previous year and purchasing power of MNT has weakened, our banks stockholders
has posted 20.0 billion MNT as subordinate payable with a condition to convert on shares which was an important step that
increased our banks risk capacity by 72.0%. Bank deposit has increased by 46.6% which enabled the increasing of banks
lending capacity. This enabled the possibility to successfully implement the goal set to increase the amount of loan grants to
SMEs.

During the reporting year, our banks loan portfolio has increased by 57.6%. As a result of this excellent performance,
the loan operation has shown its positive effect in maintaining banks sustainable development and raising the level of
profitability that increased our net income by 2.3 times more than the previous year in 2014. We have implemented several
innovating activities in our operation for maintaining transparency and enforcing appropriate governance principles implemented
by the Bank of Mongolia.

Corporate governance practice has become the attention around the world, and in this current situation where the best
methods of governance are more concerned, the Board of Directors have cooperated with International Finance Corporation,
member organization of World Bank, to improve corporate governance, to reduce risk, to promote profitability, to attract
new investments, and the policy documents which are the principle source of good governance have been reviewed to be
newly revised and amended. These documents have been an important step towards the objectives to be to lead by good
governance bank.

I encourage the bank colleagues to successfully implement the objectives for 2015 with dignity.

SINCERELY,
CHAIRMAN OF THE BOARD OF DIRECTORS
BATBAYAR. T

11

CAPITAL BANK
ANNUAL REPORT 2014

BOARD OF DIRECTORS

The Board of Directors /BOD/ has been newly assigned with 7 members on the shareholders meeting which was held on
24th March, 2014. Two of them are independent members, and it is consisted of highly skilled members with masters and
doctoral degrees in banking, finance and business management, as well as rich experience in working for banking and financial
organizations and lecturing banking and finance theories to university students for many years.

Auditing committee, integrated risk management committee, remuneration, nomination committee were established within BOD
and detailed plans are made to be executed by monthly, quarterly and annually schedule for each committee, and the members
have completed their plans according to their respective responsibilities. The discussing agenda for the meeting, the main
method of BODs operation, were reflected in the annual plan with definite period, and Board members were appointed for
the meeting preparation and the meetings were creatively organized. The meeting was held eight times during the reporting
year, and the critical issues such as credit, risk, personnel, information technology, prudential ratios requirements, and the
implementation of business plan were discussed. The CEO, Deputy CEOs, directors of departments, senior officers and other
officers of the bank who are related to those issues have attended the meetings, and recommendations and directions were
given to the malfunctioning or works that are need to be attentive in the future. Monitoring the performances which resulted
in constituting the banks normal operations was the stimulation for motivating the bank colleagues and directing them to the
right direction.

Furthermore, BOD members have made an on-site visit often to the departments, offices and units, to hear the employees
impression, and if necessary, include some of the issues in the meeting to be discussed in accordance with the plan which
resulted in attending the Management Committee Meeting of informing examination results of Assets and Liabilities Management
Committee, Risk Management Committee and Internal Auditing Committee Meeting, in order to give recommendations and
directions. Involving the BOD members in seminars and conference organized by Mongolian Banks Association in cooperation
with the Bank of Mongolia and International financing organizations, has been an important contribution in promoting innovation
activities in the BOD operations.

All the relevant regulations abided in the BOD level has been newly processed based on the advices of International Finance
Corporation and international best practices as well as reflecting the proposals of Board members and shareholders in order to
perfect the implementation of corporate governance principles which has become another step towards good governance.

The Board of Directors has been working accurately with the shareholder and executives of the bank. The necessary information
of Board of Directors has been located in the banks web site as implementing the transparency policy of proper governance.

MEMBERS OF THE BOARD OF DIRECTORS:

1. Batbayar. T - Bank advisor, Doctor of Economic Sciences

(Ph.D), Honorary Professor of National University of Natural
Economy and Law of Irkutsk city, Russian Federation.

2. Gookhuu. Sh - Head of the department of San economic

institute

3. Minj. A Finance specialist of Imperial international

finance organization

4. Nasanbayar. B - Senior professor of Mongolian National

University and elder officer of the bank
5. Undarmaa. B President of Bishrelt Group and
shareholder of the bank, Doctor of Economic Sciences
(Ph.D)
6. Tserentogoo. A Professor of Mongolian National
University
7. Chinbishrelt. A Chief executive officer of Bishrelt
LLC

COMMITTEES WITHIN THE BOARD OF DIRECTORS:

A. REMUNERATION AND NOMINATION COMMITTEE:

HEAD: UNDARMAA. B BOARD MEMBER

MEMBERS:

GOOKHUU. SH

INDEPENDENT BOARD MEMBER

CHOGJILSUREN. N NON BOARD MEMBER

B. INTEGRATED RISK MANAGEMENT COMMITTEE:

HEAD:

GOOKHUU. SH

INDEPENDENT BOARD MEMBER

MEMBERS: MINJ. A BOARD MEMBER

CHINBISHRELT. A BOARD MEMBER

C. AUDITING COMMITTEE:

HEAD:

MEMBERS:

NASANBAYAR. N

INDEPENDENT BOARD MEMBER

TSERENTOGOO. A

BOARD MEMBER

GANTUMUR. N

NON BOARD MEMBER

EXECUTIVE
MANAGEMENT

13

CAPITAL BANK
ANNUAL REPORT 2014

GREETING FROM THE CHIEF EXECUTIVE OFFICER

Dear Shareholders, colleagues and clients,

First of all, I would like to send my warm greetings to our honored customers, employees, shareholders and board
members of Capital Bank.

The year of 2014 has been an exceptional year with achievements and mistakes combined for the Mongolian banking sector.

In this competitive market of banking sector, the scope of our banks operation has been expanding year by year. The
investments in the product development and information technology has increased dynamically and the implementation of
international best practices by the virtue of defining the proper objectives have increased the banks competitive capacity and
made an influential impact on the maintenance of sustainable development.

Today, We became one of the column of Mongolian banking sector, there liable bank with 88 branches throughout Mongolia,
in 21 provinces, 3 cities, with approximately 600 professional employees and 400.000 customers, that provides all types of
modern banking products and services. For the past 2-3 years, Capital bank has been the leader among other commercial banks
by our performances. We have resolved policy level issues rapidly, major investments have been made with courage and have
accelerated our operation which resulted in making big changes in short term. We are, further, making continuous innovation,
change, improvements and developments as fast as integrating with this globalized electronic century, and awaiting for the new
initiatives and objectives to fulfill together.

According to the banks financial performances in 2014, our total asset has reached 817.4billion MNT by 47.3 percent
of increase from previous year, loan portfolio has reached 489.8 billion MNT by 58.2 percent, deposit has reached 325.0

CAPITAL BANK
ANNUAL REPORT 2014

14

billion MNT by 43.7 percent, net-profit of the bank has increased by 6.2 billion MNT and reached 9.0 billion MNT by 232
percent, respectively. Moreover, the banks equity has reached 79.0 billion MNT which is increased by 30.0 billion MNT or
70 percent.

Further, in accordance with other performances of last year, the number of customers has reached 348300, by 28900
customers or 9 percent, the number of card holders has reached 58258, by 13648 cardholders or 31 percent, the number
of internet banking customers has reached 4071, by 2718 customers or 201 percent, the number of customers involved in
Help News service has reached 28000, by 23942 customers or 590 percent, the number of ATMs has reached 59, by 28
ATMs or 90 percent, the number of merchant POS has reached 262, by 178 merchant POS or 211 percent of increase,
respectively.

In 2014, the bank has promoted the following new products and services in the market:

- New savings products with 14 month term for the apartment down payment.
- Advancement of gold
- UnionPay TravelMate card
- In the scope of corporate social responsibility, for the Mongolian population health we have signed the cooperation memorandum
with Seran hospital, one of the major representatives of health industry in South Korea, and initiated a discount service.
- Payment service which Mongolian telecom phone payment can be paid through the bank.
- Started an insurance brokerage services and it is enabled to deliver complex insurance service to the customers.
Furthermore, projects and programs initiated by the Mongolian Government, Bank of Mongolia, international organizations,
investment funds, governmental and non-governmental organizations were successfully implemented through our bank. As a
result, we have supported over 4000 small and medium sized enterprises to initiate or broaden their business operation, and
have disbursed loans with over 250 billion MNT, as well as created over 2000 new workplaces.

Implemented projects include:

- Sustainable Livelihoods Projects of World bank

- Two-step-loan project for SME development and environment protection of JICA
-

Market and pasture management development project of UNs IFAD

- SME development fund loan of Ministry of Labor

- Price stabilization Program of Bank of Mongolia and the Government
- Mortgage loan with interest rate of 8%
- Organic Mongolia Program
- New development program of medium term objectives of Development Bank
- Atar /crop cultivation/ campaign of Investment and Development fund
- Employment generation project Employment Promotion Fund and Government
- Agri-business promotion program Mercy Corps

In addition, we have participated in the relevant selection processes in 2014 and have successfully implemented new projects
and programs as following:

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CAPITAL BANK
ANNUAL REPORT 2014

- Urban sector development MON2301 project C component of Asian Development fund /only through Capital Bank and
State Bank/
- Concessional loan of Ulaanbaatar citys SME development fund /only through Capital Bank/
- Export promotion program-888 of Development bank and Government
- Leader sector promotion program of Development bank and Government

Our achievements have been evaluated by domestic and international organizations in 2014 and prestigious awards of banking
sector were granted to our bank. For instance: our bank has been awarded with BEST SME BANK of Mongolia-2014 from
Capital Finance International, prestigious world-class banking, finance and economic British magazine. The award is granted
to the leaders of banking and financial sector based on the comments of United Nations, World Bank, International Monetary
fund, World Trade organization and International Finance Corporation every year.

Global Sustainable Finance Conference is organized annually by European Organization for Sustainable Development and was
held in Germany from 12th to 13th June, 2014. The foresaid Organization has highly valued efforts and activities of Capital
bank, the first commercial bank of Mongolia in the fields of promoting green development and protecting environment, and
granted Certificate of Merit for Outstanding Sustainable Project Financing. The organization holds a survey around the worlds
financial organizations every year, and highlights the best banking and financial institutions by evaluating their operation results
and contributions towards environment and green development funding within each categories.

Mongolian commercial banks consider the economic benefits and risk assessments of the financing project concurrently with the
consideration of negative impact on environment and society, and remain to refuse finance projects with negative impact on
environment and society, to support initiative green products and services. Furthermore, Mongolian banks have integrated to
approve sustainable financing policy principals of Mongolia in order to lead other business sectors in sustainable development,
while adhering to the related principals and requirements on their internal operation. In 2014, our bank has successfully started
executing this operation as we have approved policy documentations, as well as, staff training is organized by stages that the
implementation process has began effectively.

The core business for 2014 was to improve the banks governance and to implement best practices of international corporate
governance. Since 2013, we have not only been in a consistent relationship with International Finance Corporation, involving
our executive level officials in governance training and conferences to advance their knowledge, but also it has been an
effective step to have collaborated in processing advisory services from the corporation to complete the governance policy
documentations. At the same time, it has been noticed day by day that the cooperation links between the departments of the
bank has been improving; as a result, their organizing works have positive effects on many activities and progresses.

By the end of 2014, our bank is ranked on the 7th place among the banking system, and belongs to the 2nd banking
group. This year, there is a demand for us to increase our rank in the system, conjointly, to improve the banks profitability.
Furthermore, the bank has maintained its asset increase during 2013-2014 when the economic growth was relatively decreased.
However, by the beginning of 2015, it is being definite that the deteriorating economic situation will have a negative impact
on the financial market, including the cash market.

In other words, it is considered to set up the business plan in the form to deliver our products and services to the customers
more closely and to make progress in all aspect of the operation. Additionally, the bank will work on transforming its traditional
methods into more electronic form, since banking services have become faster and prompt in their electronic form nowadays.

We have all the possibilities to attract new customers if we provide competitive e-banking services and correctly determine
the customers demand. Thus, we have planned to make major progresses in improving corporate governance, implementing
international best practices of governance, and further, implementing the global trend of sustainable finance policy and principals
and improving the banks monitoring environment for the coming year. Therefore, I would like to take this opportunity
to inform you that we have planned this year to be Proper development, innovation year to increase our positioning
in the market by directing the departments and offices function for the business growth and strategy implementation into
strengthening operational independency and role of the branches and units through promoting with policy.

CAPITAL BANK
ANNUAL REPORT 2014

16

In general, it is essential to improve the banks profitability, return on assets and competitiveness. It is directly related to the
employees effort, creativity and initiatives, as well as, it is required from the management team to have ethics and responsibility
to be a good example to lead with their knowledge, appropriate action and skillfulness, and to implement proper management.
Therefore, in 2015 and in the near future, we will work with our efforts to achieve our objectives of the business plan of
2015 by building good corporate governance and introducing the international best practice in our operation in order to
become the best bank with the best governance, best services and best employees.

SINCERELY,
CHIEF EXECUTIVE OFFICER
ARIUNBOLD. A

18

2014

EXECUTIVE MANAGEMENT

Chief Executive Officer Ariunbold.A

Director of Corporate Banking Department Delgertsetseg.S

First Deputy Chief Executive Officer Gerelmaa.A

Director of Risk Management Department Oyuntuya.M

Deputy Chief Executive Officer Yanjin.B

Director of General Coordinating Department Binderee.Kh

Deputy Chief Executive Officer Undarmaa.B

Director of Branch Management Department Narankhuu.B


2014

19

Director of Information and Technology Department Purevsuren.B

Director of Internal Auditing Department Butemj.S

Director of Credit Policy Regulation Department Badamchuluun.D

Director of E-Banking Department Buyanmunkh.B

Director of Business Development Department Ariunaa.N

Director of Trade Finance Office Enkhbold.B

Director of Financial Accounting Department Enkhjargal.A

19

CAPITAL BANK
ANNUAL REPORT 2014

CAPITAL BANK
ANNUAL REPORT 2014

20

21

CAPITAL BANK
ANNUAL REPORT 2014

CORPORATE GOVERNANCE

Corporate governance is the provision with the
purpose of maintaining the adequate levels of coordination
of activities among the shareholders, board of directors,
executive management and other participants. It ensures the
financial credentials of the companys business. Capital bank
has been significantly emphasizing the issues regarding the
implementation of appropriate corporate governance.

Thus, Operational regulation to implement appropriate

governance in Capital Bank has been developed and adhered
based on the four principles of appropriate governance;
transparency, fairness, responsibility and reporting, guided
by the reference of Banks appropriate governance principle
implementing regulation issued by Corporate governance
codex and the Bank of Mongolia.

The purpose of this regulation is to implement appropriate

governance in the operation, to maintain sustainable
development, to intensify the implementation of mission,
vision and business plan. As a result, it is to promote
foreign and domestic investment, to contribute in maintaining
the national economic growth, to create a convenient
environment to earn the trust of customers and depositors,
and to increase amount of resource and prosperity.

One of the most important parts of corporate governance

is the maintenance of transparency. We disclose financial
reports of quarters and audited annual reports along with its
related explanations and introductions to the public timely
in the form of daily publications and electronic news as we
consider that it is essential to increase the confidence of the
customers and depositors for the bank. Thus, we transparently
include in our website and annual reports the information,
such as: information related to the banks mission, vision,
business policy, procedures of ethical rules, shareholders,
information about the professional skills, work experience
of Chairman, board members and executive managements,
works and transactions /granted loan, issued guarantee and
letter of credit/ concerning the related parties, risks that may
affect the financial stability, as well as information related
to management, organizational chart, business diversification,
branches and units, management committees. Plus, we
annually promote the banks audited financial statement
with transparency, in addition to, periodically providing
information about our banks products and services through
other media channels.

In the scope of accountability principles, we have been

improving the rules, regulations and guidance implemented in
the bank with amendments in accordance with the amendments
made on the relevant laws, regulations and rules by the
superior organizations. In order to improve the employees
business knowledge and to raise their responsibility, monthly
examination is taken regarding the knowledge of their relative
laws, rules and regulations by online survey tests.

The Board of directors plays an important role for the

implementation of corporate governance in accordance
with the relevant provisions of Corporate Governance.
The Board of Directors was established independently of

executive management with 7 members, who are guided

by the provisions of related Banking acts and laws, and the
members can avoid political and other interests, can make
independent decisions. 2 of them fully meet the requirements
of independent members as referred to the Article 33 of
Banking act and are experienced and skilled members in the
fields of controlling and monitoring banking functions. Thus,
the composition of the Board of Directors and its number
meets the requirements of appropriate governance.
The implementation of reporting principle is an important
leverage for the employee to increase their accountability,
to prevent any probable risks and to promote their work.
It is reflected on the annual plan to organize the executive
management reporting on the Board of Directors meeting at
least two times a year, as well as to discuss the departments
management report and recording in accordance with the
specified schedule. The group is responsible for the meetings
preparation to ensure the preparation of information and
recording of departments management, as well as, to know
the departments employees views, to give evaluation and
review on the work process, to provide specific advice
about what shall be focused in the future, and to require
the Auditing committee to ensure monitoring on the
implementation of the meeting decisions, as we consider that,
it has been a significant stimulation to the banks operation.
Executive management reporting is not only presented to the
Board of Directors, but also it is discussed during the central
and rural areas management integrated conference, as well
as, published on the banks website that it helps to improve
the managements responsibility.

One of the most important appropriate governance methods

is the rational system of risk management and internal
auditing. The risk management committee is organized as
fully independent, and the committee members are skilled
and experienced with every probable risks of the bank,
hence, any probable risk actions or branches are immediately
evaluated and discussed on the committee meeting to be
taken appropriate measures.

The internal audit department of the bank takes detailed

examinations on activities of all the branches and units,
gives evaluation and directions. The Auditing committee
and some of board members participate in the examination
result reporting meeting and give advice which improves
the inspection effectiveness, also, to eliminate the violations
found during the examination.
The reliability of bank for its clients, investors and savings
account holders is one of the most important factors of
appropriate banking governance. We are organizing the
council of bank clients, receiving their opinions at the boxes
in the peripheral bank branch offices and listening to their
opinions by telephone 1800 1912. During the internal
audit department inspections at the bank branch offices, we
are taking appropriate measures along with the opinions of
our customers. We have developed procedures and guidelines
of service personnel regulations on how to handle customers.
Moreover, we have developed TOP customer procedures

CAPITAL BANK
ANNUAL REPORT 2014

and other relevant instructions and regulations separately.

In accordance with the evaluation standard of banks

appropriate governance implementation, the evaluation is
made by half year and full year, and delivered to the Bank
of Mongolia. Since 2015, the evaluation is delivered to
the Bank of Mongolia with a new standard. According to
the evaluation report, the appropriate governance has been
adequately implemented on the bank, but still, there are
several issues that need further consideration. Therefore,
we have cooperated with IFC, and newly developed the
rules and regulations Shareholder, Board of Directors and
committees under BOD based on their advice. Further,
have made specific amendments on the banks rules and
regulations, and have been adhered throughout all the
branches and units in order to perfect the banks appropriate
corporate governance implementation which has been a very

22

important step towards the good governance.

In 2014, Board members and banks executive managements

have participated in the seminars organized by the
specialists of IFC, and have received adequate advice and
recommendations that has been a critical importance.

ECONOMIC
OVERVIEW
MACRO
ECONOMICS

CAPITAL BANK
ANNUAL REPORT 2014

24

ECONOMIC GROWTH
Depending on the complexity of the trade balance that happened
throughout the year 2014, the economic real growth reached
7.9% because the MNT rate was dropped by 20%, inflation
was increased with double digit numbers.
Moreover, policy developers have limited opportunity to further
promote the economic growth because economic instability
was originated and off-budget expense is unlikely to increase
significantly.
ECONOMIC SITUATION
The main indicator that directly reflects macro economy
outlook is the national currency, and it refers to products of
MNT and currency rate of other countries.
Since 2013, inflation rate has been maintaining high level
and it did not decrease to one digit number since 2014. This
indicator that reflects the macro economys stability is unable
to reach the targeted level of the Bank of Mongolia. MNT rate
decrease is also an indicator of economy complication. Currency
rate depreciation, which began in late 2013, is caused by trade
balance deficit and foreign direct investment decrease. The Bank of
Mongolia has been conducting the monetary contractionary policy
in order to stop the MNT rate depreciation, and as a result,
reduced the growth rate of foreign currency. During the crisis of
2008 2009, USD rate had 24% of increase, however, during
2013 2014, the USD rate has increased by 35.2%. Result
shows that Mongolian MNT rate has depreciated by 50% since
2011. From these performances, it can be concluded that macro
economy was in a complicated situation in 2014.

UNEMPLOYMENT
Based on the labor market data, unemployment rate remained stable and economic development slowdown scene is yet to be observed.
During this time of economic development depreciation, it is not mentioned in the official data of labor market, but it can affect the
employment that employers to reduce the working hours or provide unpaid leave.
MACRO ECONOMY OUTLOOK OF 2014:
- As the trade balance crisis continues, the real GDP of 2014 reached
15,472.87 billion, increased by 7.9 percent which is an indication of
slower growth than the previous years.
-Economic challenges affected most in the construction and trade
sector. Construction sector increased by 1.02 percent, but trade sector
decreased by 6.9 percent.
-Foreign trade turnover reached USD11 billion, increased by 2.6
percent compared to the previous year. However, foreign trade balance
deficit decreased by 125 and reached to USD 537.9 million, including;
export amount increased by 35.3 percent and reached to USD 5.8
billion, import amount decreased by 17.6 percent and reached to USD
5.2 billion.
-Consumer goods and services price increased for the nationwide by 0.8 percent from the previous month of December, 2014 and by
11.0 percent from the same period of the previous year.
-In 2014, there was a risk to have an economic crisis that the foreign investment was declined and foreign currency inflow was decreased
sharply that caused capital shortage in the economy which resulted disruption in lending, decrease overall money supply by absolute
amount, and the real GDP turned negative.
-Average rate of MNT against USD reached MNT1,883.0 by December, 2014 and decreased by 9.8 percent or MNT 168.74 from
the beginning of the reporting year.

CAPITAL BANK
ANNUAL REPORT 2014

25

FINANCIAL PERFORMANCE
Although Mongolian economy growth has slowed down and
impacted negatively on the financial performances of the banking
sector during the reporting year, our banks financial performance
has increased. Total assets has increased by 47 percent or MNT
263 billion and reached MNT 817.0 billion which was 39 percent
more that the growth of banking system and raised its share of
the market. Profit amount increased 2.3 times more compared to
2013 and reached to MNT 9 billion.
Capital bank met all the criteria of the Bank of Mongolia and other
relevant organizations. The Banks quality indicator, non-performance
loan rate was 2.5 percent which shows good performance out of
the banking system, in addition, liquidity ratio was 33 percent and
capital adequacy ratio was maintained with 16 percent. Promoting
the small and medium sized enterprises has become the most
significant issue for social and economy of Mongolia. As regards,
our bank have effectively implemented many projects and programs
to support small and medium sized enterprises in order to make
significant contribution for Mongolian economy development by
promoting national industry, small and medium sized enterprises and
business operators with our policy. For instance;
- Amendments have been made in the loan condition, becoming
more flexible; loan term is extended from 24 months to 36 months
in order to reduce the burden of drawing term, and interest rates
are lowered by stage.
- Loan repayment chart is flexibly determined based on the
customers business specifics, seasonal features.
- We have been cooperating with Credit Guarantee Fund for a
significant time with the aim to resolve the customers requested
loan amount without reduction due to lack of collateral.
We also have planned many activities to create financial maturity in
order to make the lender to become good customers and monitor
loan portfolio performance by advancing financial supervision and
continuously delivering comprehensive bank products and services
to customers.

350

DEPOSIT /BILLION MNT/

300

325

- Capital deposited from customers increased by MNT 99.0 billion

or 44 percent compared to the previous year and reached MNT
325.0 billion by increasing the term and non-term deposits of
individuals, government and institutional funding organizations.
- Loan portfolio granted to small and medium sized enterprises
and individuals has been increasing year by year; by MNT 73
billion in 2012, by MNT 114 billion in 2013 and has increased
by MNT 180 billion or 58 percent in 2014 which reached MNT
490 billion.
- The equity amount is also increased by MNT 29 billion or 70
percent compared to the previous year and reached MNT 70.0
billion which increased the banks capital adequacy ratio. While
increasing the equity to enough amounts to close the asset risk,
equity fund amount reached MNT 33.0 billion which resulted in
exceeding the minimum amount of equity fund by 106 percent.
- Net income after taxes has increased 2.3 times from MNT 6.2
billion and reached MNT 9 billion compared to 2013.
- During the reporting year, profit amount of MNT 9 billion makes
return on total asset 1 percent and income /profit margin/ 10.7
percent. Loan to deposit ratio of 65 percent is at the proper
level, and when MNT 100 is received as income, its MNT 89 is
emerged as a cost.
- Our banks share in the total assets of the system is 3.8 percent
which has increased since the beginning of the year.
- Despite the growth of the banks financial performance, reduction
is observed in some months, non-performance loan amount is
expected to further grow, that we are focusing more on as well
as reducing the credit and source centralization and increasing the
equity sufficiency.

120%
100%

98%

250

As a result:

326

220

47%

100

2%
2011

2012
Loan

40%
326

300

40%

30%

220

20%

70
58%

70%

10.0 PROFIT /BILLION MNT/

9.0

60%

8.0

24
17

Loan

2013
Growth rate

2014

2013

232%

7.0

600

300%

500

250%

150%

30%

4.0

20%

3.0

100%

2.0
1.0

2.7
0.9
2011

50%

0.7
-21%
2012
Loan

0%
2013
Growth rate

2014

-50%

2014

Growth rate

350%

5.0

0%
2012

8.9

200%

10%

10

295%

6.0

40%

59%

2012
Loan

50%

41

40

2011

Growth rate

60
50

0%

2014

80%
58%

10%

100

0%
2013

EQUITY /BILLION MNT/

70

2011

47% 50%

200

70%
60%

555

48%

400

20%

50

20

80%

817

500
60%

150

30

70%

600

200

80

TOTAL ASSETS /BILLION MNT/

800
700

80%

226

900

LOAN /BILLION MNT/

59%

59%

490

59%

400

59%

310

300
200

196
123

58%
58%

58%
58%
58%

100
-

59%

58%
58%
2011

2012
Loan

2013
Growth rate

2014

HUMAN
RESOURCES
MANAGEMENT

27

CAPITAL BANK
ANNUAL REPORT 2014

HUMAN RESOURCES MANAGEMENT

Employees with competitive education, ethics, highly
skilled with banking and financial sector experiences, good with
work performance and productivity and respected leader within
co-workers are valuable factors of our banks competitiveness. We
aim to constitute a community who are stable, sincere, honest and
proud of the bank as our mission by implementing multilateral
policies and program to promote each employees contribution, to
focus on their training and development, and to solve their social
issues.
As we have set goals in stages to achieve these aims, we have been
organizing diversified and wide range of activities. For instance;
1. Within the framework of the banks mission to draw closer
to the customers, to increase the banks branches and to have
extensive network, we have created new jobs and supported
employment. For instance:
By the end of 2013, Capital bank had 295 employees, but
this number increased to 539 employees that we have created
144 vacant positions by the end of 2014. 10 branches were
opened in rural areas and Ulaanbaatar city within the first half of
2014 and 14 branches were opened within the second half of
the year. As a consequence, Capital bank is ranked at the 3rd
place among the commercial banks by its number of branches as
well as we have created vacant positions and truly supported the
employment.
We will continue to create vacant positions and support
employment. Within this objective, we will have 779 new
employees as we increase 240 more vacant positions than the
previous year by the end of 2015.
2. It has been a year specially focused on the human resource
selection and clearance operation. For instance:
We have made radical changes starting from Teller selections,
the banks primary or business processing unit, by implementing
new method Assessment Center of hierarchy selection. The
implementation of this new method develops the selection process
more efficient by setting precise criteria in each stage, holding
strong competition among the candidates which creates the
opportunity to fairly evaluate their skills from the group. As the
Teller selection process becomes adequate and efficient, the
advantageous opportunity is consisted to implement the policy to
promote the officials to the next level from teller position, such
as; senior teller or financier.
We aim to further develop the human resource selection with
modern methods, effectiveness and rationality by constantly
implementing in stage activities
3. Human resource training and development programs are being
methodically implemented. For instance:
We are aiming to increase the employees work performance
and productivity by increasing each employees efficiency and
improving their convertibility. Within this aim, we have developed
Integrated training policy.
Banks internal training and programs share major parts of
the Integrated training policy and plan. Internal departments
organize trainings regarding their operations and actively participate
in improving the branch staff and their discipline training.

The human resource department has internally organized Instructor

training for the departments staff within the framework of this
policy.
In order to make the management team to be exemplary and to
contribute in the development of the employees, long-term training
program has been developed for the managements. Within this
framework, modern and innovating trainings such as: Selection
methodology by group, Performance evaluation methodology,
Communication management and Team management have
been internally organized by Human resource department.
In addition to the banks internal training, wide range of
training activities are organized such as involving our employees in
the foreign trainings, organizing joint trainings with domestic and
foreign experts and studying in foreign countries. To emphasize
one of the trainings, we have organized several training phase
with the cooperation of International Finance Corporation /IFC/
in To improve corporate governance. It was crucially important
training which has contributed significantly in the improvement of
corporate governance and its development.
In 2014, the bank has spent around MNT 25 million for
training, and plans to spend around MNT 132 million in 2015. In
other words, the bank significantly contributes in the development
of its employees, promotes intellectual investment and aims to be
employee-friendly organization.
In order to support the employees to develop and to work
progressively, many programs are been implemented in addition
to the abovementioned trainings. For instance; New employees
adaptation program, Program to improve managerial skills and
Career development program for branch employees.
4. Policies to retain human resource, to increase their salary or
similar revenue, truly evaluate their performance, to create optimal
remuneration system and to resolve their social issues in stages,
are constantly implemented. For instance:
Position level and salary rate suitable for the position level
and standard salary system is applied on the employees of
departments and branches of the bank, and this system has been
developed.
In order to retain our employees, we have been applying
increment for the serving year and educational level increment
as a continuous tradition.
We have developed two types of regulation; to execute the
Performance evaluation of the banks department employees
based on the target compromising principle and to execute the
Performance evaluation of the branch employees based on the
Plan implementation, actual quantitative performance and actual
contribution evaluating principle, and have been implemented in
our operation. The main purpose of these regulations is to evaluate
the employees performance, to create suitable remuneration
system and to build the right motivation for each employees, and
it is been continuously implemented for 2015.
We serve our employees with lunch in order to save their
time and to provide healthy, reliable products in a convenient
environment. The bank serves with staff canteen and a chief cook.
We also provide our employees of branches in Ulaanbaatar and
rural areas with extra pay of transportation and lunch meal.
In order to resolve a part of social issues of our employees,

CAPITAL BANK
ANNUAL REPORT 2014

we have been implementing regulation and programs of grants,

allowances and other benefits, as well as, we have granted our
employees consumer and mortgage loans with concessional terms.
Since 2013, we have initiated Mortgage loan with concessional
terms and retention agreement with specific conditions dedicated
to our employees who are working stably and productively. This
program was successfully implemented through 2014.
5. Human resource information system or the right software
solution is an important tool for promoting the systematic policy and
multilateral operation of human resource. Within this framework,
we have introduced the integrated human resource information
system Green ERP program. For instance:
Since the beginning of 2014, we have intensively worked in
purchasing the program, fully implementing in our operation,
centralizing the program and improving the utility. In the following
year, we will continuously work with the aim to further improve
its utility, adapt its utility in our day-to-day operation of human
resource and to provide our internal users with multilateral
information.

28

We have adapted to this new software for accounting the salaries

or similar revenues of our banks total employees with accurate
and timely manner, as well as providing these information to each
employees in advance. We will further aim to constantly improve
this sector and work effectively.
With the support of this software, preparation and foundational
works for the aims, such as: management employees
communication and mutual understanding , as well as, information
and view sharing between their senior managements or a third
parties, on the other hand, saving time and paper, have been
established in this year. Starting from 2015, we are aiming to
constitute the possibility to make the Job position requirement,
employee skill assessment, Career development program and
Performance evaluation by software utilities only that without
any paper usage, and employees, managements, third parties and
their superior managements can be participated.

29

CAPITAL BANK
ANNUAL REPORT 2014

RISK MANAGEMENT
Corporate governance plays an important role for implementing risk management, and our bank has cooperated with International
Financial Corporation in governance sector. We have implemented the risk governance in accordance with their advice and defined as
following;

In 2014, foreign direct investment declined, trade balance crisis continues, and USD rate constantly increased and reaching MNT 1888.44
by the end of the year. Its impact reflected on the real economy, and economic growth /7.8 percent/ decreased compared to the
previous year, which it has become a major challenge for entrepreneurs and decision makers. Capital bank has insured financial stability
and increased profitability by successfully conducting the external and internal risk management in the transformation of key performance
of macro and micro economy.
EXCHANGE RISK

MAXIMUM RISK, BY MILLION MNT

Risk tolerance

Maximum risk

Capital bank has conducted research on exchange risk assessment, oversight methods and samples in order to improve our operation and
the maximum amount of loss caused by exchange fluctuation is measured and supervised on a daily basis. Maximum amount of loss is
measured by EGARCH method and maximum amount of loss in extreme market conditions is measured by theory of extreme POT /
Peaks Over Threshold/ method, respectively.
Limit of loss from foreign exchange open position is MNT 89 million, and whether the maximum amount of potential loss in 10 days is
within this limit is monitored on a daily basis. According to the predictions made by the fourth quarter of 2014, there was no occasion
exceeding the loss limitation.

CAPITAL BANK
ANNUAL REPORT 2014

30

In addition to above mentioned methods of exchange risk assessment, Commercial team which is consisted of specialists and directors of
Treasury Department and Risk Management Department, also constantly monitors the economic and market transformation, and working
to prevent any potential risks.
LIQUIDITY RISK
In the framework of liquidity risk management, we steadily ensure the prudential criteria set by the Bank of Mongolia, as well as, we have
studied the liquidity criteria recommended from the International Central Bank and introduced it in our operation.

KEY RATIO PERFORMANCES

By 2014.12.31

Prudential ratio

Liquidity ratio

33.3%

>25%

Ratio of liquid assets and total assets

28.6%

>20%

Ratio of instable source and deposits

10.1%

<25%

For instance, we have been ensuring the prudential ratios as we internally measure the LCR* ratio which is mentioned in the BASEL
III document. Also, liquidity scenario analysis, stress test and GAP analysis are regularly made and introduced in the Risk management
committee and Assets and Liability management committee, and it is used in the decision making process.
Liquidity sensitivity analysis /By 2014.12.31 /
Level
Low

Outflow
5% of deposit outflow

Medium

10% of deposit outflow

High

15% of deposit outflow

Explanation
In case of low scenario, when 5% of deposit outflows,
liquidity ratio decreases by 3 function and reaches 30%
from 33%.
In case of medium scenario, when 10% of deposit outflows, liquidity ratio decreases by 7 function and reaches
26% from 33%.
In case of high scenario, when 15% of deposit outflows,
liquidity ratio decreases by 11 function and reaches 22%
from 33%.

As it can be seen from the results of liquidity sensitivity analysis of 31st December, 2014, when Capital bank outflows the 10% of the
deposits with special conditions of market, it will be able to maintain the liquiditys prudential ratios.
CREDIT RISK
Capital bank has been forming the optimal loan portfolio and reducing the risk of default loans which causes the borrowers business
operations to fail due to external factors.
We have been conducting our operation by forming the optimal loan portfolio and maintaining the loan portfolio performance and loan
concentration in the rational level.
For this purpose, we have been measuring the borrowers operation and its impact on the loan portfolio depending on the economic
circumstances and have been taking the relevant actions, while adhering to the limitations adequate for our banks features and complying
with the principles set in accordance with international standards and authorized organizations regarding the credit operations.
Additionally, non-performing loan amount in the loan portfolio has been reducing in the recent years that we have promptly provided the
assessment and result on the loan portfolio quality and conducted appropriate measures as we have been automating the loan classification
and loan risk fund.
In order to implement the credit risk management effective and
accessible, we have updated the loan resolution authorizations in each
level of branches, units, Credit committee and BOD, and relevant
supervising system has been improved. We have taken relevant
measures as we have been quarterly reviewing the impact of economic
circumstances and its transformation on the business operations of
the borrowers and provisioning the complications that might arise for
their business operation. Moreover, we have successfully initiated the
operation to make a complete estimate for the environmental and social
risks in the loan operation, as well as, we have been implementing the
8 principles of finance. By implementing this operation, we further
promote the sustainable economic development, and also, it is very
effective in reducing the potential loan risk of the customers operation
and the bank.

31

CAPITAL BANK
ANNUAL REPORT 2014

OPERATIONAL RISK
Within the implementation of integrated policy of operational risk, our bank approved and started to implement Policy and strategy for
Operational risk management in the reporting year.
Capital bank has been implementing the operational risk by conducting risk assessment, research and analysis in each level of banks
product, services and operation, and determining the risk level, as well as developing risk reducing guidance and providing it to the
branches and units.
Furthermore, we have been conducting studies on methods of modern credibility, statistical techniques, calculation of internal and external
impact factors, and choose the samples and methods suitable for our bank in order to prevent potential risks by foreseeing and determining
the key performances of the risk
INSURANCE
Capital bank has become the fourth bank which obtains the license to conduct Bancassurance service on the Financial Regulatory Committee
meeting held on 29th January, 2014. Within the license, the bank is providing the banking products and services with the possibility to
combine with Bancassurance service to the citizens and customers through our branches and units spread across the country. Likewise,
the credit risk Bancassurance service is introduced in every level of the bank which created the possibility to use risk free loans for our
customers.
By choosing the Bancassurance service of Capital bank, clients will have the Bancassurance service with the most convenient terms, as well
as the following advantages:

Protection of properties from all types of potential risks

Getting comprehensive banking and Bancassurance services, products from one-point stop and saving your valuable time

Getting Bancassurance products and services that meet ones needs at most favorable terms available.
Our bank will aid our customers and citizens to prevent from any potential risks and overcome from the risks as we
have been introducing the importance of Bancassurance services and its advantages.

SUSTAINABLE FINANCING
In accordance with the decision to implement a program in order to accumulate the development system for Mongolian sustainable
financing, a working team consisted of all commercial banks, the Bank of Mongolia, Ministry of Environment and Green Development
and Financial Regulatory Committee was established in 2013. Within its cooperation, this operation was successfully initiated in 2014
and it was an important year that the policy documents were approved, as well as, the related activities started to be implemented in
the banking sector step by step.
Specifically, policy principles of Mongolian sustainable financing were approved with the aim for the commercial banks to assess the
economic benefits and risks of their financing projects, while managing the negative social and environment impacts into account, refuse
to finance project with negative impacts on the environment and society, to promote the initiatives of green product and services, as
well as, to adhere the principles and requirements related to their internal operation and to lead other business sectors into sustainable
development. Our bank illustrates the importance of sustainable financing that the environment and social risk management was newly
created in August, 2014 and has been successfully implementing the operation.
Furthermore, European Organization for sustainable development, a German organization, annually organizes the Global Sustainable
Financing conference and it was held on 12th - 13th June, 2014 in Germany. The foresaid Organization has highly valued efforts and
activities of Capital bank, First Commercial bank of Mongolia in the fields of promoting green development and protecting environment
and granted Certificate of Merit for Outstanding Sustainable Project Financing. In its survey of financial institution around the world,
the organization values the results of contributions for environmental and green development in each nomination and highlights the best
banks and financial institutions.
The banks of Mongolia, the key presenters of financial sector, may play an important role for the development of green economy in
Mongolia which is the means to reach the sustainable development and to reduce poverty. Therefore, we are cooperating to promote
the development and implementation of principles of considering environment and social issue for business resolutions and operations.
Even though, economic development and innovation create new opportunities and circumstances, we need to resolve air-water-soil pollution,
climate change, natural resources and water shortages, environmental degradation, over population, poverty and other issues in addition. In
this era where Mongolian rapid development is at its start, we aim to work in accordance with sustainable livelihood, education, health and
lifestyle while maintaining in line with environment protection, our unique nomadic culture, high value storage for the economic growth.
We are assured that our effort for determining the way to overcome the above mentioned challenges and our integrated ideas regarding
the healthy, safe and green living environment, will support the operations to make a decision adequate for the banks products, services,
business operations, partners and customers, and lead us to economic development which considers not only benefits, but also Mongolian
environment and social issues. We are aiming to become a sector which is the core for sustainable development as we make positive impact
on the economic sustainability and contribute in creating new vacant positions. This goal and effort is able to create the possibility to bring
our bank into international market and to increase the financing from investors. It has become more definite that when the customers
environment and social performance is inadequate, it is possible to put the bank into legal, credit, and further business reputational risks.
We consider that there will be negative impact on the environment and society if the above mentioned risks are not managed properly.
Thus, conducting environmental and social issue in our business and internal operation has become a critical matter to effectively manage

CAPITAL BANK
ANNUAL REPORT 2014

32

SUSTAINABLE DEVELOPMENT

Economy

Society

Environment

NON-SUSTAINABLE DEVELOPMENT

Economy
Society

Environment

the credit operation, customers, product types and reputation related risks. In addition, it is possible for the bank to promote sustainable
and green development and financial accessibility through the products and services recommended for the customers. We are confident
that we will achieve positive results as we focus more on these sectors.

33

CAPITAL BANK
ANNUAL REPORT 2014

INFORMATION TECHNOLOGY
We have been conducting in providing the banking products
with ease, ensuring the bank and customer data security, system
continuity and reliability, and to constitute the proper management
and control system of information technology as our mission.

As we have introduced the internal auditing system in our

operation, the auditing processing became automated, reducing
the manual operations, decreasing risks and improving productivity.

We have been working step by step in order to achieve these

objectives. Herein:

As we have developed cash supply system, it has become

effective to constantly monitor cash supply and reduce risks related
to cash transportation to branches.

1. In the framework of advancing the reliability of information

technology in order to improve the operational monitoring, we
have operated as following:

Bancassurance software was developed and its implementation

enabled the possibility to provide insurance brokerage through
branches.

We have created the condition to maintain the reliability and

continuity for 24 hours of monitoring by implementing the
Database monitoring system in our operation.

In the framework of improving management data system, we

have automated the reporting used in the bank and created an
integrated reporting center. In the following year, we are planning
to obtain integrated reporting system.

We are executing the operation in phases to connect the rural

areas branches with high-speed fiber optics. 44 rural area branches
have increased their networks and transaction speed.
We have constituted the possibility to monitoring and sharing
the interbank transaction continuity by improving the Network
monitoring system.
2. In the framework of improving the monitoring and security of
information technology, we have operated as following;
We have introduced internationally recognized comprehensive
system of information data. The implementation of this system
creates the integrated resolution for internet flow, its utility,
security and e-protection as well as integrated monitoring and
reporting of its proper utility.
We also have introduced the new version of internationally
recognized SSL system in our operation to ensure the customer
data security.
3. In the framework of providing the customer orientated products
and services faster, we have operated as following;
We have introduced the Call Center in our operation to create
an integrated system of communication in order to provide bank
products and services fast and efficient.
As we have introduced the electronic accounting system, the
registration of confiscated cards and disputed transactions have
become automated and customer proposal and request resolution
became faster.
We have successfully implemented the project to connect the
SWIFT program of international settlement with the banks internal
accounting software. This increases the transaction processing speed
and reduces the delays made by SWIFT.
By implementing the service income centralization software
of Mongolian Telecom, customers become able to receive
comprehensive banking products at a single point, to get the
settlement information from the bank and make an online
settlement.
4. In the framework of automating the internal operation and
improving productivity, we have operated as following;

CAPITAL BANK
ANNUAL REPORT 2014

34

TREASURY MANAGEMENT
We, Capital bank, properly implementing asset and liability
management, has ranked 3rd by asset growth between Mongolian
banks, total asset reaching MNT 817.4 billion. The Government
and BOM securities have increased by 42.3%, which is the 13.31%
of total asset. Total deposits increased by 45.5%, reaching MNT
747.7 billion and liquidity ratio reached 32.63%.
In order to closely monitor financial performance and condition,
we calculate the indicators such as the structure of assets and
liabilities, asset quality, liquidity, profitability and interest rates
regularly on a timely basis.
We have researched ratio indicators that international banks use
in order to measure liquidity performance and liquidity risk.
Accordingly, it has improved liquidity ratio by tuning the indicators
relative to its specific characteristics.
Capital bank has ensured adequate level of liquidity and maintained
the average appropriate level of reserve requirements set by BOM,
placing excess reserves to other banks and financial institutions
as overnight loans, interbank deposits, central bank deposits and
investing in Central bank short term securities.
We maintain the foreign currency risk in appropriate levels and
manage the foreign currency positions in accordance with the limits
set by the bank.

FOREX

manner from leading online forex company Forex Capital Markets,

or FXCM, in 2011. By introducing the service, the bank was
able to cut margin account minimum balance of customers that is
maintained for the purposes of participating in FX, CFDs, Precious
metal and commodity in international markets and provided with
opportunity to trade 1:200 margin trading leverage of owners
equity capital. Also, the bank performs transactions of cash
replenishments, account debit and credit in a prompt manner.

COOPERATION WITH CORRESPONDENT BANKS

Our bank has 8 currency accounts with 11 correspondent banks and
has been actively working in the fields of performing international
settlement services, forex trades and trade finance of customers
with countries of their wish.
In 2014, we have successfully initiated its work for the purposes
of opening Representative office in South Korea in order to bring
the services of the bank more reliably and faster to Mongolian
citizens and their family working and living in South Korea. As a
result, we have started to actively work cooperatively with Kookmin
bank and Korea exchange bank and provided the customers with
opportunities to access banking services easily.
We always seek to deliver foreign transaction services to customers
in an easy manner.

During the reporting period, Capital bank, through its 88 branches,

actively conducted forex trade with customers and entities and
forex trade, foreign exchange revaluations were profitable. In order
to bring the world market rates nearer to the customers, the
bank performs currency exchange rate negotiations in 13 different
currencies.

Also, the bank works to set service fees of correspondent banks in

most competitive way possible.

Thus, in accordance with Price stabilization program being

implemented by BOM and Government, the bank has been actively
performing financial derivative trades such as forward and swaps
with oil importing companies for 3rd year now.

Although the level of foreign trade turnover growth wasnt observed

in 2014, Trade finance portfolio level of our bank has increased.

Further, the bank is organizing works in the fields of executing

forex deals with the aid of software; facilitating and easing hand
work in order to activate forex, execute payments and transactions
of customers promptly.
PHYSICAL GOLD TRADE
Our bank received its license of physical gold purchase in 2011
and in order to increase the number of physical gold trade
customer entities and individuals and in order to work closely
with them, the bank has started to grant gold-backed business
loans, gold advances, provide customers with financial information
and prolong gold-purchase schedule time in 2014, which aided
in increase of profit for the year. Although gold prices fell by
about 30% in global market in the year 2014, the bank has
ensured continuous gold trade operations, which was the key to
its profitable effects.
MARGIN TRADING
We have first received its White label service licenses in an official

TRADE FINANCE

In the fields of trade finance, the bank offers services like

performance guarantees, warranties, letter of credit in cooperation
with international banks and is contributing to the support of
business entrepreneurs of the country.
In purposes of creating safe conditions for customers of the bank
to prevent potential risk in foreign trade, the bank has updated its
foreign trade policy and regulations in line with required conditions
and provisions of international agreements and treaties.
Further, the bank will work to expand its existing portfolio of
trade finance and activate its operations in this field of activity.
PROJECTS AND PROGRAMS
Capital bank has an extensive experience in cooperating with
project implementing organizations in the fields of SME support.
In this context, we have been selected as an implementer
organization of projects implemented by International reputable
organizations, Government and its bodies in last few years.
It is our mission to contribute to the economic development

35

CAPITAL BANK
ANNUAL REPORT 2014

of the country by supporting national manufacturing and SMEs

and businesses. Accordingly, we have introduced international best
practices in these fields, which has given its actual results.
We actively cooperate with Government, BOM, International
organizations, Investment funds, governmental and non-governmental
organizations in the scope of various projects and programs and
has successfully implemented projects and programs such as
Welfare project, 40000 household apartment program, Atar
/crop cultivation/ campaign, Sustainable livelihood ,Project
loan of SME development fund, Wool and cashmere industry
development project, Project Loan for enhancing employment
Project loan for SME support and environment protection,
Residential mortgage loan, Market and Pasture management
project, Organic Mongolia program, Price stabilization
program. The project loans granted, amounting to approximately
MNT 250 billion, aided in startup businesses and former businesses
to start and expand their operations, to create about 2000 new
workplaces. In the reporting period, the bank has started to
implement the following new projects and programs along with the
foresaid projects.

EXPORT PROMOTION PROGRAM

For the purposes of promoting national industrialization and
manufacturing, our bank has concluded Tripartite Financing
Agreement and Cooperation agreement with Development bank
of Mongolia, SME development fund on 8th August, 2014 in the
scope of Export promotion and Import substitution industrialization
888 project financed by Chinggis bond funds in the fields of
Export promotion program adopted by Resolution No.52 of
State Parliament dating to 2012 and Resolution No. 239 of
Government dating to 2013. Accordingly, our bank granted total
of MNT 21.2 billion to total of 32 business entities in the fields
of Export promotion.
LEATHER SECTOR PROMOTION PROGRAM
Leather sector promotion program was adopted by Resolution
No 74 of Mongolian great Khural dating to 2012 for the purposes
of granting concessional loans to national SMEs operating in
Mongolian territory in order to aid in purchase of fur and leather
for processing, manufacturing of end products, upgrading and
updating equipment. In accordance with the program, our bank
granted loans amounting to MNT 6 billion in line with its purpose.
CONCESSIONAL LOANS FROM SME DEVELOPMENT FUND
OF CAPITAL CITY
The purpose of SME development fund of Capital city is to
promote SMEs, to increase product manufacturing, to upgrade
equipment for production and to increase employment.In the
fields of ensuring implementation of 2013-2016 Action plan of
Governor and Mayor of Ulaanbaatar, priority areas are funded. We
have concluded Cooperation agreement with the foresaid fund on
8th October, 2014 and have been working cooperatively.

URBAN SECTOR DEVELOPMENT MON2301 PROJECT C

COMPONENT OF ASIAN DEVELOPMENT FUND:
MICRO LOANS FOR CONNECTIONS TO CLEAN AND
SEWAGE WATER SYSTEM AND IMPROVEMENT OF HOUSING
CONDITIONS
Sub-lending Agreement with total financing of USD 2 million was
concluded between Ministry of Finance and Capital bank on 19th
of November, 2014 in accordance with the implementation of
Urban sector development project MON2301 implemented by
Mongolian Government and Asian development bank. The purpose
of the project is to grant micro loans to ger-area, low-income
households, female-headed households for making clean and sewage
water connections, improving housing conditions.
The project loans are granted to households of target provinces,
namely, Altai, Arvaikheer, Bayankhongor, Erdenet, for the purposes
of making separate water connections, improving housing conditions
by installing energy-efficient stoves, insulating walls, roof and floor,
replacing windows with PVC windows. The loans are granted for
the following main purposes.


-To make separate connections to clean and sewage

water pipelines

-To improve housing conditions

-To build energy-efficient houses

-To establish standard street of energy-efficient houses

for female-headed and low-income households.

HIGHLIGHTS
OF 2014

37

CAPITAL BANK
ANNUAL REPORT 2014

HIGHLIGHTS OF 2014
Capital bank is the first to become the FATCA compliant bank
from Mongolia.
Our bank has introduced the UnionPay Travelmate card as the
first bank in Mongolia.
We have received our license for conducting bancassurance
services on 29th January, 2014 from the regular meeting of
Financial Regulatory Committee.

SOCIAL RESPONSIBILITY
We have mentioned in our value that To Implement banks
social responsibility and make contribution to the development of
Mongolia
Within these objectives, the bank has efficiently implemented the
social responsibility for the contribution to the development of the
country and for the welfare of our customers and citizens as well
as for our future generation. Herein:

Capital bank and SME development fund of Ulaanbaatar city

have signed cooperation agreement in order to provide financial
support for SMEs, to develop the industry sector, and to convenient
termed loans for environment friendly productions.

In contribution to the development for the country:

By 31st December, 2014, the total outstanding loan amount was
491,05 billion MNT which has increased by 179,41 billion
MNT or 36,54% compared to previous year. Corporate loan
amount has increase by 39.16 percent which is maintaining the
62.82 percentage of total loan portfolio. This is relevant to the
main factors for the contributions for the countrys society and
economy, as well as for the implementation of Price stabilizing
sub-program of Mongolian Government and the Bank of Mongolia,
Export promoting program of Mongolian Government and the
Development bank of Mongolia and the SME development fund.

Mr. Batbayar. T, Chairman of our bank was awarded with

Medal of Khas Erdene from Mongolian Banker Association.

In the framework of Organic Mongolia program, we have

allocated 196 million MNT loan to 25 borrowers in 2014.

Capital bank has been awarded with BEST SME BANK OF

MONGOLIA 2014
We have been awarded with BEST SME BANK of Mongolia-2014
from Capital Finance International, prestigious world-class banking,
finance and economic British magazine.

In the framework of the projects for supporting SME, creating

employment, expansion of industry, 76,5 billion MNT loan was
allocated to 100 individuals and entities from our bank.

Capital bank has organized the TOGETHER, WE DEVELOP

SME conference.
In order to provide financial support for Mongolian patients in
Korea, we have signed a cooperation memorandum with Korean
Seran General Hospital.

Capital bank was granted Certificate of Merit for Outstanding

Sustainable Project Financing by European Organization for
Sustainable Development.
European Organization for Sustainable Development, Germany
was has highly valued efforts and activities of Capital bank, First
Commercial bank of Mongolia in the fields of promoting green
development and protecting environment and granted Certificate
of Merit for Outstanding Sustainable Project Financing.
The Honored Social Responsibility implementer
Our bank was award with The Honored Social Responsibility
Implementer from Terguun Oyu society.
By the establishment of 24 new branches /8 branches in
Ulaanbaatar city and 16 branches in rural area/ in 2014, our bank
successfully expanded the operation and service applying leading
technologies in all provinces in Mongolia.

Capital bank has started to allocate project loan of Development

fund of SME since 2011 with the aim to strengthen the SMEs
position in the economy and to create new vacancies through
providing a centralized financial resources required for the SMEs.
In 2014 we have allocated loan amount of 5 billion MNT.
In order to support the export, we have allocated 20,5 billion
MNT loan to 14 entities.
In order to support the production of major construction
materials, our bank has allocated loan amount of 9,4 billion MNT
in 2014.
In the framework of Price stabilizing sub-program of consumer
products the bank has allocated 25,9 billion MNT to 11 entities
on order to reserve meat, to increase the number of store houses
of food and food products, to develop intensive farming, and to
keep stabilization of price.
In the framework of supporting wool and cashmere industry, we
have allocated 45,09 billions MNT to borrowers.

CAPITAL BANK
ANNUAL REPORT 2014

38

IN FRAMEWORK OF SOCIAL EVENTS, INVESTMENT, AND

PROSPERITY:
In the occasion of Tsagaan Sar, Mongolian national ceremony,
Capital bank has sponsored the Mongolian citizen-Mongolian
treasure, an event dedicated to Mongolian citizens living and
studying in South Korea which is organized by Ministry of
Population Development, Social Protection, Ministry of Labor,
Embassy of Mongolia in Republic of Korea, and the Center for
Social Protection.
In order to support national manufacturers, we have successfully
organized conference TOGETHER, WE DEVELOP SME on 5th
April, 2014.
Capital bank has joined the Global Money Week movement
initiated and organized by Child Youth Finance International
(CYFI). We have organized joint training in collaboration with
Mongolian Pupils Association which includes the representatives
of 140 schools from Ulaanbaatar city and 15 provinces in order
to provide knowledge regarding financial education, proper use
of money, banking and financial sector under the call for Every
Children are Financiers.
In order to make contribution for development of Basketball
sport in Mongolia, our bank has sponsored the team Capital
bank on Sprite Super League for the 2nd year.
We have celebrated the International Childrens day with a
lot of promotions on 1st June, 2014 together with our adorable
children.
Our bank have acquainted with the activities of companies of
organic production, which are making contribution to the green
development of Mongolia, along with the pupils of 115th school
of Ulaanbaatar city in order to provide ecological education in the
framework of Eco-tour program with the collaboration of NTV
television.

Capital Bank has visited toUguumur children welfare centre in

order to create a cabinet dedicated for planting flower which is
named after Capital Bank, in addition, we have given presents and
window plants to each pupils as gifts.
On occasion of Mongolian Elders day, Capital bank including
all branches showed respect to over 8500 elders and organized
contest of chess and checkers. In cooperation with cultural centers
of districts and micro districts, we held dancing contest for the
elders.
Our bank has provided financial support for L. Odgiiv who was
a participant representing Mongolia in Peace and Global harmony
flambeau.
In order to provide financial support for Mongolian patients in
Korea, we have signed a cooperation memorandum with Korean
Seran General Hospital. Accordingly, the international credit
card holders of Capital bank now have the opportunity to have
10% from the Seran General Hospital.
We have actively participated in construction for building Mini
greenhouse and Bank Boscage that are activities to plant trees
and bushes, as well as to improve seed planting in cooperation with
Organic Mongolia project.
Capital bank participated in Open Day for supporting family
development in order to promote operation of social welfare
sector.
All branches of Capital bank have joined the donation campaign
Three millions hearts dedicated to B. Amin-Erdene who was
suffering from congenital heart disease.

OUR
CUSTOMERS

CAPITAL BANK
ANNUAL REPORT 2014

40

MONLABEL LLC
Monlabel LLC was founded in 2004 and has been cooperating with Capital bank since 2007 for their supply of all the financial
needs. With the cooperation of Capital bank, the company purchased printing machine of international standard of high technology and
high capacity PW-260-R6C from LABELMEN MACHINERY LLC of Taiwan in December, 2007 for the first time in the label sector.
With the support of Capital Bank, the company installed printing machine LABELMEN PW-460-R6C, which has twice more capacity from
previous equipment and the capacity, reliability and efficiency of the company has improved. Furthermore, employment has been doubled
and it is possible to distribute high quality labels in domestic and foreign markets.

DENIMON LLC
Denimon LLC /denim is the main material for making jeans and mon means Mongolia/ was established in May, 2009. With the support
of financing from Capital Bank, the company has upgraded equipments of jeans industry and perform high quality design of jeans, tailoring
and washing. The company has successfully developed the Urban Jeans as Mongolian brand.

NYAMSULD LLC
In 2001,Nyamsuld LLC started its stable continuous operation of heat insulated windows and doors production. Since 2008 the
company has been constantly cooperating with Capital Bank. With the support of project finance from Capital bank, the company upgraded
its equipments and devices with a production capacity of 50 to 70 sq.m windows and doors daily. The Company uses products and
plastic material needed for producing high quality window from worlds leading brands such as Germanys Kommerling and Silverline,
lockage and hinges from Australian MACO and Germanys WINK HAUS, padding rubber from Germanys EPDM.

TUMEN TOOROIT LLC

Tumen Tooroit LLC was established in 2011. Since its establishment, the company has been cooperating with Capital bank. The
company performs operation in the fields of hog farm in territory of 13th micro district, Khan-Uul district. With support of project
finance by Capital Bank, the company is currently operating with 2000 hogs to provide healthy meat and meat products to the citizens
of Ulaanbaatar.

DORNIIN TSAS LLC

Dorniin tsas LLC was established in 2006 and has been cooperating with Capital Bank since 2013. With support of project finance and
business loan of Capital Bank, Dorniin tsas LLC has established industry of lightweight aerated concrete blocks in August, 2014. The
industry has capacity to produce 200,000 m3 blocks annually and its main purpose is to maintain 50 percent of block utility in Mongolia.

SHAR NARST LLC

Shar Narst LLC has been operating in field of mining sector since 2001. From 2002s, the company started to cooperate with our bank.
Shar narst LLC is currently working on gold-digging in Mandal soum, Shariin gol, of Selenge province, Selenge soum of Bulgan province,
and Tushig soum of Selenge province in accordance with special license for use of gold reserve. Shar Narst LLC is reputable company in
mining sector and was awarded as Best entity of Mongolia with rehabilitation in coal mine of Shariin gol.

BANKS
OBJECTIVES SET
FORTH FOR THE
YEAR OF 2015

CAPITAL BANK
ANNUAL REPORT 2014

42

BANKS OBJECTIVES SET FORTH FOR THE YEAR OF 2015

Through improving quality of banking service, the bank shall issue comprehensive service and products for corporate and individual
successfully and develop policy of banking service and products.
In order to become a leading SME bank in Mongolia, the bank shall support SME, introduce best experience into its operation from
International financial organizations, and identify own brand of SME product.
To be reliable partner and financial counselor of high-level customers with wide range of business, and ensure the quality of a fixed
set of financial controls at the appropriate level, and intensify income of interest and non-interest by increasing complex sale of product.
To develop operation of bank assurance of Mongolian insurance market in accordance with international standard, and become leading
bank of insurance brokerage.
To support sustainable business development of the bank, enhance normal operation of branches, enhance market competitiveness of
individuals and corporate in Ulaanbaatar and provincial area, increase market share of business, enhance performance of branches and
units plan and efficient management.
To enhance business growth and reputation of the bank, perform development of product based on customer demand, and implement
adequate marketing policy met requirement of branch feature for the product.
In order to implement service of electronic unit, the bank shall introduce independent processing system of card, maintain reliable
operation continuously, and expand range of product and service.
Permanently perform research based on continuous and reliable operation of Information and technology and business policy, introduce
advanced technologies, enhance prompt of operation with automation and provide with proper management of information and technology
and control system.
To develop Accounting policy document of the bank in accordance with International standard, provide with accounting integrated
management to the branches, control its performing accounting, and provide with consolidated financial statement to foreign and domestic
customers.
We will attract low-cost resources, effectively implement asset and liability combined management in an optimal manner and increase
profitability by enhancing cooperation with international and domestic financial institutions by actively operating in trade finance,
participating in capital market and money market, taking active part in projects and programs announced by foreign organizations and
implementing domestic projects and programs successfully.
To implement comprehensive policy of administration and security, introduce adequate technologies solution, ensure performance, create
new control system and improve employees professional skill and efficiency and clarify employees responsibilities.
To implement the best practices of corporate governance and social responsibility internationally accepted, and become leading
company from in this field of corporate governance and social responsibility.
To introduce best practices and international standards within of sustainable finance except of Mongolian legislation to meet international
market expectations.
In order to reduce risk, branches of the bank shall make consolidated compliance registration correctly, report permanently compliance
failure and take measure to eliminate compliance failure based on the risk.
In order to manage the risk, the bank shall improve risk database by automating risk monitoring and control.
To support employees valuable contribution, highly pay attention to their training and development, implement a series of policies and
programs for supporting in resolution of social problems faced by employees to form community who are proud of the bank constantly
and sincerely work for the bank.

43

CAPITAL BANK
ANNUAL REPORT 2014

CORRESPONDENT BANKS

CORRESPONDENT BANKS
COMMERZ BANK AG

LOCATIONS
60261, KAISERSTRASSE 16, FRANKFURT
AM MAIN, GERMANY

SWIFT CODES
COBADEFF

400878518000EUR

400878518000AUD
30111810000000001626 /RUB/

INTERNATIONAL BANK FOR

ECONOMIC COOPERATIVE OPERATION

MASHA PORYVAEVA STREET, 11

MOSCOW, RUSSIA, GSP-6 107996

IBECRUMM

30111840300000001626 /USD/
30111978900000001626 /EUR/
30111826900000001626 /GBP/

BANK OF TOKYO MITSUBISHI UFJ LTD

KOREA EXCHANGE BANK 100 793

7-1 MARUNOUCHI 2-CHOME, CHIYODAKU TOKYO 100-0005 TOKYO JAPAN

181 2-KA ULCHI-RO, CHUNG-KU, SEOUL
100-793 KOREA, REPUBLIC OF181,
EULJIRO 2GA, JUNG-GU, SEOUL 100-793,
KOREA

BOTKJPJT

635-0467650 /JPY/
0963-THR-050560010 /USD/

KOEXKRSE

0963-FRW-001000082 /KRW/
0963-THR-050560109 /AUD/

CHINA CONSTRUCTION BANK

011100 6 QIAN JUN ROAD

ERLIANHAOTE CHINA

PCBCCNBJNME

NRA15014150500220100345 /
USD/

15001658408052502696 /CNY/

INDUSTRIAL AND COMMERCIAL BANK

OF CHINA

010020 JIAOXUE HOTEL FLOOR 1 1

ULANQIAT EAST STREET HUHEHAOTE
CHINA

ICBKCNBJNMA

AGRICULTURAL BANK OF CHINA

NEIMENGGU BRANCH, HUHEHAOTE,

CHINA

ABOCCNBJ050

BANK OF INNER MONGOLIA

33 TENG FEI ROAD, HUHHOT, INNER

MONGOLIA, P.R.CHINA 010020

HSSYCNBH

0610040629200094456USD
0610040629200094580CNY
05999914040000130 /USD
05999901040000145 /CNY/
001114236000000161/USD/
201101236000000142/CNY/
TRY IBAN:
TR840014300000000001042664

AKTIF INVESTMENT BANK A.S.

BUYUKDERE CAD. NO:163 ZINCIRLIKUYU

34394 SISLI ISTANBUL

CAYTTRIS

USD IBAN:
TR030014300000000001042667
EUR IBAN:
TR600014300000000001056773

10

BANK OF CHINA

1 FUXING MEN NEI AVE, 100818

BEIJING, CHINA

BKCHCNBJ

11

KOOKMIN BANK

SEWOO BUILDING FLOOR 9 10,

YEOUIDO-DONG, YEONGDEUNGPO- GU,

CZNBKRSE

778400002965 /USD/
843-8-USD-01-8 /USD/
843-8-KRW-01-0 /KRW/

BRANCHES
AND ATM
LOCATION

45

CAPITAL BANK
ANNUAL REPORT 2014

The bank extends its banking service to customers through its 88 branches on dated on December 31, 2014 /including headquarter,
7 branches, 22 settlement centers, and 8 cashiers in Ulaanbaatar city, 23 branches , 18 settlement centers, and 9 cashiers in rural
area/.
With establishment of 24 new branches /8 branches in Ulaanbaatar city and 16 branches in rural area/ in 2014, the bank expands
the operation in all provinces in Mongolia successfully.
BRANCHES IN ULAANBAATAR CITY
HEAD OFFICE
Head office of Capital Bank, Sambuu street 43, Chingeltei district,
Ulaanbaatar, Mongolia
Tel: + 976 7000 1912 Fax: + 976 11-310833
Open hours: Monday Friday 09:00 18:00
Closed: Saturday and Sunday
CENTRAL BRANCH
Head office of Capital Bank, Sambuu street 43, Chingeltei district,
Ulaanbaatar.
Tel: + 976 7000 1912 Fax: + 976 11-310833
Open hours: Monday Friday: 09:00 18:00
Closed: Saturday and Sunday
BAYANGOL AREA
KHOROOLOL BRANCH
1st floor, Apex trading center, Sookhii shoe marketplace, 14th
khoroo, 3rd micro district, Bayangol disctrict, Ulaanbaatar.
Tel: + 976 7007 9002 Fax: + 976 7007 9002
Open hours: Monday Friday: 08:00 22:00 Saturday: 10:00
19:00
Closed: Sunday
CUSTOMS OF CITY SETTLEMENT CENTER
Building of Ulaanbaatar city Customs, Autority Tranporters street,
Bayangol district, Ulaanbaatar city
Tel: + 976 9611 9901 Fax: + 976 5011 9901
Open hours: Monday-Friday: 08:00-17:00 Saturday: 10:00-16:00
Closed: Sunday
TRAIN STATION SETTLEMENT CASHIER
2nd floor of Ulaanbaatar central station, 1st khoroo, Transporters
street, Bayangol district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 08:00-17:00 Saturday: 10:00-16:00
Sunday: 10:00-15:00
10TH KHOROOLOL SETTLEMENT CENTER
1st floor of Itgelt town, 10th khoroolol, 5th misrodistrict, Bayangol
district, Ulaanbaatar city
Tel: +976 9611 5003 Fax: + 976 5011 5003
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
MATERIAL IMPEX SETTLEMENT CASHIER
1st floor of Material Impex Co Ltd Building, 10th micro district,
Bayangol district, Ulaanbaatar city
Tel: + 976 5011 9924
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CAPITAL TOWN SETTLEMENT CENTER
Capital Town, Modnii 2 street, Bayangol distirict, Ulaanbaatar
city
Tel: +976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CHINGELTEI AREA
STATE DEPARTMENT STORE BRANCH
2nd micro district, Sukhbaatar district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday

50 000 SETTLEMENT CENTER

Apartment #21, Enkhtaivan street-15, Chingeltei district,
Ulaanbaatar city
Tel: 976 9611 9903
Open hours: Monday Friday 08:00-22:00, Saturday: 08:00-22:00,
Sunday: 10:00-18:00
NAIMAN SHARGA SETTLEMENT CENTER
Building of Bosgot Urgoo LLC, Naiman Sharga trading center,
Chingeltei district, Ulaanbaatar city
Tel: + 976 - 9611 5047
Open hours: Monday-Friday: 08:00-20:00 Saturday and Sunday:
09:00 - 19:00
KHAILAAST SETTLEMENT CENTER
15th Business supporting center for SME, Chingeltei district,
Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CHINGELTEI SETTLEMENT CENTER
18th Microdistrict, Chingheltei district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
CHINGELTEI - SOCIAL INSURANCE SETTLEMENT CASHIER
Social Insurance building, Chingeltei district, Ulaanbaatar city
Tel: +976 1800 1912
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
BAYANZURKH AREA
TSAIZ-16 BRANCH
1st floor, apartment 75, micro district 16, Bayanzurkh district,
Ulaanbaatar city
Tel: + 976 9101 1065
Open hours: Monday-Friday: 09:00-18:00
Closed: Saturday and Sunday
NARANTUUL CREDIT CENTER
Narantuul International Commercial Center, Bayanzurkh district,
Ulaanbaatar city
Tel: + 976 7007 9004 Fax: + 976 7007 9004
Open hours: Monday- Sunday: 10:00-18:00
Closed: Tuesday
SANSAR SETTLEMENT CENTER
Apartment #2, micro district 15, Bayanzurkh district,Ulaanbaatar
city
Tel: + 976 7007 9023
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
BAYANZURKH SETTLEMENT CENTER
Building of MPRP of the district, Bayanzurkh district, Ulaanbaatar
city
Tel: + 976 7007 9010
Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
ALTAN-ULGII SETTLEMENT CENTER
Building of OMHE LLC, khrooo 22, Bayanzurkh district,
Ulaanbaatar city
Tel: 976-9611 8810
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

CAPITAL BANK
ANNUAL REPORT 2014
BOTANIC SETTLEMENT CENTER
Botanic, 12st khoroo ,Bayanzurkh district, Ulaanbaatar city
Tel: 976-9611 9928
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

46

21ST SETTLEMENT CASHIER

Building of social insurance department, Trade Union Street,
Songinokhairkhan district, Ulaanbaatar city
Tel: + 976 7007 - 9019
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday

KHAN-UUL AREA
KHAN-UUL BRANCH
Building of Khangai institute, 3rd khoroo, Chinggis avenue, KhanUul district, Ulaanbaatar city
Tel: + 976 9611 9914 Fax: + 976 5011 9914
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

GUNGERVAA SETTLEMENT CENTER

Gungervaa marketplace, Tolgoit, 1st khoroo, Songinokhairkhan
district, Ulaanbaatar city
Tel: 976-7017 1811
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

ALTAI TOWN SETTLEMENT CASHIER

3th khoroo, Uildverchin street, Khan-Uul district, Ulaanbaatar city
Tel: + 976 9611 8807
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

TAKHILT SETTLEMENT CENTER

22rd micro district, Songinokhairkhan district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

BUYANT-UKHAA SETTLEMENT CENTER

10th micro district, Khan-Uul district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Firday 09:00-18:00
Closed: Saturday and Sunday

SUKHBAATAR AREA
BAGA TOIRUU BRANCH
1st floor, building 6, 4th khoroo, Chingeltei district, Ulaanbaatar
city
Tel: + 976 7007 9018
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

AIRPORT SETTLEMENT CASHIER

Chinggis Khaan International airport, Khan-Uul district, Ulaanbaatar
city
Tel: + 976 9611 8801
Open hours: Monday - Sunday 24 hours
SONSGOLON SETTLEMENT CASHIER
Building of Interdesign LLC, 20th micro district, Bayangol district,
Ulaanbaatar
Tel: +976 1800 1912
Open hours: Monday-Firday 09:00-18:00
Closed: Saturday and Sunday
SONGINOKHAIRKHAN AREA
21ST KHOROOLOL BRANCH
Building of social insurance department, Trade Union Street,
Songinokhairkhan district, Ulaanbaatar
Tel: + 976 7007 9019
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
TOLGOIT STATION SETTLEMENT CASHIER
Building of Tolgoit Station of UB railroad, 20th khoroo,
Songinokhairkhan district, Ulaanbaatar
Tel: + 976 9611 - 8820
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHILCHIN TOWN SETTLEMENT CENTER
#54, Building of 6th Department, 7th khoroo, Songinokhairkhan
district, Ulaanbaatar city
Tel: 976-9611 9907 Fax: 50119907
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
TSERGIIN KHOTKHON SETTLEMENT CENTER
Building#41, Petroleum street, 20th khoroo, Songinokhairkhan
district, Ulaanbaatar city
Tel: + 976 9611 9917
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
TAVAN SHAR SETTLEMENT
Building#66,18th khoroo, Songinokhairkhan district, Ulaanbaatar
city
Tel: +976 9611 - 8820
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

KHUNSNII 4 SETTLEMENT CENTER

Building of Monre Impex LLC, 6th micro district, Sukhbaatar
district, Ulaanbatar
Tel: + 976 7007 9015 Fax: +976 7007 9015
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
CENTRAL POST OFFICE CASHIER
Information technology system apartment, Sukhbaatar square,
Chingeltei district, Ulaanbaatar city
Tel: + 976 1800 1912
Open hours: Monday-Friday 08:00-20:00, Saturday and Sunday
09:00-19:00
17 SETTLEMENT CENTER
17th bus station, 13th micro district, Sukhbaatar district,
Ulaanbaatar
Tel: + 976 9611 8815
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DAMBADARJAA SETTLEMENT CENTER
1st floor, Selbe trading center, Dambadarjaa, Sukhbaatar district,
Ulaanbaatar city
Tel: + 976 9611 8022
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
BRANCHES AND UNITS IN PROVINCIAL AREAS
UMNUGOBI BRANCH
Dalanzadgad city, Umnugobi province
Tel: + 976 7053 2193 Fax: + 976 7053 3971
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-15:00
Closed: Sunday
TSOGTTSETSII SETTLEMENT CENTER
Tavan Tolgoi village, Tsogttsetsii soum, Umnugobi province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-14:00
Closed: Sunday
MANLAI SETTLEMENT CENTER
Manlai soum, Umnugobi province
Tel: +976 1800 1912
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-14:00
Closed: Sunday

47

CAPITAL BANK
ANNUAL REPORT 2014

KHANBOGD SETTLEMENT CENTER

Apartment of Ovoogiingobi LLC, Khanbogd soum, Umnugobi
province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
SHIVEEKHUREN CASHIER
Shiveekhuren post, Gurvantas soum, Umnugobi province
Tel: + 976 1800 1912
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
GASHUUNSUKHAIT SETTLEMENT CENTER
Border point of Gashuunsukhait, Khanbogd soum, Umnugobi
province
Tel: + 976 1800 1912
Open hours: Monday-Friday 08:00-18:00
Closed: Saturday and Sunday
BAGANUUR BRANCH
Natsagdorj street-63, Naran khoroolol, Baganuur district,
Ulaanbaatar city
Tel: +976 7021 2412, + 96 7021 0408 Fax: + 976 7021 2142
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-16:00
Closed: Sunday

ZAMIIN-UUD BRANCH
1st floor of Gun service center, Zamiin-Uud soum, Dornogovi
province
Tel: 0252-45-43890, 70527996 Fax: 0252-45-43891
Open hours: Monday-Sunday 09:00-18:00
TRAIN STATION SETTLEMENT CASHIER
Passengers service center, Zamiin-Uud soum, Dornogobi province
Tel: 0252-45-43299
Open hours: Monday-Sunday 09:00-18:00
KHIL SETTLEMENT CASHIER
Controlling point, Zamiin-Uud soum, Dornogobi province
Tel: +976 1800 1912
Open hours: Monday-Sunday 09:00-19:00
E-TRANSSETTLEMENT CASHIER
Building of E-Trans LLC, Zamiin-Uud soum, Dornogobi province
Tel: + 976 1800 1912
Open hours Monday-Sunday 09:00-19:00
SOCIAL INSURANCE SETTLEMENT CASHIER
Social insurance department building, Zamiin-Uud
Dornogovi province
Tel: +976 1800 1912
Open hours: Monday-Sunday 09:00-19:00

soum,

BAIDLAG SETTLEMENT CENTER

4th street of Baidlag, khoroo 4, Baganuur district, Ulaanbaatar city
Tel: + 976 7021- 0445 Fax: + 976 7021 0445
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

ARKHANGAI BRANCH
Building of Mongolian Telecommunications, Erdenebulgan soum,
Arkhangai province
Tel: + 976 7033 3470 Fax: + 976 7033 3470
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

ORKHON BRANCH
Building 20, micro district 4, Khurenbulag Bag, Bayan-Undur soum,
Orkhon province
Tel: + 976 7035 7504 Fax: +976 7035 7505
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

DARKHAN BRANCH
Building 15, 6th micro district, 12th bag, Darkhan soum, DarkhanUul province
Tel: + 976 7037 7102 Fax: + 976 7032 7102
Open hours: Monday-Friday 09:00-18:00 Saturday 10:00-15:00
Closed: Sunday

SOCIAL INSURANCE SETTLEMENT CASHIER

Building of Social insurance Department, Bayan-Undur soum,
Orkhon province
Tel: + 976 7035 7510
Open hours: Monday-Firday 08:00-18:00
Closed: Saturday and Sunday

DARKHAN ZAKH SETTLEMENT CENTER

Tax Office Building, 7th bag, Darkhan soum, Darkhan-Uul province
Tel: + 976 7037 - 6983
Open hours: Monday-Friday 09:00-18:00, Saturday 10:00-15:00
Closed: Sunday

BULAG SETTLEMENT CENTER

Building #26 , Oyut bag, Bayan-Undur soum, Orkhon province
Tel: + 976 7035 6604 Fax: + 976 7035 6604
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
IKH ZALUU SETTLEMENT CENTER
PC mall shopping center, Bayan-Undur soum, Orkhon province
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
URT TSAGAAN SETTLEMENT CENTER
Ikh Zaluu Bag, Bayan-Undur soum, Orkhon province
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
CHANDMANI CASHIER
#207, Apartment of Erdene-Chandmani LLC, Bayan-Undur soum,
Orkhon province
Tel: + 976-7035 6504
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

KHEETEI KHOROOLOL SETTLEMENT CENTER

Building of RP, bag 10th, Darkhan soum, Darkhan-Uul province
Tel: 01372- 70377112 Fax: 01372- 70377112
Open hours: Monday-Friday 09:00-19:00 Saturday 10:00-16:00
Closed: Sunday
ZUUNKHARAA SETTLEMENT CENTER
Sangiin dalai trade center, Mandal soum, Selenge province
Tel: +976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHOVD BRANCH
Building of Medicine supply Khovd, Jargalant soum, Khovd
province
Tel: + 976 7043 2993 Fax: +976 7043 29936
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHISHIG SETTLEMENT CENTER
Khishig Plaza building, Jargalant soum, Khovd province
Tel: + 976 7043 9939 : + 976 7043 9933
Open hours: Tuesday - Saturday 09:00-18:00
Closed: Monday and Sunday

CAPITAL BANK
ANNUAL REPORT 2014

48

IKH BUYAN SETTLEMENT CENTRE

Ikh Buyan Market place, Ooj van LLC, Jargalant soum, Khovd
province
Tel: + 976 7043 9939
Open hours: Wednesday-Sunday 09:00-18:00
Closed: Monday and Tuesday

KHERLEN SETTLEMENT CENTER

24th building, 6th bag, Kherlen soum, Dornod province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

BULGAN SETTLEMENT CENTER

Bulgan soum, Khovd province
Tel: + 976 7043 9939
Open hours: Wednesday-Sunday 09:00-18:00
Closed: Monday and Tuesday

SELENGE BRANCH
Building of Mongol Em Impex , Sukhbaatar soum, Selenge province
Tel: 7036-3752 Fax: 7036-3752
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

YARANT CASHIER
Buildingf of Yarant border point, Bulgan soum, Khovd province
Tel: + 976 7043 9939
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

ALTANBULAG SETTLEMENT CENTER

Building of Altanbulag Market center, Bag#9, Sukhbaatar soum,
Selenge province
Tel: + 976 7036 3753
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

KHUVSGUL BRANCH
Building of Capital bank, Murun city, Khuvsgul province
Tel: + 976 7038 8498 Fax: + 976 7038 8499
Open hours: Monday-Friday 09:00-18:00
Closed: Monday and Sunday
MURUN SETTLEMENT CENTRE
Bolor service center building, Murun soum, Khuvsgul province
Tel: + 976 1800 1912
Open hours: Tuesday-Sunday 09:00-18:00
Closed: Monday
BAYAN-ULGII BRANCH
4 zamiin uulzvar, Ulgiisoum, Bayan-Ulgii province
Tel: + 976 7042 2298 Fax: + 976 7042 2298
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
ULGII SETTLEMENT CENTER
Bayan-Ulgii trade and service center, 5th bag, Ulgii soum BayanUlgii province
Open hours: Monday-Friday 10:00-18:00 Saturday 11:00-16:00,
Closed: Sunday
UVS BRANCH
Uvs pharmacy building, 3rd bag, Ulaangom soum, Uvs province
Tel: + 976 7045 4555 Fax: + 976 7045 4555
Open hours: Monday-Friday 08:00-17:00
Closed: Saturday and Sunday
BAYANKHONGOR BRANCH
1st floor of Bayankhongor Em Impex, building, 3rd bag,
Bayankhongor soum, Bayankhongor province
Tel: + 976 7044 4595 Fax: + 976 7044 4595
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHONGOR SETTLEMENT CENTER
Bayanmongol service center building, Bayankhongor soum,
Bayankhongor province
Tel: + 976 1800 1912
Open hours: Tuesday-Sunday 10:00-18:00
Closed: Monday
UVURKHANGAI BRANCH
Center pharmacy building, 5th bag, Arvaikheer soum, Uvurkhangai
province
Tel: +976 7032 4090 : + 976 7032 4090
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DORNOD BRANCH
1st floor of To Van Hotel, 9th bag, Kherlen soum, Dornod province
Tel: +976 7058 - 4934 Fax: + 976 7058 - 4934
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

DORNOGOBI BRANCH
Service office building, Sainshand soum, Dornogobi soum
Tel: + 976 7052 - 3778
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
KHENTII BRANCH
Bayan-Erdes 1st floor, Temuujin street, Chinggis city, Khentii
province
Tel: + 976 7056 - 2811
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
SUKHBAATAR BRANCH
Unu-Enkhjin service center building, Baruun-Urt soum, Sukhbaatar
province
Tel: + 976 1800 1912
Open hours: Monday Friday 09:00-18:00
Closed: Saturday and Sunday
ZAVKHAN BRANCH
Building of Em Impex building, Uliastai soum, Zavkhan province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
UV PROVINCE BRANCH
Building of Em Impex LLC, Zuunmod soum, Tuv province
Tel: + 976 7027 3455
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
DUNDGOBI BRANCH
Em Impex LLC building , Mandalgobi soum, Dundgobi province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
BULGAN BRANCH
Em Impex LLC bulidng, Bulgan soum, Bulgan province
Tel: + 976 7034 4448
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
GOBISUMBER BRANCH
1st bag, Sumber soum, Gobisumber province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday
GOBI-ALTAI BRANCH
Capital bank building, Batsuuri street, Esunbulag soum, Gobi-Altai
province
Tel: + 976 1800 1912
Open hours: Monday-Friday 09:00-18:00
Closed: Saturday and Sunday

49

CAPITAL BANK
ANNUAL REPORT 2014

BRANCH, UNIT

ADDRESS

10th khoroolol settlement centre

Building#81, Micro district 10 Khoroo 5, Bayangol district

10th khoroolol settlement centre

Telmen market, 1st floor of Building#33, Railroad street, Peace Avenue, Micro district 2, Bayangol distirct

17 settlement centre

1st floor of Nomin Hypermarket, 32th toirog, micro district 12, Sukhbaatar district

17 settlement centre

Khan bank building, Khuchit shonkhor marketplace micro district 12, Chingeltei district

21st khoroolol branch

Minii zakh supermarket, 21st khoroolol, 19th micro district, SonginoKhairkhan district

Baga Toiruu branch

1st floor of Skytel Plaza, Chingis Avenue-9, micro district 1, Sukhbaatar district

Baga Toiruu branch

1st floor of Bishrelt hotel, Independence square, Sambuu street-43, micro distirct 4, Chingeltei district

Baga Toiruu branch

Dalai eej minii zakh micro district 3, Sukhbaatar district

Bayanzurkh settlement centre

Bayanzurkh settlement centre, Capital bank, Mongolian Peoples Party Building, micro district

10

Bayanzurkh settlement centre

Tenger plaza trade center, micro district 8, Bayanzurkh district

11

Botanic settlement centre

1st floor of Well Mart trade center, Botanic

12

Dambadarjaa settlement centre

Naran Trade center Belkhi, micro district 16, Sukhbaatar district

13

Dambadarjaa settlement centre

Ariun tengis supermarket, micro district 21, Bayanzurkh district

14

Capital town settlement centre

1st floor of Well Mart trade center, micro district 18, Bayangol district

15

Capital town settlement centre

B1st floor of Grand Plaza miscro district 2, Bayangol district

16

Naiman sharga settlement centre

1st floor of Altjin bumbugur trade center, micro district 2, Chingeltei district

17

Narantuul credit centre

Narantuul credit centre, Capital Bank, Narantuul international trade centre, micro district 14, Bayanzurkh
district

18

Narantuul credit centre

Dunjingarav trade centre, micro district 26, Bayanzurkh district

19

Airport cashier

Chinggis khaan International airport, micro district 10, Khan-Uul district

20

Sansar settlement centre

2nd floor of Sky department, Chingis khaan hotel building, Tokyo street, micro district 1, Bayanzurkh district

21

Sansar settlement centre

Minii zakh supermarket located in the east cross-roads, micro district 13, Bayanzurkh district

22

Tavan shar settlement centre

Soyombo cinema, Tsambagarav station, micro district 17, Songino Khairkhan district

23

Tavan shar settlement centre

Dragon trade center, micro district 18, Songino Khairkhan district

24

Tavan shar settlement centre

Mini zakh supermarket, Sapporo, 1st khoroolol, micro district 17, SonginoKhairkhan district

25

Tavan shar settlement centre

50000 settlement centre, Capital bank, 2nd micro district, Chingeltei district

26

50000 settlement centre

1st floor, Teddy trade centre, Newtell LLC builing, 2nd micro district, Chingeltei district

27

50000 branch

5th floor, State Department Store, 2nd micro district, Chingeltei district

28

Takhilt settlement center

Takhilt settlement center, Capital bank, 22nd micro district, SonginoKhairkhan district

29

Center branch

Head office, Capital Bank, Sambuu street, 3rd micro district, Chingeltei district

30

Khailaast settlement centre

Khailaast settlement centre, Capital Bank, Khailaast 84 station, 15th micro district, Chingeltei district

31

Khan-Uul branch

1st floor Nomin United LLC, 2nd micro district, Khan-Uul district

32

Khan-Uul branch

1st floor, SKY Hypermarket, 2nd khoroo, Khan-Uul district

33

Khan-Uul branch

Nomin trade center, 3rd micro district, Khan-Uul district

34

Khan-Uul branch

1st floor, Mongolian University of Life sciences, Khan-Uul district

35

Khoroolol branch

1st floor APEX trade center, 3rd khoroolol, 14th micro district, Bayangol district

36

Khoroolol branch

1st floor Bayangol department store, Ard Auysh 20th street, 8th micro district, Bayangol district

37

Customs of city settlement centre

Building Governors office, Zamchdiin street, 4th micro district, Bayangol district

38

Customs of city settlement centre

Building Ulaanbaatar railway station Transporter street, 1st micro district

39

Khunsnii-4 settlement center

1st Information and technology park, 6th micro district, Sukhbaatar district

40

Tsaiz-16 branch

Tsaiz-16 branch, Capital Bank, Well Mart trade center, 16 khoroo, 16th micro district

41

Tsaiz-16 branch

Building, Law Enforcement University, Bayanzurkh district

42

Tsergiin Khotkhon settlement center

Well Mart 22 trade center, Khuuchin 22nd tovchoo, 20th microdistirct , Songinokhairkhan district

43

Chingeltei settlement center

Chingeltei settlement center, Capital Bank, Yargait street-23-373, 18th microdistict, Chingeltei district

BRANCH, UNIT

ADDRESS

CAPITAL BANK
ANNUAL REPORT 2014

50

44

Baganuur Branch

Baganuur new marketplace Building, 3rd microdistrict, Baganuur district

45

Baganuur Branch

Kherlen trade center, Natsagdorj.D street, 1st microdistirct, Baganuur district, Ulaanbaatar city

46

Bayan-Ulgii Branch

1st floor of Information and Communication networking stated owned company, 5th bag, Ulgii soum, BayanUlgii province

47

Gobisumber branch

Gobisumber settlement center, Capital Bank, 1st bag#56-1-2 Sumber soum, Gobisumber province

48

Darkhan branch

New Darkhan International trade center, 6th khoroolol, 12th bag, Darkhan soum, Darkhan-Uul province

49

Darkhan branch

Ikher mogoi trade center, Building of Delbe LLC, 5th bag, Darkhan soum, Darkhan-Uul province

50

Dornod branch

AICBN supermarket, 9th bag, Kherlen soum, Dornod province

51

Dundgobi branch

Yalguum market, 7th bag, Saintsagaan soum, Dundgovi aimag

52

Gobi-Altai branch

Shine Altai zakh, Eson bulag soum, Gobi-Altai aimag

53

Zamiin-Uud branch

Building of Khiliin tsogtsolbor, Zamiin-Uud soum, Dornogovi province

54

Zuun kharaa settlement centre

Zuun kharaa settlement centre, Capital Bank, Sangiin dalai service centre, 7th bag, Mandal soum,
Selenge province

55

rkhon branch

Bayan trade and service center, Uurkhaichin bag, Bayan-Undur soum, Orkhon province

56

Uvurkhangai branch

Oyu-centre supermarket, 5th bag, Arvaikheer soum, Uvurkhangai province

57

Umnugovi branch

Provincial diagnose and treatment centre, 1st bag, Dalanzadgad city, Uvurkhangai province

58

Sukhbaatar branch

Sukhbaatar branch, Capital Bank, Building Unu-Enkhjin LLC, 7th bag, Baruun-Urt soum, Sukhbaatar
province

59

Selenge branch

Altanbulag trade centre, 2nd bag, Sukhbaatar soum, Selenge province

60

Tuv aimag branch

Tuv aimag branch, Capital bank, Trade street, Nomt 1st bag, Zuunmod soum, Tuv province

61

Uvs branch

Bituu trade centre, 3rd bag, Ulaangom soum, Uvs province

62

Khovd branch

KHISHIG PLAZA centre, Baatarkhairkhan bag, Jaragalant soum, Khovd province

63

Khovd branch

Khovd branch, Capital Bank, Magsarjav bag, Jargalant soum, Khovd province

64

Khuvsgul branch

UBM supermarket building, 5th bag, Murun soum, Khuvsgul province

65

Arkhangai branch

TANSAG supermarket 3rd bag, Erdenebulgan soum, Arkhangai aimag

66

Bulgan branch

"UFC" supermarket, 5th bag Bulgan soum, Bulgan province

67

Bayankhongor branch

State owned company building for Telecommunication networking, 1st bag, Bayankhongor soum,
Bayankhongor province

68

Khentii branch

Postal service building, 1st bag, Kherlen soum, Khentii province

69

Zavkhan branch

Temeetei pharmacy, Mongol Em Impex building, Jinst bag, Uliastai soum, Zavkhan aimag

AUDITED
FINANCIAL
STATEMENT

CAPITAL BANK LLC

CORPORATE INFORMATION
REGISTERED OFFICE SAMBUUGIIN STREET- 43,
ULAANBAATAR 211238,
MONGOLIA
BOARD OF DIRECTORS

BATBAYAR TUGUU
GOOKHUU SHARAV
MINJ ALMAAZ
TSERENTOGOO AYUSH
UNDARMAA BATBAYAR
NASANBAYAR BUYA
CHINBISHRELT ARIUNBOLD

CORPORATE SECRETARY

DASHLKHUNDEV ULZII-OCHIR
AUDITORS ERNST & YOUNG MONGOLIA AUDIT LLC
CERTIFIED PUBLIC ACCOUNTANTS

CAPITAL BANK
ANNUAL REPORT 2014

52

STATEMENT BY CHAIRMAN OF BOARD OF GOVERNORS AND EXECUTIVES

We, BATBAYAR TUGUU and ARIUNBOLD AGVAANJAMBA, being the Chairman of the Board of Governors
and Chief Executive Officer of CAPITAL BANK LLC (the Bank) respectively, and YANJIN BADARCH, being
the officer primarily responsible for the financial management of the Bank, do hereby state that, in our opinion,
the accompanying financial statements set out on pages 5 to 90 present fairly, in all material respects, the financial
position of the Bank as at 31 December 2014 and of its financial performance and cash flows for the year then
ended in accordance with International Financial Reporting Standards.

T. BATBAYAR

Chairman of BOD

A. ARIUNBOLD
Chief Executive Officer

B.YANJIN
Deputy CEO

53

CAPITAL BANK
ANNUAL REPORT 2014

REPORT OF THE INDEPENDENTAUDITORS

To the shareholders of Capital Bank LLC
_____________________________________________________________________________
We have audited the accompanying financial statements of Capital Bank LLC (the Bank), which comprise the statement
of financial position as at 31 December 2014 and the statement of profit or loss and comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies
and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors
consider internal control relevant to the entitys preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

CAPITAL BANK
ANNUAL REPORT 2014

54

REPORT OF THE INDEPENDENTAUDITORS

To the shareholders of Capital Bank LLC
_____________________________________________________________________________
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at 31
December 2014, and its financial performance and cash flows for the year then ended in accordance with International
Financial Reporting Standards.
Restriction on use
This report is made solely to the shareholders of the Bank, as a body, in accordance with the audit requested by
shareholders in accordance with Article 94 of Company Law of Mongolia and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report.

ERNST & YOUNG MONGOLIA AUDIT LLC

Certified Public Accountants

Ulaanbaatar, Mongolia
Date: 31 mar 2015

PETER MARKEY
Director

55

CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014

Notes

2014
MNT000

2013
MNT000

Interest and similar income

Interest and similar expenses
Net interest income

3
4

71,127,906
(47,818,405)
23,309,501

35,741,098
(27,769,000)
7,972,098

Fees and commission income

Fees and commission expenses
Net fees and commission income

5
5

2,111,568
(235,777)
1,875,791

1,234,505
(316,265)
918,240

Net trading income

Total operating income

9,140,125
34,325,417

11,913,877
20,804,215

Credit loss expense

Net operating income

(4,441,190)
29,884,227

(31,369)
20,772,846

Operating expenses
Share of loss in an associate

8
9

(18,534,627)
(684)

(17,938,386)
-

11,348,916

2,834,460

(2,411,566)

(141,623)

8,937,350

2,692,837

(420,258)

3,838,364
(383,836)

(420,258)

3,454,528

8,517,092

6,147,365

Profit before tax

10

Income tax expense

Profit for the year attributable to equity holders of
the Bank
Items that may be reclassified subsequently to income
statement:
Available-for-sale securities:
Change in fair value of available-for-sale securities
Income tax expense
Other comprehensive income for the year, net of
tax
Total comprehensive income for the year, net of
tax, attributable to equity holders of the Bank

10

The accompanying notes form an integral part of the financial statements.

1

CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

2014
MNT000

2013
MNT000

11
12
13
14
14
9
15
16
17
18
19

78,009,528
67,092,377
16,605,013
9,717,063
99,090,725
499,316
490,839,049
49,374,711
2,035,214
2,507,883
1,670,958
817,441,837

77,681,714
33,675,589
12,752,355
18,570,354
57,854,431
310,952,250
31,824,090
2,413,436
2,806,203
6,275,543
110,653
554,916,618

20
21
22
23
13
24

130,844,588
39,293,695
324,957,560
249,974,576
1,401,020
500,504
888,655
747,860,598

74,615,549
226,170,741
208,747,545
2,297,183
1,657,129

33,000,000
23,083,353
13,497,886
69,581,239

33,000,000
4,391,960
3,652,675
41,044,635

817,441,837

554,916,618

Notes

ASSETS
Cash and balances with the central bank
Due from banks
Derivative financial instrument
Financial investments available-for-sale
Financial investments held-to-maturity
Investment in an associate
Loans and advances to customers
Property, plant and equipment
Intangible assets
Other assets
Assets held for sale
Prepaid tax
TOTAL ASSETS
LIABILITIES AND EQUITY
Due to banks
Repurchase agreements
Due to customers
Borrowed funds
Derivative financial instrument
Other liabilities
Corporate income tax payable
Deferred tax liability
TOTAL LIABILITIES

10

383,836
513,871,983

EQUITY ATTRIBUTABLE TO EQUITY

HOLDERS OF THE BANK
25

Ordinary shares
Other components of equity
Retained profits
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY

The accompanying notes form an integral part of the financial statements

2

56

3,034,270 #

(420,258)
(420,258)

3,454,528 #

3,454,528

Available-for sale
reserve
MNT000

49,083 #

19,512
(907,861)

937,432 #

(27,684)

612,682

352,434

MNT000
(Note 26)

Other reserves

- #

20,000,000 #

20,000,000
-

Subordinated
loan
MNT000
(Note 25)

13,497,886

907,861

8,937,350
8,937,350

3,652,675

(612,682)

2,692,837

1,572,520

Retained
earnings
MNT000

69,581,239

20,000,000
19,512
-

8,937,350
(420,258)
8,517,092

41,044,635

(27,684)

11,000,000

6,147,365

23,924,954

MNT000

Total equity

The accompanying notes form an integral part of the financial statements.#represents other components of equity of MNT 23,083,353,000(2013: MNT 4,391,960,000)
3

33,000,000

Increase in subordinated loan

Increase in other reserve
Transfer to retained earnings

At 31 December 2014

Profit for the year

Other comprehensive income
Total comprehensive income

33,000,000

Decrease in other reserve

At 31 December 2013

11,000,000

22,000,000

Transfer from retained earnings

Issue of ordinary shares

Total comprehensive income

At 1 January 2013

Ordinary
shares
MNT000
(Note 25)

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

CAPITAL BANK LLC

57

CAPITAL BANK
ANNUAL REPORT 2014

CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014

Note

2014
MNT000

2013
MNT000

CASH FLOWS FROM OPERATING

ACTIVITIES
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Accredited interest expenses
Credit loss for loans and advances to customers
Impairment loss on foreclosed properties
Intangible assets written off
Property, plant and equipment written off
Loss on property, plant and equipment disposal
Changes in fair value of derivatives
Unrealised foreign exchange loss
Operating profit before working capital changes
Changes in operating assets:
Statutory deposit with Bank of Mongolia
Loans and advances to customers
Assets held for sale
Other assets
Changes in operating liabilities:
Due to banks
Due to customers
Other liabilities
Repurchase agreements
(Decrease)/increase in other reserve
Cash used in operations
Share of loss of an associates
Income tax paid
Net cash flows used in operating activities

8
8
7
8
8
8
8
6

27

26

11,348,916

2,834,460

1,466,371
343,659
4,441,190
680,923
42,481
(6,149,841)
5,883,872
18,057,571

975,632
387,705
162,915
31,369
264,653
197,599
54,888
211,383
(8,998,158)
7,972,999
4,095,445

(4,740,506)
(190,211,862)
3,923,662
(788,644)

(12,589,167)
(120,870,189)
(6,275,543)
(254,577)

56,229,039
98,786,819
749,214
39,293,695
19,512
21,318,500
684
(1,634,207)
19,684,977

23,679,947
111,765,681
(568,463)
(7,552,510)
(27,684)
(8,597,060)
(149,693)
(8,746,753)

(54,369,288)
(500,000)
(19,019,164)
(5,745)
(73,894,197)

(31,713,845)
(13,879,673)
(193,050)
(45,786,568)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial investments
Investment in associates
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash flows used in investing activities

16
17

58

59

CAPITAL BANK
ANNUAL REPORT 2014
CAPITAL BANK LLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014

Note
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares
Repayment of borrowed funds
Drawdown of borrowed funds
Drawdown of subordinated loan
Net cash flows generated from financing activities

25
23
23
25

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents brought forward
Cash and cash equivalents carried forward

27

2014
MNT000

2013
MNT000

(32,671,619)
73,898,650
20,000,000
61,227,031

11,000,000
(10,764,743)
127,066,467
127,301,724

7,017,811

72,768,403

121,815,950

49,047,547

128,833,761

121,815,950

51,637,549

23,607,203

199,315,986

31,745,519

Operational cash flows from interest

Interest paid
Interest received

The accompanying notes form an integral part of the financial statements.

5


CAPITAL BANK

2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
1.

CORPORATE INFORMATION
Capital Bank LLC (the "Bank") is principally engaged in the business of banking and
financial services pursuant to License No. 1 issued by The Bank of Mongolia. There have
been no significant changes in the nature of these activities during the year.
The Bank is a limited liability company, incorporated and domiciled in Mongolia. The
registered address and the principal place of business of the Bank is Sambuugiin street- 43,
Ulaanbaatar 211238, Mongolia.
The Bank is 99.97% owned by Bishrelt Holding Co. Limited, a company incorporated in
Mongolia.
The financial statements of the Bank were authorised for issue by the Board of Governors in
accordance with a resolution of the Governors on 31 March 2015.

2.

ACCOUNTING POLICIES

2.1

Basis of preparation
The financial statements of the Bank have been prepared on a historical cost basis, except
for financial investments available-for-sale and derivative financial instruments that have
been measured at fair value. The financial statements are presented in Mongolian Tugrug,
which is denoted by the symbol MNT, and all values are rounded to the nearest thousand,
except when otherwise indicated.
Statement of compliance
The financial statements of the Bank have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board (IASB).
Presentation of financial statements
The Bank presents its statements of financial position in order of liquidity. An analysis
regarding recovery or settlement within 12 months after the statement of financial position
date (current) and more than 12 months after the statement of financial position date (non
current) is presented in Note 30.
Financial assets and financial liabilities are offset and the net amount reported in the
statement of financial position only when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realise the assets
and settle the liability simultaneously. Income and expenses are not offset in the statement
of comprehensive income unless required or permitted by any accounting standard or
interpretation, and as specifically disclosed in the accounting policies of the Bank.

60
61

61
62

CAPITAL

BANK

ANNUAL
2014
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.2

Significant accounting judgments, estimates and assumptions

The preparation of the Banks financial statements requires management to make
judgements, estimates and assumptions that affect the reported amount of revenues,
expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure
of contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities
affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty
at the reporting date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are described below.
The Bank based its assumptions and estimates on parameters available when the financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances beyond the
control of the Bank. Such changes are reflected in the assumptions when they occur.
Going concern
The Banks management has made an assessment of the Banks ability to continue as a
going concern and is satisfied that the Bank has the resources to continue in business for the
foreseeable future. Furthermore, management is not aware of any material uncertainties that
may cast significant doubt upon the Banks ability to continue as a going concern.
Therefore, the financial statements continue to be prepared on the going concern basis.
Depreciation of buildings
Buildings are depreciated on a straight line basis over the estimated useful life of 10-40
years even though the lease period of the land on which the buildings are located is shorter
than 40 years. By virtue of the Law of Mongolia on Land, the Bank enjoys the rights to
request for extension of the lease period and the relevant authority shall extend the period of
lease subject to certain conditions being met. The management believes that the Bank has
met the conditions set consistently, accordingly, and for the purpose of depreciation of
buildings, the Bank estimated that a cumulative lease period of 40 years is reasonable and
appropriate.


CAPITAL BANK

2014
ANNUAL

REPORT

2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.2

Significant accounting judgments, estimates and assumptions (Contd.)

Impairment losses on loans and advances
The Bank reviews its individually significant loans and advances at each statement of
financial position date to assess whether an impairment loss should be recorded in the
statement of profit or loss and comprehensive income. In particular, management judgment
is required in the estimation of the amount and timing of future cash flows when
determining the impairment loss. These estimates are based on assumptions about a number
of factors and actual results may differ, resulting in future changes to the allowance.
Loans and advances that have been assessed individually and found not to be impaired and
all individually insignificant loans and advances are then assessed collectively, in groups of
assets with similar risk characteristics, to determine whether provision should be made due
to incurred loss events for which there is objective evidence but whose effects are not yet
evident. The collective assessment takes account of data from the loan portfolio (such as
levels of arrears, credit utilisation, loan to collateral ratios, etc.), and judgments to the effect
of concentrations of risks and economic data (including levels of unemployment, real estate
prices indices, country risk and the performance of different individual groups).
The impairment loss on loans and advances is disclosed in more detail in Notes 7 and 15and
further described in Note 32.
Impairment of available-for-sale investments
The Bank also records impairment charges on available-for-sale equity investments when
there has been a significant or prolonged decline in the fair value below their cost. The
determination of what is 'significant' or 'prolonged' requires judgment. In making this
judgment, the Bank evaluates, among other factors, historical share price movements and
duration and extent to which the fair value of an investment is less than its cost.
Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded on the statement
of financial position cannot be derived from active markets, they are determined using a
variety of valuation techniques that include the use of mathematical models. The inputs to
these models are derived from observable market data where possible, but where observable
market data are not available, judgment is required to establish fair values. The valuation of
financial instruments is described in more detail in Note 28.

62
63

63
64

CAPITAL

BANK

ANNUAL
2014
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.3

Changes in accounting policies and disclosures

The accounting policies adopted are consistent with those of the previous financial year,
except for the following standards and amendments to IFRS that became effective as of 1
January 2014:
New and amended standards and interpretations
Consolidated Financial Statements - Investment Entities
Amendments to IFRS 10
Disclosure of Interests in Other Entities - Investment
Amendments to IFRS 12
Entities
Separate Financial Statements - Investment Entities
Amendments to IAS 27
Financial Instruments: Presentation - Offsetting Financial
Amendments to IAS 32
Assets and Financial Liabilities
Impairment of Assets - Recoverable Amount Disclosures for
Amendments to IAS 36
Non-Financial Assets
Financial Instruments: Recognition and Measurement Amendments to IAS 39
Novation of Derivatives and Continuation of Hedge
Accounting
Levies
IFRIC 21
Amendments to a number of IFRSs issued in December 2013
Annual Improvements
(2010-2012 cycle)
Amendments to a number of IFRSs issued in December 2013
Annual Improvements
(2012-2014 cycle)
The adoption of the above standards and interpretations did not result in significant changes to
accounting policies and did not have any effect on the financial performance or position of the
Bank.
Standards issued but not yet effective
The Standards and Interpretations that are issued, but not yet effective, up to the date of
issuance of the Companys financial statements are disclosed below. The Company intends
to adopt these standards, if applicable, when they become effective.


CAPITAL BANK

2014
ANNUAL

REPORT

2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.3

Changes in accounting policy and disclosures (Contd.)

IFRS 9 (Final version)

Amendments to IFRS 10

Amendments to IFRS 11

IFRS 14
IFRS 15
Amendments to IAS 16

Amendments to IAS 16
Amendments to IAS 19

Amendments to IAS 27

Amendments to IAS 28

Amendments to IAS 38

Amendments to IAS 41
IFRIC 15
Annual Improvements
(2010-2012 cycle)
Annual Improvements
(2011-2013 cycle)
Annual Improvements
(2012-2014 cycle)

Financial Instruments 3
Consolidated Financial Statements- Sale or Contribution of
Assets between an Investor and its Associate or Joint
Venture 2
Joint Arrangements - Accounting for Acquisitions of
Interests in Joint Operations 2
Regulatory Deferral Accounts 2
Revenue from Contracts with Customers 3
Property, Plant and Equipment - Clarification of Acceptable
Methods of Depreciation and Amortization 2
Property, Plant and Equipment - Bearer Plants 2
Employee Benefits - Defined Benefit Plans: Employee
Contributions 1
Separate Financial Statements - Equity Method in Separate
Financial Statements 2
Investments in Associates and Joint Ventures - Sale or
Contribution of Assets between an Investor and its Associate
or Joint Venture 2
Intangible Assets - Clarification of Acceptable Methods of
Depreciation and Amortization 2
Agriculture - Bearer Plants 2
Agreements for the Construction of Real Estate 1
Amendments to a number of IFRSs issued in December 2013 1
Amendments to a number of IFRSs issued in December 2013 1
Amendments to a number of IFRSs issued in September 2014
2

Effective for annual periods beginning on or after 1 January 2015

Effective for annual periods beginning on or after 1 January 2016
3 Effective for annual periods beginning on or after 1 January 2018
2

The Bank is in the process of assessing if the adoption of these Standards and Interpretations in
the future periods will have material impact on its financial statements.

10

64
65

66
65

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies

(1) Foreign currency translation
The functional currency of the Bank is the Mongolian Tugrug. Transactions denominated in
foreign currencies are initially recorded at their respective functional currency spot rates at
the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency spot rates of exchange at the statement of financial position date.
Differences arising on settlement or translation of monetary items are recognised in profit or
loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value is determined. The gain or loss arising on translation of nonmonetary items measured at fair value is treated in line with the recognition of gain or loss
on change in fair value of the item.
USD/MNT exchange rate as at 31 December 2014 and 31 December 2013 were 1,885.60
and 1,654.10, respectively.

11


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(2) Financial instruments initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.
(i)

Date of recognition
All financial assets and liabilities are initially recognised on the trade date, i.e., the
date that the Bank becomes a party to the contractual provisions of the instrument.
This includes regular way trades: purchases or sales of financial assets that require
delivery of assets within the time frame generally established by regulation or
convention in the market place.

(ii)

Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their
purpose and characteristics and the managements intention in acquiring them. All
financial instruments are measured initially at their fair value plus transaction costs,
except in the case of financial assets and financial liabilities recorded at fair value
through profit or loss.

(iii)

Derivatives recorded at fair value through profit or loss

The Bank uses derivatives such as forward foreign exchange contracts. Derivatives
are recorded at fair value and carried as assets when their fair value is positive and
as liabilities when their fair value is negative. Changes in the fair value of
derivatives are included in Net trading income.

(iv)

Available-for-sale financial investments

Available-for-sale investments include equity and debt securities. Equity
investments classified as available-forsale are those which are neither classified as
held for trading nor designated at fair value through profit or loss. Debt securities in
this category are intended to be held for an indefinite period of time and may be sold
in response to needs for liquidity or in response to changes in the market conditions.
The Bank has not designated any loans or receivables as available-for-sale.
After initial measurement, available-for-sale financial investments are subsequently
measured at fair value.

12

67
66

67
68

CAPITAL

BANK

ANNUAL
2014
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(iv)

Available-for-sale financial investments (Contd.)

Unrealised gains and losses are recognised directly in equity (Other comprehensive
income) in the Available-for-sale reserve. When the investment is disposed of, the
cumulative gain or loss previously recognised in equity is recognised in the
statement of comprehensive income in Other operating income. Where the Bank
holds more than one investment in the same security, they are deemed to be disposed
of on a firstin firstout basis. Interest earned whilst holding available-for-sale
financial investments is reported as interest income using the effective interest rate.
Dividends earned whilst holding available-for-sale financial investments are
recognised in the statement of comprehensive income as "Other operating income"
when the right of the payment has been established. The losses arising from
impairment of such investments are recognised in the statement of comprehensive
income in Impairment losses on financial investments and removed from the
"available-for-sale reserve".

(v)

Held-to-maturity financial investments

Held-to-maturity financial investments are nonderivative financial assets with fixed
or determinable payments and fixed maturities, which the Bank has the intention and
ability to hold to maturity. After initial measurement, held to maturity financial
investments are subsequently measured at amortised cost using the EIR less
impairment. Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees that are an integral part of the EIR. The
amortisation is included in "Interest and similar" income in the statement of
comprehensive income. The losses arising from impairment of such investments are
recognised in the statement of comprehensive income line "Credit loss expense".
If the Bank were to sell or reclassify more than an insignificant amount of held to
maturity investments before maturity (other than in certain specific circumstances),
the entire category would be tainted and would have to be reclassified as availablefor-sale. Furthermore, the Bank would be prohibited from classifying any financial
asset as held to maturity during the following two years.

(vi)

Due from banks and loans and advances to customers

"Due from banks" and "Loans and advances to customers" include nonderivative
financial assets with fixed or determinable payments that are not quoted in an active
market, other than:

13


CAPITAL BANK

2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4 Summary of significant accounting policies (Contd.)

(vi)

Due from banks and loans and advances to customers (Contd.)

Those that the Bank intends to sell immediately or in the near term and those that the
Bank, upon initial recognition, designates as at fair value through profit or loss
Those that the Bank, upon initial recognition, designates as available-for-sale
Those for which the Bank may not recover substantially all of its initial investment,
other than because of credit deterioration

After initial measurement, amounts "Due from banks" and "Loans and advances to
customers" are subsequently measured at amortised cost using the EIR, less
allowance for impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees and costs that are an integral part of the
EIR. The amortisation is included in Interest and similar income in the statement of
comprehensive income. The losses arising from impairment are recognised in the
statement of comprehensive income in "Credit loss expense".
The Bank may enter into certain lending commitments where the loan, on
drawdown, is expected to be classified as held for trading because the intent is to sell
the loans in the short term. These commitments to lend are recorded as derivatives
and measured at fair value through profit or loss.
Where the loan, on drawdown, is expected to be retained by the Bank, and not sold
in the short term, the commitment is recorded only when it is an onerous contract
that is likely to give rise to a loss (e.g., due to a counterparty credit event).
(vii)

Borrowed funds
Financial instruments issued by the Bank that are not designated at fair value
through profit or loss, are classified as liabilities under "Borrowed funds", where the
substance of the contractual arrangement results in the Bank having an obligation
either to deliver cash or another financial asset to the holder, or to satisfy the
obligation other than by the exchange of a fixed amount of cash or another financial
asset for a fixed number of own equity shares.
After initial measurement, borrowings are subsequently measured at amortised cost
using the EIR. Amortised cost is calculated by taking into account any discount or
premium on the issue and costs that are an integral part of the EIR.
An analysis of the Banks borrowed funds is disclosed in Note 23.

14

68
69

70
69

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(viii) Reclassification of financial assets
Effective from 1 July 2008, the Bank was permitted to reclassify, in certain
circumstances, nonderivative financial assets out of the "held-for-trading" category
and into the "available-for-sale", "loans and receivables", or "held-to-maturity"
categories. From this date, it was also permitted to reclassify, in certain
circumstances, financial instruments out of the "available-for-sale" category and into
the "loans and receivables category". Reclassifications are recorded at fair value at
the date of reclassification, which becomes the new amortised cost.
For a financial asset reclassified out of the "available-for-sale category", any
previous gain or loss on that asset that has been recognised in equity is amortised to
profit or loss over the remaining life of the investment using the EIR. Any difference
between the new amortised cost and the expected cash flows is also amortised over
the remaining life of the asset using the EIR. If the asset is subsequently determined
to be impaired, then the amount recorded in equity is recycled to the statement of
comprehensive income.
The Bank may reclassify a nonderivative trading asset out of the "held for trading"
category and into the "loans and receivables" category if it meets the definition of
"loans and receivables" and the Bank has the intention and ability to hold the
financial asset for the foreseeable future or until maturity. If a financial asset is
reclassified, and if the Bank subsequently increases its estimates of future cash
receipts as a result of increased recoverability of those cash receipts, the effect of
that increase is recognised as an adjustment to the EIR from the date of the change
in estimate.
Reclassification is at the election of management, and is determined on an
instrument by instrument basis. The Bank does not reclassify any financial
instrument into the fair value through profit or loss category after initial recognition.

15


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(3) Derecognition of financial assets and financial liabilities
(i)

Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired
The Bank has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material
delay to a third party under a passthrough arrangement; and either:
The Bank has transferred substantially all the risks and rewards of the
asset; or
The Bank has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset

When the Bank has transferred its rights to receive cash flows from an asset or has
entered into a passthrough arrangement, and has neither transferred nor retained
substantially all of the risks and rewards of the asset nor transferred control of the
asset, the asset is recognised to the extent of the Banks continuing involvement in
the asset. In that case, the Bank also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the
rights and obligations that the Bank has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset
is measured at the lower of the original carrying amount of the asset and the
maximum amount of consideration that the Bank could be required to repay.
(ii)

Financial liabilities
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires. Where an existing financial liability is replaced
by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new
liability. The difference between the carrying value of the original financial liability
and the consideration paid is recognised in the statement of profit or loss and
comprehensive income.

16

71
70

72
71

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(4) Repurchase and reverse repurchase agreements
Securities sold under agreements to repurchase at a specified future date are not
derecognised from the statement of financial position as the Bank retains substantially all of
the risks and rewards of ownership. The corresponding cash received is recognised in the
statement of financial position as an asset with a corresponding obligation to return it,
including accrued interest as a liability within repurchase agreements, reflecting the
transactions economic substance as a loan to the Bank. The difference between the sale and
repurchase prices is treated as interest expense and is accrued over the life of agreement
using the EIR.
Conversely, securities purchased under agreements to resell at a specified future date are not
recognised in the statement of financial position. The consideration paid, including accrued
interest, is recorded in the statement of financial position, within reverse repurchase
agreements, reflecting the transactions economic substance as a loan by the Bank. The
difference between the purchase and resale prices is recorded in Net interest income and is
accrued over the life of the agreement using the EIR.
If securities purchased under agreement to resell are subsequently sold to third parties, the
obligation to return the securities is recorded as a short sale within "Financial liabilities held
for trading" and measured at fair value with any gains or losses included in "Net trading
income".
(5) Determination of fair value
The Bank measures certain financial instruments such as derivatives, available-for-sale
investments and properties at fair value at each statement of financial position date. Also,
fair values of financial instruments carried at amortised cost are measured for disclosure
purposes.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset
or liability
The principal or the most advantageous market must be accessible to the Bank.

17


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(6) Impairment of financial assets
The Bank assesses at each reporting date, whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that have occurred after the initial recognition
of the asset (an incurred loss event) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated.
Evidence of impairment may include: indications that the borrower or a group of borrowers
is experiencing significant financial difficulty; the probability that they will enter
bankruptcy or other financial reorganisation; default or delinquency in interest or principal
payments; and where observable data indicates that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate
with defaults.
(i)

Financial assets carried at amortised cost

For financial assets carried at amortised cost (such as amounts due from banks, loans
and advances to customers as well as held to maturity investments), the Bank first
assesses individually whether objective evidence of impairment exists for financial
assets that are individually significant, or collectively for financial assets that are not
individually significant. If the Bank determines that no objective evidence of
impairment exists for an individually assessed financial asset, it includes the asset in
a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is, or continues to be, recognised are not included
in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount
of the loss is measured as the difference between the assets carrying amount and the
present value of estimated future cash flows (excluding future expected credit losses
that have not yet been incurred). The carrying amount of the asset is reduced through
the use of an allowance account and the amount of the loss is recognised in the
statement of profit or loss and comprehensive income. Interest income continues to
be accrued on the reduced carrying amount and is accrued using the rate of interest
used to discount the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as part of Interest and similar income.

18

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73

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(6) Impairment of financial assets (Contd.)
(i)

Financial assets carried at amortised cost (Contd.)

Loans together with the associated allowance are written off when there is no
realistic prospect of future recovery and all collateral has been realised or has been
transferred to the Bank. If, in a subsequent year, the amount of the estimated
impairment loss increases or decreases because of an event occurring after the
impairment was recognised, the previously recognised impairment loss is increased
or reduced by adjusting the allowance account. If a future writeoff is later
recovered, the recovery is credited to the Credit loss expense.
The present value of the estimated future cash flows is discounted at the financial
assets original EIR. If a loan has a variable interest rate, the discount rate for
measuring any impairment loss is the current EIR. If the Bank has reclassified
trading assets to loans and advances, the discount rate for measuring any impairment
loss is the new EIR determined at the reclassification date. The calculation of the
present value of the estimated future cash flows of a collateralised financial asset
reflects the cash flows that may result from foreclosure less costs for obtaining and
selling the collateral, whether or not foreclosure is probable.
For the purpose of a collective evaluation of impairment, financial assets are
grouped on the basis of the Banks internal credit grading system, that considers
credit risk characteristics such as asset type, industry, geographical location,
collateral type, pastdue status and other relevant factors.
Future cash flows on a group of financial assets that are collectively evaluated for
impairment are estimated on the basis of historical loss experience for assets with
credit risk characteristics similar to those in the group. Historical loss experience is
adjusted on the basis of current observable data to reflect the effects of current
conditions on which the historical loss experience is based and to remove the effects
of conditions in the historical period that do not exist currently.
Estimates of changes in future cash flows reflect, and are directionally consistent
with, changes in related observable data from year to year (such as changes in
unemployment rates, property prices, commodity prices, payment status, or other
factors that are indicative of incurred losses in the group and their magnitude). The
methodology and assumptions used for estimating future cash flows are reviewed
regularly to reduce any differences between loss estimates and actual loss
experience.

19


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(6) Impairment of financial assets (Contd.)
(ii)

Available-for-sale financial investments

For available-for-sale financial investments, the Bank assesses at each reporting date
whether there is objective evidence that an investment is impaired.
In the case of debt instruments classified as available-for-sale, the Bank assesses
individually whether there is objective evidence of impairment based on the same
criteria as financial assets carried at amortised cost. However, the amount recorded
for impairment is the cumulative loss measured as the difference between the
amortised cost and the current fair value, less any impairment loss on that
investment previously recognised in the statement of comprehensive income. Future
interest income is based on the reduced carrying amount and is accrued using the
rate of interest used to discount the future cash flows for the purpose of measuring
the impairment loss. The interest income is recorded as part of Interest and similar
income. If, in a subsequent period, the fair value of a debt instrument increases and
the increase can be objectively related to a credit event occurring after the
impairment loss was recognised in the statement of comprehensive income, the
impairment loss is reversed through the statement of comprehensive income.
In the case of equity investments classified as available-for-sale, objective evidence
would also include a significant or prolonged decline in the fair value of the
investment below its cost. The Bank treats significant generally as 20% and
prolonged generally as greater than six months. Where there is evidence of
impairment, the cumulative loss measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that investment
previously recognised in the statement of comprehensive income is removed from
equity and recognised in the statement of comprehensive income. Impairment losses
on equity investments are not reversed through the statement of comprehensive
income; increases in the fair value after impairment are recognised in other
comprehensive income.

(iii)

Renegotiated loans
Where possible, the Bank seeks to restructure loans rather than to take possession of
collateral. This may involve extending the payment arrangements and the agreement
of new loan conditions. Once the terms have been renegotiated, any impairment is
measured using the original EIR as calculated before the modification of terms and
the loan is no longer considered past due. Management continually reviews
renegotiated loans to ensure that all criteria are met and that future payments are
likely to occur. The loans continue to be subject to an individual or collective
impairment assessment, calculated using the loans original EIR.
20

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CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(6) Impairment of financial assets (Contd.)
(iv)

Collateral repossessed
The Banks policy is to determine whether a repossessed asset is best used for its
internal operations or should be sold. Assets determined to be useful for the internal
operations are transferred to their relevant asset category. Assets that are determined
better to be sold are immediately transferred to 'Assets held for sale'. Repossessed
assets where the Bank is yet to determine its use are retained under this
account.Repossessed assets are initially recognised at the lower of their fair values
less costs to sell and the amortised cost of the related outstanding loans on the date
of the repossession, and the related loans and advances together with the related
impairment allowances are derecognised from the balance sheet. Subsequently,
repossessed assets are measured at the lower of their cost and fair value less costs to
sell and are included in Assets held for sale.

(7) Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the
Statement of financial position if, and only if, there is a currently enforceable legal right to
offset the recognised amounts and there is an intention to settle on a net basis, or to realise
the asset and settle the liability simultaneously. This is not generally the case with master
netting agreements, therefore, the related assets and liabilities are presented gross in the
Statement of financial position.
(8) Leasing
The determination of whether an arrangement is a lease, or it contains a lease, is based on
the substance of the arrangement and requires an assessment of whether the fulfilment of
the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Bank as a lessee

Leases which do not transfer to the Bank substantially all the risks and benefits incidental to
ownership of the leased items are operating leases. Operating lease payments are
recognised as an expense in the statement of comprehensive income on a straight line basis
over the lease term.
Bank as a lessor

Leases where the Bank does not transfer substantially all the risk and benefits of ownership
of the asset are classified as operating leases. Initial direct costs incurred in negotiating
operating leases are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income.
21


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies(Contd.)

(9) Investment in associates and joint ventures
An associate is an entity over which the Bank has significant influence. Significant
influence is the power to participate in the financial and operating policy decisions of the
investee, but is not control or joint control over those policies.
The considerations made in determining significant influence or joint control are similar to
those necessary to determine control over subsidiaries.The Banks investment in its
associate is accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially
recognised at cost. The carrying amount of the investment is adjusted to recognise changes
in the Banks share of net assets of the associate or joint venture since the acquisition date.
Goodwill relating to the associate or joint venture is included in the carrying amount of the
investment and is not tested for impairment individually.
The statement of profit or loss and comprehensive income reflects the Banks share of the
results of operations of the associate or joint venture. Any change in OCI of those investees
is presented as part of the Banks OCI. In addition, when there has been a change
recognised directly in the equity of the associate or joint venture, the Bank recognises its
share of any changes, when applicable, in the statement of changes in equity. Unrealised
gains and losses resulting from transactions between the Bank and the associate or joint
venture are eliminated to the extent of the interest in the associate or joint venture.
The aggregate of the Banks share of profit or loss of an associate and a joint venture is
shown on the face of the statement of profit or loss outside operating profit and represents
profit or loss after tax and non-controlling interests in the subsidiaries of the associate or
joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting
period as the Bank. When necessary, adjustments are made to bring the accounting policies
in line with those of the Bank.
After application of the equity method, the Bank determines whether it is necessary to
recognise an impairment loss on its investment in its associate or joint venture. At each
reporting date, the Bank determines whether there is objective evidence that the investment
in the associate or joint venture is impaired. If there is such evidence, the Bank calculates
the amount of impairment as the difference between the recoverable amount of the associate
or joint venture and its carrying value, and then recognises the loss as Share of profit of an
associate and a joint venture in the statement of profit or loss.

22

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77

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(9) Investment in associates and joint ventures (Contd.)
Upon loss of significant influence over the associate or joint control over the joint venture,
the Bank measures and recognises any retained investment at its fair value. Any difference
between the carrying amount of the associate or joint venture upon loss of significant
influence or joint control and the fair value of the retained investment and proceeds from
disposal is recognised in profit or loss.
(10)

Recognition of income and expenses

Revenue is recognised to the extent that it is probable that the economic benefits will flow
to the Bank and the revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised.
(i)

Interest and similar income and expense

For all financial instruments measured at amortised cost, interest bearing financial
assets classified as available-for-sale and financial instruments designated at fair
value through profit or loss, interest income or expense is recorded using the EIR.
EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or a shorter period, where
appropriate, to the net carrying amount of the financial asset or financial liability.
The calculation takes into account all contractual terms of the financial instrument
(for example, prepayment options) and includes any fees or incremental costs that
are directly attributable to the instrument and are an integral part of the EIR, but not
future credit losses.
The carrying amount of the financial asset or financial liability is adjusted if the
Bank revises its estimates of payments or receipts. The adjusted carrying amount is
calculated based on the original EIR and the change in carrying amount is recorded
as Interest and similar income for financial assets and Interest and similar expense
for financial liabilities. However, for a reclassified financial asset for which the
Bank subsequently increases its estimates of future cash receipts as a result of
increased recoverability of those cash receipts, the effect of that increase is
recognised as an adjustment to the EIR from the date of the change in estimate.
Once the recorded value of a financial asset or a group of similar financial assets has
been reduced due to an impairment loss, interest income continues to be recognised
using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss.

23


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies(Contd.)

(10)

Recognition of income and expenses (Contd.)

(ii)

Fee and commission income

The Bank earns fee and commission income from a diverse range of services it
provides to its customers. Fee income can be divided into the following categories:
Fees earned for the provision of services over a period of time are accrued over that
period. These fees include commission income and asset management, custody and
other management and advisory fees.
Loan commitment fees for loans that are likely to be drawn down and other credit
related fees are deferred (together with any incremental costs) and recognised as an
adjustment to the EIR on the loan. When it is unlikely that a loan will be drawn
down, the loan commitment fees are recognised over the commitment period on a
straight-line basis.

(iii)

Dividend income
Revenue is recognised when the Banks right to receive the payment is established,
which is generally when the shareholders approve the dividend.

(iv)

Net trading income

Results arising from trading activities include all gains and losses from changes in
fair value and related interest income or expense and dividends for financial assets
and financial liabilities "held for trading".

(11)

Cash and cash equivalents

Cash and cash equivalents as referred to in the cash flow statement comprises cash on hand,
nonrestricted current accounts with central banks and amounts due from banks on demand
or with an original maturity of three months or less.
(12)

Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Subsequent costs
are included in the assets carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to
the Bank and the cost of the item can be measured reliably. The carrying amount of any
replaced part is derecognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in which they are incurred.
24

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79

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4 Summary of significant accounting policies(Contd.)

(13)

Property, plant and equipment (Contd.)

All items of property, plant and equipment are initially recorded at cost. Subsequent costs
are included in the assets carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to
the Bank and the cost of the item can be measured reliably. The carrying amount of any
replaced part is derecognised. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in which they are incurred.
Subsequent to recognition, property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses. Depreciation is calculated using the
straight-line method to write down the cost of property and equipment to their residual
values over their estimated useful lives. Land is not depreciated. The estimated useful lives
are as follows:

Buildings
Office equipment
Vehicles
Computer hardware

10 to 40 years
10 years
10 years
3 years

The residual values, useful life and depreciation method are reviewed at each financial yearend to ensure that the amount, method and period of depreciation are consistent with
previous estimates and the expected pattern of consumption of the future economic benefits
embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. The difference between the net
disposal proceeds, if any and the net carrying amount is recognised in statement of
comprehensive income.
(14)

Intangible assets

The Banks other intangible assets include the value of computer software and licenses.
An intangible asset is recognised only when its cost can be measured reliably and it is
probable that the expected future economic benefits that are attributable to it will flow to the
Bank.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is their fair value as at the date of
acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses.
25


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(13)

Intangible assets (Contd.)

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible
assets with finite lives are amortised over the useful economic life. The amortisation period
and the amortisation method for an intangible asset with a finite useful life are reviewed at
least at each financial yearend. Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the asset are accounted for by
changing the amortisation period or method, as appropriate, and they are treated as changes
in accounting estimates.
The amortisation expense on intangible assets with finite lives is presented as a separate line
item in the statement of comprehensive income.
Amortisation is calculated using the straightline method to write down the cost of
intangible assets to their residual values over their estimated useful lives as follows:

(14)

Computer software and licenses

Marketing items

3-10 years
10 years

Impairment of nonfinancial assets

The Bank assesses at each reporting date whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is
required, the Bank estimates the assets recoverable amount. An assets recoverable amount
is the higher of an assets or Cash generating unit's (CGUs) fair value less costs to sell and
its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a pretax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. In determining fair value less costs to sell, an
appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value
indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Bank estimates the assets or CGUs
recoverable amount. A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the assets recoverable amount since the
last impairment loss was recognised. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceeds the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised
for the asset in prior years. Such reversal is recognised in the statement of profit or loss and
comprehensive income.Impairment losses relating to goodwill are not reversed in further
periods.
26

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81

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies(Contd.)

(15)

Financial guarantees

In the ordinary course of business, the Bank gives financial guarantees, consisting of letters
of credit, guarantees and acceptances. Financial guarantees are initially recognised in the
financial statements (withinOther liabilities) at fair value, being the premium received.
Subsequent to initial recognition, the Banks liability under each guarantee is measured at
the higher of the amount initially recognised less cumulative amortization recognised in the
statement of comprehensive income, and the best estimate of expenditure required to settle
any financial obligation arising as a result of the guarantee.
Any increase in the liability relating to financial guarantees is recorded in the statement of
profit or loss in Credit loss expense. The premium received is recognised in the statement of
profit or loss in Net fees and commission income on a straight line basis over the life of the
guarantee.
(16) Employee benefits
(i)

Short term benefits

Wages, salaries and other salary related expenses are recognised as an expense in
the year in which the associated services are rendered by employees of the Bank.
Short term accumulating compensated absences such as paid annual leave are
recognised when services are rendered by employees that increase their entitlement
to future compensated absences, and short term non-accumulating compensated
absences such as sick leave are recognised when absences occur.

(ii)

Defined contribution plans

As required by law, companies in Mongolia make contributions to the government
pension scheme, and the Social and Health Fund. Such contributions are recognised
as expenses in profit or loss as incurred. The Bank also records funds in a "defined
contribution plan". The contribution constitute of fees collected from employees
who were late or were disciplined with a fine and the fund is used to pay for events
held for the employees, direct donations to employees, and other related
expenditures.

(17)

Provisions

Provisions are recognised when the Bank has a present obligation (legal or constructive) as
a result of a past event, and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation. The expense relating to any provision is presented in the statement
of profit or loss and comprehensive income net of any reimbursement.
27


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies(Contd.)

(18)

Taxes

(i)

Current tax
Current tax assets and liabilities for the current and prior years are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those that are enacted or
substantively enacted by the reporting date.

(ii)

Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. Deferred tax liabilities are recognised for all taxable temporary
differences, except:
Where the deferred tax liability arises from the initial recognition of goodwill or
of an asset or liability in a transaction that is not a business combination and, at
the time of the transaction, affects neither the accounting profit nor taxable profit
or loss
In respect of taxable temporary differences associated with investments in
subsidiaries, where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the
foreseeable future

Deferred tax assets are recognised for all deductible temporary differences, carry
forward of unused tax credits and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be
utilised except:
Where the deferred tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss
In respect of deductible temporary differences associated with investments in
subsidiaries, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilized

28

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83

CAPITAL BANK

2014
ANNUAL
REPORT
2014

CAPITAL BANK LLC

NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(18) Taxes (Contd)
(ii)

Deferred tax (Contd.)

The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred
tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively enacted at the reporting
date.
Current tax and deferred tax relating to items recognised directly in equity are also
recognised in equity and not in the statement of comprehensive income.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.

(19)

Assets held for sale

Assets held for sale are measured at the lower of their carrying amount and fair value less
costs to sell. Repossessed assets are classified as assets held for sale if their carrying
amounts will be recovered principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when the sale is highly probable and
the asset or disposal group is available for immediate sale in its present condition,
management has committed to the sale, and the sale is expected to have been completed
within one year from the date of classification.
In the statement of profit or loss and comprehensive income of the reporting period, and of
the comparable period of the previous year, income and expenses from discontinued
operations are reported separately from income and expenses from continuing operations,
down to the level of profit after taxes, even when the Bank retains a noncontrolling interest
in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately
in the statement of profit or loss and comprehensive income.
Property, plant and equipment and intangible assets once classified as held for sale are not
depreciated or amortised.
29


CAPITAL
BANK
2014
ANNUAL

REPORT

2014
CAPITAL BANK LLC
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2014
2.

ACCOUNTING POLICIES (CONTD.)

2.4

Summary of significant accounting policies (Contd.)

(20)

Dividends on ordinary shares

Dividends on ordinary shares are recognised as a liability and deducted from equity when
they are approved by the Banks shareholders. Interim dividends are deducted from equity
when they are declared and no longer at the discretion of the Bank.
Dividends for the year that are approved after the reporting date are disclosed as an event
after the reporting date.
(21)

Equity reserves

The reserves recorded in equity on the Banks statement of financial position include
Available-for-sale reserve, Other reserve and Regulatory reserve. Other reserve
represents appropriations of retained earnings, based on the decision of the Chief Executive
Officer of the Bank. The purpose of other reserve is to support the Bank employees social
activities. Regulatory reserve represents the difference in the loan loss provision amount
between IFRS and BOM regulations. Available-for-sale reserve constitutes fair value
changes arising from available-for-sale securities.

30

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2014

2014

Sambuu street - 43, Chingeltei district,

Ulaanbaatar city 211238, Mongolia
Website: http://www.capitalbank.mn
E-mail: info@capitalbank.mn
TEL: +976-7000-1912, +976-1800-1912,
FAX: +976-310833

86