TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Audited financial statements
Table of contents

Contents
General information
Statement by chairman and executives
Independent Auditor’s reportStatement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements

Page
1
2
3–4
5
6
7
8 – 10
11 - 88

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
General information

Board of directors

Mr. Koppa R (Chairman)
Mr. Erdenebileg D
Ms. Yanjmaa D
Mr. Khurelbaatar.D
Ms. Bolormaa J
Mr. Delgersaikhan J

Secretary of board of directors

Ms. Nyamsuren N

Registered office

Peace Avenue 19,
Sukhbaatar District, 1st khoroo,
Ulaanbaatar 14210, Mongolia

Auditors

Ernst & Young Mongolia Audit LLC
Certified Public Accountants

1TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of profit or loss and other comprehensive income
For the year ended 31 December 2022
Notes

2022
MNT’000

2021
MNT’000

Interest income calculated using the effective interest method
Other interest and similar income
Interest and similar expense
Net interest income

44
5642,747,024
31,331,028(354,478,116)
319,599,936

570,786,451
26,321,014(405,636,562)
191,470,903

Fee and commission income
Fee and commission expense
Net fee and commission income

6677,961,275(27,512,673)
50,448,602

65,236,995(20,800,855)
44,436,140

Trading and other operating income/(expense)
Total operating income

7

13,924,925
383,973,463(13,405,598)
222,501,445

Credit loss reversal
Net operating income

828,297,839
412,271,302

57,705,549
280,206,994

Operating expenses
Share of profit/(loss) of an associate
Profit before tax

915(172,790,891)
418,388239,898,799(130,938,563)(28,728,932)
120,539,499

Income tax expense
Profit for the year

10.1

(45,650,106)
194,248,693(15,729,066)
104,810,433

11

4,041

2,180

(16,130,824)(1,266,566)

14,779,163–(1,351,661)(18,633,681)
14,843,570(5,056,677)

192,897,032

99,753,756

Earnings per share (MNT)
Basic and diluted earnings per share

Other comprehensive income/(loss) (net of tax):
Other comprehensive income to be reclassified to profit or loss insubsequent periods (net of tax):
Net change in fair value of debt instruments at fair value through othercomprehensive income
30
Other comprehensive income not to be reclassified to profit or loss in subsequent
periods (net of tax):
Revaluation (loss)/gain on equity instruments at fair value through othercomprehensive income
30
Revaluation of property and equipment
30
Other comprehensive loss
Total comprehensive income for the year, net of tax

The accompanying notes form an integral part of the financial statements.
5

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of financial position
At 31 December 2022_______________________________________________________________________________________________________________________________

2022
MNT’000

2021
MNT’000

12
13
14
14
14
14
15
16
17
18
19
20
21
22
23

1,756,207,294
767,067,640
266,017,128
1,079,812,762
73,528,478
250,553,216
924,685
265,374,431
4,137,182,398
465,950,560
79,997,754
24,665,717
470,625,143
15,449,135
1,421,361
9,654,777,702

976,352,237
504,417,550
199,870,221
1,754,434,647
57,662,947
590,679,288
506,297
101,647,498
4,588,465,405
200,051,593
79,902,629
3,605,964
480,838,433
7,902,693
2,334,413
9,548,671,815

24
25
26
16
27
28
29
22
10.2
10.3

33,120,234
316,804,791
6,207,309,405
166,203,537
1,418,831,195–
260,483,585
15,869,783
55,742,118
2,401,790
8,476,766,438

13,938,713
289,792,528
6,266,310,519
78,035,961
1,408,740,129
160,140,274
289,069,965
8,999,663
12,499,999
1,035,344
8,528,563,095

30
30
30

323,810,329
664
258,908,980
595,291,291
1,178,011,264

323,809,925–
210,143,332
486,155,463
1,020,108,720

9,654,777,702

9,548,671,815

Notes
ASSETSCash and balances with Bank of Mongolia
Due from other banks and financial institutions
Financial assets at fair value through profit or loss
Debt instruments at fair value through other comprehensive income
Equity instruments at fair value through other comprehensive income
Debt instruments at amortised cost
Investment in associate
Derivative financial instruments
Loans and advances to customers
Other assets
Investment property
Assets held for sale
Property and equipment
Right-of-use assets
Intangible assets
TOTAL ASSETSLIABILITIESDue to banks and other financial institutions
Repurchase agreements
Due to customers
Derivative financial instruments
Borrowed funds
Debt securities issued
Other liabilities
Lease liabilities
Income tax liabilities
Deferred tax liabilities
TOTAL LIABILITIESEQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE
BANK
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITYTOTAL LIABILITIES AND EQUITY

The accompanying notes form an integral part of the financial statements.
6

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of changes in equity
For the year ended 31 December 2022

Share capital Share premium . Other reserves .
MNT’000
MNT’000
MNT’000(Note 30)
(Note 30)
(Note 30)

Retainedearnings .
MNT’000

Total equity
MNT’000

At 1 January 2021
Profit for the year
Other comprehensive income
Total comprehensive income
Realised revaluation reserve
Dividend (Note 30)
Movement on regulatory reserve*
Increase in ordinary shares
At 31 December 2021 and 1 January
2022

72,723,171
–
–
–
–
–
–
251,086,754

251,086,754
–
–
–
–
–
–
(251,086,754)

220,381,635–(5,056,677)(5,056,677)(32,613,320)–
27,431,694–

386,162,134
104,810,433–
104,810,433
32,613,320(9,998,730)(27,431,694)–

930,353,694
104,810,433(5,056,677)
99,753,756–(9,998,730)––

323,809,925–

210,143,332

486,155,463

1,020,108,720

Profit for the year
Other comprehensive income
Total comprehensive income
Realised revaluation reserve
Dividend (Note 30)
Movement on regulatory reserve*
Increase in ordinary shares
At 31 December 2022

–
–
–
–
–
–
404
323,810,329

–
–
–
–
–
–
664
664

–
(1,351,661)(1,351,661)(5,537,618)–
55,654,927–
258,908,980

194,248,693
194,248,693–(1,351,661)
194,248,693
192,897,032
5,537,618–(34,995,556)(34,995,556)(55,654,927)
–
–
1,068
595,291,291 1,178,011,264*Reserves include the regulatory reserve that is set up in compliance with Bank of Mongolia (“BoM”) requirements and is
distributable to Shareholders of the Bank subject to BoM’s approval.

The accompanying notes form an integral part of the financial statements.
7

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of cash flows
For the year ended 31 December 2022

Notes
CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax
Adjustments for:
Changes in fair value of financial derivatives(Gain)/Loss on disposal of property and equipment(Gain)/Loss on disposal of assets-held-for sale, net
Valuation gain on investment property(Gain)/Loss on disposal of foreclosed properties, net
Gain on disposal of investment properties
Gain on partial disposal of investment in associate
Net modification loss from project mortgage loans(Gain)/Loss on disposal of debt instrument measured at FVOCIImpairment of foreclosed properties
Modification loss on other loans receivables
Loss on initial recognition of equity investment measured at FVOCIWrite-off of foreclosed properties
Loss from revaluation of properties
Amortisation of deferred grant
Share of (profit)/loss in associate
Credit loss reversal
Depreciation of property and equipment
Amortisation of intangible assets
Depreciation of rights-of-use assets
Property and equipment written off
Intangible assets written off
Interest expense of borrowed funds
Interest expense of debt securities issued
Accretion of interest on lease liabilities
Unrealised foreign exchange differences of borrowed funds
Operating profit before working capital changes
Changes in operating assets and liabilities:
Statutory deposits with BoM
Due from other banks and financial institutions
Loans and advances to customers
Assets-held-for sale
Other assets
Due to banks
Repurchase agreements
Due to customers
Other liabilities
Cash generated from operations
Interest portion of the lease liabilities paid
Interest paid on borrowed funds
Interest paid on debt securities issued
Net cash flows generated from operating activities

The accompanying notes form an integral part of the financial statements.
8

7
7
7
7
7
7
7
7
7
7
7
7
7
7
7
15
8
9
9
9
9
9
5
5
5

2022
MNT’000

2021
MNT’000

239,898,799

120,539,499(97,805,076)
133,393
102,101(95,125)
4,541,099––
7,781,905(125,429)–
13,861,532–––(232,737)(418,388)(28,297,839)
13,182,054
1,644,302
5,345,669
7,225,692
1,685
93,256,863
6,326,356
990,130
97,002,614
364,319,600(21,067,389)(10,997,768)(3,391,791)(433,617)(204,152)(6,063,066)(5,434,794)
6,754,302
509,10927,650,688
17,805,897
14,508,803
2,123,116
1,745,195–
28,728,932(57,705,549)
13,653,950
2,373,456
5,128,494
154,371–
116,374,067
12,800,000
1,219,631(151,362)
266,620,022(142,511,368)(29,676,880)
483,985,686(24,334,203)(307,584,159)
19,181,521
27,012,263(59,001,114)(27,500,688)
303,890,658(990,130)(84,192,165)(6,466,630)
212,241,733(124,050,688)(15,513,234)(501,093,613)
3,873,960(61,028,385)(89,007,431)
65,504,912
954,892,336(348,300,156)
151,897,723(1,219,631)(105,600,240)(12,800,000)
32,277,852

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of cash flows (contd.)
For the year ended 31 December 2022

Notes
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial investments
Proceeds from disposal of financial investments
Proceeds from/(Payment for) gold prepayment agreement
Proceeds from disposal of property and equipment
Purchase of property and equipment
Proceeds on disposal of investment properties
Purchase of intangible assets
Net cash flows (used in)/generated from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from drawdown of borrowed funds
Repayment of borrowed funds
Payment of deferred upfront fees
Dividend paid
Repayment of debt securities
Proceeds from grant received
Proceeds from issuance of shares
Payment of principal portion of lease liabilities
Net cash flows (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents brought forward
Cash and cash equivalents carried forward

21
23

30
29
30

12
12

OPERATIONAL CASH FLOWS FROM INTEREST
Interest paid
Interest received
NON-CASH ACTIVITIES
Additions to right-of-use assets and lease liabilities
Modification of leases
Foreclosure of collaterals
Additions to property and equipment
Consideration for disposal of property and equipment
Consideration for disposal of investment property

22
22

2022
MNT’000

2021
MNT’000(787,212,627)
1,236,504,531
34,144,815
8,792,270(20,231,695)–(732,935)
471,264,359(1,422,590,074)
930,207,988(14,244,000)
15,976,615(25,018,146)
10,305,493(333,455)(505,695,579)

750,952,149(845,690,067)(1,238,328)(33,841,116)(160,000,000)
561,938
1,068(5,975,936)(295,230,292)

1,096,949,851(255,441,498)(2,127,043)(9,998,730)–––(5,230,452)
824,152,128

388,275,800
1,727,107,692
2,115,383,492

350,734,401
1,376,373,291
1,727,107,692(363,844,513)
805,020,573(412,379,234)
646,982,797

13,267,832
156,856
26,583,542–––

2,636,768
575,218
20,404,728
34,069,935
33,789,205
16,655,777

Reconciliation of changes in liabilities arising from financing activities:
Lease liabilities
At 1 January
Non-cash additions
Lease modification
Termination of lease
Interest expense during the year
Interest portion of the lease liabilities paid
Principal portion of lease liabilities paid
At 31 December

The accompanying notes form an integral part of the financial statements.
92022
MNT'000

2021
MNT'000

8,999,663
13,267,832
156,856(578,632)
990,130(990,130)(5,975,936)
15,869,783

11,384,522
2,636,768
575,218(366,393)
1,219,631(1,219,631)(5,230,452)
8,999,663

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Statement of cash flows (contd.)
For the year ended 31 December 2022___________________________________________________________________________________________________________________________________________________________________

Reconciliation of changes in liabilities arising from financing activities (contd.):
Borrowed funds
MNT'000

Debt securities
issuedMNT'000

At 1 January 2021

558,736,354

160,140,274

New disbursement
RepaymentInterest repayment
Deferred upfront fee
Net repayment

1,096,949,851(255,441,498)(105,600,240)(2,127,043)
733,781,070––(12,800,000)–(12,800,000)(151,362)(151,362)––

Interest expense accrued and deferral amortisation
At 31 December 2021 and 1 January 2022

116,374,067
1,408,740,129

12,800,000
160,140,274

New disbursement
RepaymentInterest repayment
Deferred upfront fee
Net repayment

750,952,149(845,690,067)(84,192,165)(1,238,328)(180,168,411)–(160,000,000)(6,466,630)–(166,466,630)

Foreign exchange movement
Non-cash items arising from financing activities

97,002,614
97,002,614––

Interest expense accrued and deferral amortisation
At 31 December 2022

93,256,863
1,418,831,195

6,326,356–

Foreign exchange movement
Non-cash items arising from financing activities

The accompanying notes form an integral part of the financial statements.
10

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
1. Corporate information
Trade and Development Bank of Mongolia LLC (the “Bank”) was incorporated under Mongolian law on 19 October 1990 andis engaged in the business of providing banking and financial services pursuant to License No. 8 issued by the Bank of Mongolia(“BoM”) under the first Banking sector supervision act in 1993.
The Bank is a limited liability company incorporated and domiciled in Mongolia. Its registered office is at Trade andDevelopment Bank of Mongolia building, Peace Avenue 19, Sukhbaatar district, 1st khoroo, Ulaanbaatar 14210, Mongolia.
As at 31 December 2022, the Bank is 64.00% owned by Globull Investment and Development PTE Ltd (“Globull”), which isincorporated in Singapore. Globull is 92.20% owned by US Global Investment LLC (incorporated in the United States ofAmerica) and 7.80% owned by Mr. Erdenebileg Doljin. (See Note 30 for the shareholders of the Bank and percentage ofownership). US Global Investment LLC is wholly owned by Mr. Erdenebileg Doljin.
The financial statements for the year ended 31 December 2022 were authorised for issue in accordance with the resolution of
the board of directors on 15 March 2023.
2. Significant accounting policies
2.1 Basis of preparation and statement of compliance
The financial statements of the Bank have been prepared in accordance with International Financial Reporting Standards(“IFRSs”) as issued by the International Accounting Standards Board (“IASB”).
The financial statements of the Bank have been prepared on a historical cost basis, except for debt and equity instruments atfair value through other comprehensive income (“FVOCI”), financial assets at fair value through profit and loss (“FVTPL”),
derivative financial instruments, buildings and land that are measured at fair value subsequent to its acquisition, investment
property, precious metal that is measured at fair value and properties held for sale which are measured at the lower of its
carrying amount and fair value less costs to sell. The financial statements are presented in Mongolian Togrog, which is denotedby the symbol MNT, and all values are rounded to the nearest thousands, except when otherwise indicated.
2.2 Presentation of financial statements
The Bank presents its statement of financial position broadly in order of liquidity based on the Bank’s intention and perceived
ability to recover/settle the majority of assets/liabilities of the corresponding financial statement line item. An analysis
regarding recovery or settlement within 12 months after the reporting date (current) and more than 12 months after the reporting
date (non-current) is presented in Note 36.
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position only
when there is a currently enforceable legal right to offset the recognised amounts without being contingent on a future eventand there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income andexpense are not offset in the statement of profit or loss and other comprehensive income (“OCI”) unless required or permitted
by any accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Bank.
2.3 Standards issued but not yet effective
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of theBank’s financial statements are disclosed below. The Bank intends to adopt these standards, if applicable, when they become
effective.
• IFRS 17
Insurance Contracts1• Amendments to IFRS 17
Insurance Contracts1• Amendments to IAS 1
Classification of Liabilities as Current or Non-current2• Amendments to IAS 8
Definition of Accounting Estimates1• Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies1• Amendments to IAS 12
Deferred Tax related to Assets and Liabilities arising from aSingle Transaction• Amendments to IFRS 16
Lease Liability in a Sale and Leaseback2• Amendments to IAS 1
Non-current Liabilities with Covenants2• Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an investor and its
Associate or Joint Venture3
1

Effective for annual periods beginning on or after 1 January 2023
Effective for annual periods beginning on or after 1 January 2024
3
No mandatory effective date yet determined but available for adoption
2

11

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.3 Standards issued but not yet effective (contd.)
IFRS 17 – Insurance contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance
contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4
Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e., life, non-life,
direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial
instruments with discretionary participation features. A few scope exceptions will apply. IFRS 17 introduces new accounting
requirements for banking products with insurance features that may affect the determination of which instruments or which
components thereof will be in the scope of IFRS 9 or IFRS 17.
Credit cards and similar products that provide insurance coverage: most issuers of these products will be able to continue with
their existing accounting treatment as a financial instrument under IFRS 9. IFRS 17 excludes from its scope credit card contracts(and other similar contracts that provide credit or payment arrangements) that meet the definition of an insurance contract if,
and only if, the entity does not reflect an assessment of the insurance risk associated with an individual customer in setting theprice of the contract with that customer.
When the insurance coverage is provided as part of the contractual terms of the credit card, the issuer is required to:••

Separate the insurance coverage component and apply IFRS 17 to it
Apply other applicable standards (such as IFRS 9, IFRS 15 Revenue from Contracts with Customers or

IAS 37 Provisions, Contingent Liabilities and Contingent Assets) to the other components Loan contracts that meet thedefinition of insurance but limit the compensation for insured events to the amount otherwise required to settle thepolicyholder’s obligation created by the contract: Issuers of such loans – e.g. a loan with waiver on death – have an option to
apply IFRS 9 or IFRS 17. The election would be made at a portfolio level and would be irrevocable.
IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures required. Early
application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. The
standards are not expected to have an impact on the Bank.
Amendments to IFRS 17 Insurance Contracts
Amendments to IFRS 17 include changes to simplify certain requirements in the standard and make financial performanceeasier to explain. The amendments also provide additional reliefs to reduce the effort required for the transition to IFRS 17. In
addition, the amendments defer the effective date of IFRS 17 to annual reporting periods beginning on or after 1 January 2023
with earlier application permitted. The amendments are not expected to have any impact on the Bank.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying
liabilities as current or non-current. The amendments clarify:••••

What is meant by a right to defer settlement
That a right to defer must exist at the end of the reporting period
That classification is unaffected by the likelihood that an entity will exercise its deferral rightThat only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability
does not impact its classification

The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and must be applied
retrospectively. The amendments have no impact on the Bank`s financial statements.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’. The
amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and thecorrection of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes inaccounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application ispermitted as long as this fact is disclosed.
The amendments are not expected to have a material impact on the Bank.

12

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.3 Standards issued but not yet effective (contd.)
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, inwhich it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The
amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for
entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies andadding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023 with earlier application
permitted. Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of thedefinition of material to accounting policy information, an effective date for these amendments is not necessary.
The Bank is currently assessing the impact of the amendments to determine the impact they will have on the Bank’s accounting
policy disclosures.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
In May 2021, the Board issued amendments to IAS 12, which narrow the scope of the initial recognition exception under IAS
12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.
The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period
presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided thatsufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable
temporary differences associated with leases and decommissioning obligations.
Lease Liability in a Sale and Leaseback – Amendments to IFRS 16
Amendments to IFRS 16 specify the requirements that a seller-lessee uses in measuring the lease liability arising in a sale andleaseback transaction to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right ofuse it retains.
The amendments are effective for annual periods beginning on or after 1 January 2024 and shall be applied retrospectively tosale and leaseback transactions entered into after the date of initial application of IFRS 16 (i.e., 1 January 2019). Earlier
application is permitted. The amendments are not expected to have any significant impact on the Bank’s financial statements.
Non-current liabilities with Covenants – Amendments to IAS 1
In October 2022, the IASB issued the 2022 Amendments to IAS 1 to further clarify that, among covenants of a liability arisingfrom a loan arrangement, only those with which an entity must comply on or before the reporting date affect the classificationof that liability as current or non-current. In addition, the 2022 Amendments require additional disclosures by an entity thatclassifies liabilities arising from loan arrangements as non-current when it has a right to defer settlement of those liabilities thatare subject to the entity complying with future covenants within 12 months after the reporting period.
The amendments are effective for annual periods beginning on or after 1 January 2024 and shall be applied retrospectively.
Earlier application is permitted. The Bank is currently assessing the impact of the amendments and whether existing loan
agreements may require revision.
Sale or Contribution of Assets between an investor and its Associate or Joint Venture – Amendments to IFRS 10 and IAS
28
Amendments to IFRS 10 and IAS 28 address an inconsistency between the requirements in IFRS 10 and in IAS 28 in dealing
with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a fullrecognition of a gain or loss resulting from a downstream transaction when the sale or contribution of assets between an investor
and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, again or loss resulting from the transaction is recognised in the investor’s profit or loss only to the extent of the unrelated
investor’s interest in that associate or joint venture. The amendments are to be applied prospectively. No mandatory effective
date yet determined for the amendments, but available for adoption.

2.4

New and amended standards and interpretations

The Bank has not early adopted any new standards, interpretations or amendments that have been issued but are not yet effectivein these financial statements.

13

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.4 New and amended standards and interpretations (contd.)
Other amendments and interpretations apply for the first time in 2022, but do not have an impact on the Bank’s financial
statements, these standards are summarised below:• Amendments to IFRS 3• Amendments to IAS 16• Amendments to IFRS 1• Amendments to IAS 37• Amendments to IFRS 9• IAS 41 Agriculture

Reference to the Conceptual Framework
Property, Plant and Equipment: Proceeds before Intended use
First-time Adoption of International Financial Reporting Standards-Subsidiary as afirst-time adopter
Onerous Contracts – Costs of Fulfilling a Contract
Fees in the ’10 Per cent’ Test for Derecognition of Financial liabilities
Taxation in fair value measurements

2.5 Summary of significant accounting policies
Foreign currency translation
The financial statements are presented in Mongolian Togrog (“MNT”), which is also the Banks functional currency. Monetary
assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange at thestatement of financial position date. All differences arising from settlement or translation of monetary items are taken to the
profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates
as 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 was determined. The gain or loss arising on translation of non-monetary
items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item.
Recognition of interest income
The effective interest rate method
Interest income is recorded using the effective interest rate (“EIR”) method for all financial instruments measured at amortised
cost (“AC”) and financial instruments designated at FVTPL. Interest income on interest bearing financial assets measured at
FVOCI are also recorded by using the EIR method. Interest expense is also calculated using the EIR method for all financial
liabilities held at amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial instrument or, when appropriate, a shorter period, to the gross carrying amount or, amortised cost as
appropriate of the financial asset.
The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any
discount or premium on the acquisition of the financial asset, as well as fees and costs that are an integral part of the EIR. The
Bank recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the
expected life of the loan. Hence, the EIR calculation also takes into account the effect of potentially different interest rates that
may be charged at various stages of the financial asset’s expected life, and other characteristics of the product life cycle(including prepayments, penalty interest and charges).
If expectations of fixed rate financial assets’ or liabilities’ cash flows are revised for reasons other than credit risk, then changes
to future contractual cash flows are discounted at the original EIR with a consequential adjustment to the carrying amount. The
difference from the previous carrying amount is booked as a positive or negative adjustment to the carrying amount of thefinancial asset or liability on the balance sheet with a corresponding increase or decrease in Interest revenue/expense calculatedusing the effective interest method.
For floating-rate financial instruments, periodic re-estimation of cash flows to reflect the movements in the market rates ofinterest also alters the effective interest rate, but when instruments were initially recognised at an amount equal to the principal,
re-estimating the future interest payments does not significantly affect the carrying amount of the asset or the liability.
The IBOR reform Phase 2 amendments allow as a practical expedient for changes to the basis for determining contractual cash
flows to be treated as changes to a floating rate of interest, provided certain conditions are met. The conditions include that thechange is necessary as a direct consequence of IBOR reform and that the transition takes place on an economically equivalentbasis.
Interest and similar income/expense
Net interest income comprises interest income and interest expense calculated using both the effective interest method andother methods. These are disclosed separately on the face of the statement of profit or loss for both interest income and interest
expense to provide symmetrical and comparable information. In its interest income/expense calculated using the effective
interest method, the Bank only includes interest on those financial instruments that are set out above.

14

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Recognition of interest income (contd.)
Interest and similar income/expense (contd.)
Other interest income/expense includes interest on derivatives in economic hedge relationships and all financial
assets/liabilities measured at FVTPL, other than those held for trading, using the contractual interest rate.
Interest income/expense on all trading financial assets/liabilities is recognised as a part of the fair value change in “Trading
and other operating income/expense”.
The Bank calculates interest income on financial assets, other than those considered credit-impaired, by applying the EIR to
the gross carrying amount of the financial asset. When a financial asset becomes credit-impaired and is therefore regarded as“Stage 3”, the Bank calculates interest income by applying the EIR to the net amortised cost of the financial asset. If thefinancial asset cures and is no longer credit-impaired, the Bank reverts to calculating interest income on a gross basis.
For purchased or originated credit-impaired (POCI) financial assets, the Bank calculates interest income by calculating thecredit-adjusted EIR and applying that rate to the amortised cost of the financial asset. The credit-adjusted EIR is the interest
rate that, at initial recognition, discounts the estimated future cash flows (including credit losses) to the amortised cost of the
POCI financial asset.
Fees and commission income
The Bank earns fees and commission income from a diverse range of services it provides to its customers. Fees and commission
income are recognised at an amount that reflects the consideration to which the Bank expects to be entitled in exchange forproviding the services. The performance obligations, as well as the timing of their satisfaction, are identified, and determined,at the inception of the contract. The Bank’s revenue contracts do not typically include multiple performance obligations, as
explained further below.
When the Bank provides a service to its customers, consideration is invoiced and generally due immediately upon satisfactionof a service provided at a point in time or at the end of the contract period for a service provided over time (unless otherwise
specified below). The Bank has generally concluded that it is the principal in its revenue arrangements because it typicallycontrols the services before transferring them to the customer.
Fee and commission income from services where performance obligations are satisfied over time
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.
Fee income from providing transaction services
Fees arising from negotiations or participating in the negotiation of a transaction for a third party, such as the arrangement of
the acquisition of shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying
transaction. Fees to components of fees that are liked to a certain performance obligation are recognised after fulfilling thecorresponding criteria of the performance.
Fee income forming an integral part of the corresponding financial instrument
Fees that the Bank considers to be an integral part of the corresponding financial instruments include: loan origination fees,
loan commitment fees for loans that are likely to be drawn down and other credit related fees. The recognition of these fees
(together with any incremental costs) form an integral part of the corresponding financial instruments and are recognised asinterest income through an adjustment to the EIR. The exception is, when it is unlikely that a loan will be draw down, the loan
commitment fees are recognised as revenue on expiry.
Fees and commission expense
Fee expense represents administration and fixed fee commission paid to the commercial banks. Fee expense is recognizedwhen actual service has been provided.
Components of fees that are linked to a certain performance are recognised after fulfilling the corresponding criteria.
Net trading income
Net trading income includes all gains and losses from changes in fair value and the related interest income or expense anddividends, for financial assets and financial liabilities held for trading.
Net gain or loss on financial assets and liabilities designated at FVTPL
Net gain or loss on financial instruments at FVTPL represents financial assets and financial liabilities designated as at FVTPL
and also non-trading assets measured at FVTPL, as required by or elected under IFRS9. The line item includes fair valuechanges, interest, dividends and foreign exchange differences.
15

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Net gain or loss on derecognition of financial assets measured at amortised cost or FVOCINet gain or loss on derecognition of financial assets measured at amortised cost includes loss (or income) recognised on saleor derecognition of financial assets measured at amortised costs or FVOCI calculated as the difference between the book value(including impairment) and the proceeds received.
Financial instruments – initial recognition
Date of recognition
Financial assets and liabilities, with the exception of loans and advances to customers and balances due to customers, areinitially recognised on the trade date, i.e., the date on which the Bank becomes a party to the contractual provisions of the
instrument. This includes regular way trades, i.e., 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. Loans and advances to customers arerecognised when funds are transferred to the customers’ accounts. The Bank recognises balances due to customers when funds
are transferred to the Bank.
Initial measurement of financial instruments
The classification of financial instruments at initial recognition depends on their contractual terms and the business model for
managing the instruments. Financial instruments, other than those measured at FVTPL, are initially measured at their fair value
including respective transaction costs. While financial instruments at FVTPL are recognised at its fair value and any transaction
costs are recognised in profit or loss. Trade receivables are measured at the transaction price. When the fair value of financial
instruments at initial recognition differs from the transaction price, the Bank accounts for the Day 1 profit or loss, as described
below.
‘Day 1’ profit or loss
When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation
technique using only inputs observable in market transactions, the Bank recognises the difference between the transaction priceand fair value in trading and other operating income/expenses. In those cases where fair value is based on models for whichsome of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only
recognised in profit or loss when the inputs become observable, or when the instrument is derecognised.
Measurement categories of financial assets and liabilities
The Bank classifies all of its financial assets based on the business model for managing the assets and the asset’s contractual
terms, measured at either:• Amortised cost
• FVOCI• FVTPL
The Bank classifies and measures its derivative and trading portfolio at FVTPL. The Bank may designate financial instruments
at FVTPL, if so doing eliminates or significantly reduces measurement or recognition inconsistencies.
Financial liabilities, other than loan commitments and financial guarantees, are measured at amortised cost or at FVTPL when
they are held for trading and derivative instruments or the fair value designation is applied.
Determination of fair value
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 tosell 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 by the Bank.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing theasset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.
The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available tomeasure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
16

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Determination of fair value (contd.)
In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation
techniques, as summarised below:•••

Level 1 financial instruments – Those where the inputs used in the valuation are unadjusted quoted prices from active
markets for identical assets or liabilities that the Bank has access to at the measurement date. The Bank considers markets
as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or
liabilities and when there are binding and exercisable price quotes available on the balance sheet date.
Level 2 financial instruments – Those where the inputs that are used for valuation and are significant, are derived fromdirectly or indirectly observable market data available over the entire period of the instrument’s life. Such inputs include
quoted prices for similar assets or liabilities in active markets, quoted prices for identical instruments in inactive markets
and observable inputs other than quoted prices such as interest rates and yield curves, implied volatilities, and credit
spreads. In addition, adjustments may be required for the condition or location of the asset or the extent to which it relates
to items that are comparable to the valued instrument. However, if such adjustments are based on unobservable inputs
which are significant to the entire measurement, the Bank will classify the instruments as Level 3.
Level 3 financial instruments – Those that include one or more unobservable input that is significant to the measurement
as whole.

The Bank periodically reviews its valuation techniques including the adopted methodologies and model calibrations. However,the base models may not fully capture all factors relevant to the valuation of the Bank’s financial instruments such as credit
risk (CVA), own credit (DVA) and/or funding costs (FVA). Therefore, the Bank applies various techniques to estimate thecredit risk associated with its financial instruments measured at fair value, which include a portfolio-based approach that
estimates the expected net exposure per counterparty over the full lifetime of the individual assets, in order to reflect the credit
risk of the individual counterparties for non-collateralised financial instruments. The Bank estimates the value of its own credit
from market observable data, such as secondary prices for its traded debt.
The Bank evaluates the levelling at each reporting period on an instrument-by-instrument basis and reclassifies instruments
when necessary, based on the facts at the end of the reporting period.
An analysis of fair values of financial instruments and further details as how they are measured are provided in Note 34.
Financial assets and liabilities per financial statement line
Due from banks, Loans and advances to customers, Financial investments at amortised cost
The Bank measures Due from banks, Loans and advances to customers and other financial investments at amortised cost only
if both of the following conditions are met:••

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest (SPPI) on the principal amount outstanding.

The details of these conditions are outlined below.
Business model assessment. The Bank determines its business model at the level that best reflects how it manages groups offinancial assets to achieve its business objective:••••

The risks that affect the performance of the business model and, in particular, the way those risks are managed;
Past experience with how the cash flows from these assets were obtained;
The metrics used to measure and report on portfolio performance and reported to the key management;
How managers of the business are compensated (for example, whether the compensation is based on the fair value ofthe assets managed or on the contractual cash flows collected)

The expected frequency, value and timing of sales are also important aspects of the Bank’s assessment.
The business model assessment is based on reasonably expected scenarios without taking ‘worst case’ or ‘stress case’ scenarios
into account. If cash flows after initial recognition are realised in a way that is different from the Bank’s original expectations,
the Bank does not change the classification of the remaining financial assets held in that business model, but incorporates suchinformation when assessing newly originated or newly purchased financial assets going forward.
The SPPI test. As a second step of its classification process the Bank assesses the contractual terms of financial instruments to
identify whether they meet the SPPI test.
‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may changeover the life of the financial asset (for example, if there are repayments of principal or amortisation of the premium/discount).
17

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Financial assets and liabilities per financial statement line item (contd.)
The most significant elements of interest within a lending arrangement are typically the consideration for the time value ofmoney and credit risk. To make the SPPI assessment, the Bank applies judgement and considers relevant factors such as thecurrency in which the financial asset is denominated, and the period for which the interest rate is set.
In contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flowsthat are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal
and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.
Derivatives recorded at fair value through profit or loss
A derivative is a financial instrument or other contract with all three of the following characteristics:• Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreignexchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial
variable that the variable is not specific to a party to the contract.
• It requires no initial net investment or an initial net investment that is smaller than would be required for other types ofcontracts that would be expected to have a similar response to changes in market factors.
• It is settled at a future date.
The Bank enters into derivative transactions with various counterparties. These include interest rate swaps, cross currency
swaps and forward foreign exchange contracts on interest rates and foreign currencies. 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 other income unless hedge accounting is applied.
Financial assets or financial liabilities held for trading
The Bank classifies financial assets or financial liabilities as held for trading when they have been purchased or issued primarily
for short-term profit-making through trading activities or form part of a portfolio of financial instruments that are managed
together, for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading assets and liabilities arerecorded and measured in the statement of financial position at fair value. Changes in fair value are recognised in net trading
income. Interest and dividend income or expense is recorded in net trading income according to the terms of the contract, or
when the right to payment has been established.
Debt instruments at FVOCIThe Bank classifies debt instruments at FVOCI when both of the following conditions are met:••

The instrument is held within a business model, the objective of which is achieved by both collecting contractual cash
flows and selling financial assets
The contractual terms of the financial asset meet the SPPI test

FVOCI debt instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value
recognised in OCI. Interest income and foreign exchange gains and losses are recognised in profit or loss in the same manner
as for financial assets measured at amortised cost.
The expected credit loss (“ECL”) calculation for debt instruments at FVOCI is explained in Note 33. Where the Bank holds
more than one investment in the same security, they are deemed to be disposed of on a first–in first–out basis. On derecognition,
cumulative gains or losses previously recognised in OCI are reclassified from OCI to profit or loss.
Equity instruments at FVOCIUpon initial recognition, the Bank occasionally elects to classify irrevocably some of its equity investments as equity
instruments at FVOCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are notheld for trading. Such classification is determined on an instrument-by-instrument basis.
Gains and losses on these equity instruments are never recycled to profit or loss even upon derecognition. Dividends arerecognised in profit or loss as other operating income when the right of the payment has been established, except when the
Bank benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in
OCI. Equity instruments at FVOCI are not subject to an impairment assessment.

18

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Financial assets and liabilities per financial statement line item (contd.)
Borrowed funds and debt securities issued
Borrowed funds and debt securities issued are contractual obligations to local and foreign financial institutions.
After initial measurement, borrowed funds and debt securities issued are subsequently measured at amortised cost using the
EIR. The amortised cost of borrowed funds and debt securities issued is calculated using EIR by taking into account any
transaction costs related to the transaction.
A compound financial instrument which contains both a liability and an equity component is separated at the issue date. Whenestablishing the accounting treatment of these non-derivative instruments the Bank first establishes whether the instrument is
a compound instrument and classifies such instruments or components separately as financial liabilities, financial assets, or
equity instruments in accordance with IAS 32. Classification of the liability and equity components of a convertible instrument
is not revised as a result of a change in the likelihood that a conversion option will be exercised, even when exercise of theoption may appear to have become economically advantageous to some holders. When allocating the initial carrying amountof a compound financial instrument to its equity and liability components, the equity component is assigned the residual amountafter deducting from the entire fair value of the instrument, the amount separately determined for the liability component. The
value of any derivative features (such as a call options) embedded in the compound financial instrument, other than the equity
component (such as an equity conversion options) is included in the liability component. Once the Bank has determined thesplit between equity and liability, it further evaluates if the liability component has embedded derivatives which would require
separation.
Financial assets and liabilities at FVTPL
Financial assets in this category are those that are not held for trading and have been either designated by management upon
initial recognition or are mandatorily required to be measured at fair value under IFRS 9.
Financial assets at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are recorded
in profit and loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or interest
expense, respectively, using the EIR, taking into account any discount/ premium and qualifying transaction costs being an
integral part of instrument. Interest earned on assets mandatorily required to be measured at FVTPL is recorded using thecontractual interest rate. Dividend income from equity instruments measured at FVTPL is recorded in profit or loss as otheroperating income when the right to the payment has been established.
Financial guarantee, letter of credit and undrawn loan commitments
The Bank issues financial guarantees, letters of credit and loan commitments.
Financial guarantees are initially recognised in the financial statements (within ‘other liabilities’) at fair value, being thepremium received. Subsequent to initial recognition, the Bank’s liability under each guarantee is measured at the higher of theamount initially recognised less cumulative amortisation recognised in the income statement, and an ECL allowance as set out
in Note 32.
The premium received is recognised in the income statement in Net fees and commission income on a straight line basis overthe life of the guarantee.
Undrawn loan commitments and letters of credits are commitments under which, over the duration of the commitment, theBank is required to provide a loan with pre-specified terms to the customer. Similar to financial guarantee contracts, thesecontracts are in the scope of the ECL requirements.
The nominal contractual value of financial guarantees, letters of credit and undrawn loan commitments, where the loan agreed
to be provided is on market terms, are not recorded on in the statement of financial position. The nominal values of these
instruments together with the corresponding ECL are disclosed in Note 32.
Due to customers
This includes current, savings, time deposits and bank guarantee fund from customers. After initial measurement, due tocustomers are subsequently measured at amortised cost using the EIR.
Due to banks
This includes deposits from other banks and financial institutions in foreign currency and local currency accounts and time
deposits placed by local and foreign commercial banks and BoM. The Bank recognises due to customer balances when funds
reach the Bank. After initial measurement, due to banks are subsequently measured at amortised cost using the EIR.

19

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Reclassification of financial assets
The Bank does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstancesin which the Bank acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
Modification of financial assets and liabilities
Modification of financial assets
When the contractual cash flows of a financial asset are renegotiated or otherwise modified as a result of commercial
restructuring activity rather than due to credit risk and impairment considerations, the Bank performs an assessment todetermine whether the modifications result in the derecognition of that financial asset. For financial assets, this assessment isbased on qualitative factors.
When assessing whether or not to derecognise a loan to a customer, amongst others, the Bank considers the following factors:••••

Change in currency of the loan
Introduction of an equity feature
Change in counterparty
Whether the modification is such that the instrument would no longer meet the SPPI criterion

If the modification does not result in cash flows that are substantially different, as set out below, then it does not result inderecognition. Based on the change in cash flows discounted at the original EIR, the Bank records a modification gain or loss,
to the extent that an impairment loss has not already been recorded.
Modification of financial liabilities
When the modification of the terms of an existing financial liability is not judged to be substantial and, consequently, does not
result in derecognition, the amortised cost of the financial liability is recalculated by computing the present value of estimatedfuture contractual cash flows that are discounted at the financial liability’s original EIR. Any resulting difference is recognised
immediately in profit or loss.
For financial liabilities, the Bank considers a modification to be substantial based on qualitative factors and if it results in adifference between the adjusted discounted present value and the original carrying amount of the financial liability of, or greater
than, ten percent.
Derecognition of financial assets and liabilities
Derecognition due to substantial modification of terms and conditions
The Bank derecognises a financial asset, such as a loan to a customer, when the terms and conditions have been renegotiatedto the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to theextent that an impairment loss has not already been recorded. The newly recognised loans are classified as Stage 1 for ECL
measurement purposes, unless the new loan is deemed to be POCI.
Derecognition other than for substantial modification
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 also derecognises the financial
asset if it has both transferred the financial asset and the transfer qualifies for derecognition.
The Bank has transferred the financial asset if, and only if, either:••

The Bank has transferred its contractual rights to receive cash flows from the asset; or
It retains the right to the cash flows, but has assumed an obligation to pay the received cash flows in full without material
delay to a third party under a ‘pass–through’ arrangement

20

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Derecognition of financial assets and liabilities (contd.)
Derecognition other than for substantial modification (contd.)Pass-through arrangements are transactions whereby the Bank retains the contractual rights to receive the cash flows of afinancial asset (the original asset), but assumes a contractual obligation to pay those cash flows to one or more entities (theeventual recipients), when all of the following three conditions are met:
• The Bank has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from theoriginal asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at
market rates• The Bank cannot sell or pledge the original asset other than as security to the eventual recipients• The Bank has to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, theBank is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents, including interest earned,
during the period between the collection date and the date of required remittance to the eventual recipients
A transfer only qualifies for derecognition if 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 controlof the asset

The Bank considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety
to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on thetransfer.
When the Bank has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset,
the asset continues to be recognised only to the extent of the Bank’s continuing involvement, in which case, the Bank also
recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects therights and obligations that the Bank has retained. Continuing involvement that takes the form of a guarantee over the transferredasset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration the Bank
could be required to pay.
If continuing involvement takes the form of a written or purchased option (or both) on the transferred asset, the continuing
involvement is measured at the value the Bank would be required to pay upon repurchase. In the case of a written put option
on an asset that is measured at fair value, the extent of the entity's continuing involvement is limited to the lower of the fairvalue of the transferred asset and the option exercise price.
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, orthe 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 profit or loss.
Forborne modified loans
The Bank sometimes makes concessions or modifications to the original terms of loans as a response to the borrower’s financial
difficulties, rather than taking possession or to otherwise enforce collection of collateral. The Bank considers a loan forborne
when such concessions or modifications are provided as a result of the borrower’s present or expected financial difficulties andthe Bank would not have agreed to them if the borrower had been financially healthy. Indicators of financial difficulties include
defaults on covenants, or significant concerns raised by the Credit Risk Department.
Forbearance may involve extending the payment arrangements and the agreement of new loan conditions. It is the Bank’s
policy to monitor forborne loans to help ensure that future payments continue to be likely to occur.
If modifications are substantial, the loan is derecognised, as explained above. Once the terms have been renegotiated without
this resulting in the derecognition of the loan, any impairment is measured using the original EIR as calculated before themodification of terms. It is the Bank’s policy to monitor forborne loans to help ensure that future payments continue to be
likely to occur.

21

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Forborne modified loans (contd.)
When the loan has been renegotiated or modified but not derecognised, the Bank considers that there has been a significant
increase in credit risk since initial recognition and thus classifies the loan as Stage 2. Once an asset has been classified as
forborne, it reclassified out of the forborne category, the customer has to meet all of the following criteria:•••

All of its facilities have to be considered performing
Regular payments of more than an insignificant amount of principal or interest have been made during at least half of theprobation period
The customer does not have any contracts that are more than 30 days past due

Details of forborne assets are disclosed in Note 33.
Impairment of financial assets
Overview of the ECL principles
The Bank records an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan
commitments and financial guarantee contracts, in this section all referred to as ‘financial instruments’. Equity instruments are
not subject to impairment under IFRS 9.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or“LTECL”), unless there has been no significant increase in credit risk (“SICR”) since origination, in which case, the allowanceis based on the 12 months expected credit loss (“12mECL”). The Bank’s policies for determining if there has been a SICR are
set out in Note 33.
The 12mECL is the portion of LTECL that represent the ECL that result from default events on a financial instrument that are
possible within the 12 months after the reporting date.
Both LTECL and 12mECL are calculated on either an individual basis or a collective basis, depending on the nature of theunderlying portfolio of financial instruments.
The Bank has established a policy to perform an assessment, at the end of each reporting period, of whether a financial
instrument’s credit risk has increased significantly since initial recognition, by considering the change in the risk of default
occurring over the remaining life of the financial instrument.
Based on the above process, the Bank groups its loans into Stage 1, Stage 2, Stage 3 as described below:
Stage 1: When loans are first recognised, the Bank recognises an allowance based on 12mECL. Stage 1 loans also include
facilities where the credit risk has improved and the loan has been reclassified from Stage 2.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the
LTECL. Stage 2 loans also include facilities, where the credit risk has improved and the loan has been reclassified
from Stage 3.
Stage 3: Loans considered credit-impaired. The Bank records an allowance for the LTECL.
POCI:POCI assets are financial assets that are credit impaired on initial recognition. POCI assets are recorded at fair value
at original recognition and interest income is subsequently recognised based on a credit-adjusted EIR. The ECL
allowance is only recognised or released to the extent that there is a subsequent change in the expected credit losses.

For financial assets for which the Bank has no reasonable expectations of recovering either the entire outstanding amount, ora proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of
the financial asset.
Calculation of ECL
The Bank calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls, discounted at
an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordancewith the contract and the cash flows that the entity expects to receive.

22

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Impairment of financial assets (contd.)
The mechanics of the ECL calculations are outlined below and the key elements are, as follows:PD:

The Probability of Default (“PD”) is an estimate of the likelihood of default over a given time horizon. A default may
only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is stillin the portfolio.

EAD: The Exposure at Default (“EAD”) is an estimate of the exposure at a future default date, taking into account expectedchanges in the exposure after the reporting date, including repayments of principal and interest, whether scheduled bycontract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments.
LGD: The Loss Given Default (“LGD”) is an estimate of the loss arising in the case where a default occurs at a given time.
It is based on the difference between the contractual cash flows due and those that the lender would expect to receive,
including from the realisation of any collateral or credit enhancements that are integral to the loan and not required tobe recognised separately. It is usually expressed as a percentage of the EAD.
When estimating the ECL, the Bank considers three scenarios (a base case, an upside and a downside). Each of these isassociated with different PDs.
The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure orcollective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure
has not prepaid or defaulted in the earlier month). This effectively calculates an ECL for each future month, which is thendiscounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original effective
interest rate or an approximation thereof.
Impairment losses and releases are accounted for and disclosed separately from modification losses or gains that are accounted
for as an adjustment of the financial asset’s gross carrying value.
The mechanics of the ECL method are summarised below:
Stage 1:

Stage 2:

Stage 3:

The 12mECL is calculated as the portion of LTECL that represent the ECL that result from default events ona financial instrument that are possible within the 12 months after the reporting date. The Bank calculates the
12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting
date. These expected 12-month default probabilities are applied to a forecast EAD and multiplied by the
expected LGD and discounted by an approximation to the original EIR.
When a loan has shown a significant increase in credit risk since origination, the Bank records an allowancefor the LTECL. The mechanics are similar to those explained above, including the use of multiple scenarios,
but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted
by an approximation to the original EIR.
For loans considered credit-impaired, the Bank recognises the lifetime expected credit losses for these loans.
The method is similar to that for Stage 2 assets, with the PD set at 100%.

POCIPOCI assets are financial assets that are credit impaired on initial recognition. The Bank only recognises the
cumulative changes in lifetime ECL since initial recognition, based on a probability-weighting of the three
scenarios, discounted by the credit-adjusted EIR.

Loan
commitments
and letters ofcreditWhen estimating LTECL for undrawn loan commitments, the Bank estimates the expected portion of the loan
commitment that will be drawn down over its expected life. The ECL is then based on the present value of the
expected shortfalls in cash flows if the loan is drawn down. The expected cash shortfalls are discounted at an
approximation to the expected EIR on the loan.
For credit cards and revolving facilities that include both a loan and an undrawn commitment, ECL arecalculated and presented together with the loan. For loan commitments and letters of credit, the ECL isrecognised within ‘other liabilities’.

Financialguarantee
contracts

The Bank’s liability under each guarantee is measured at the higher of the amount initially recognised lesscumulative amortisation recognised in profit or loss, and the ECL provision. For this purpose, the Bank
estimates ECL based on the present value of the expected payments to reimburse the holder for a credit loss
that it incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The
calculation is made using a probability-weighting of the three scenarios. The ECL related to financial guarantee
contracts are recognised within ‘other liabilities’.

23

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Impairment of financial assets (contd.)Debt instruments measured at FVOCIThe ECL for debt instruments measured at FVOCI do not reduce the carrying amount of these financial assets in the statementof financial position, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were
measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a corresponding charge to profit
or loss. The accumulated loss recognised in OCI is recycled to the profit and loss upon derecognition of the assets.
Credit cards and other revolving facilities
The Bank’s product offering includes a variety of corporate and retail overdraft and credit cards facilities, in which the Bank
has the right to cancel and/or reduce the facilities with one day’s notice. The Bank does not limit its exposure to credit losses
to the contractual notice period, but instead calculates ECL over a period that reflects its expectations of customer behaviour,the likelihood of default and its future risk mitigation procedures, which could include reducing or cancelling the facilities.
The ongoing assessment of whether a significant increase in credit risk has occurred for revolving facilities is similar to otherlending products. This is based on shifts in the customer’s internal credit grade, but greater emphasis is also given to qualitative
factors such as changes in usage.
The interest rate used to discount the ECL for credit cards and overdrafts is based on annualised the average effective interest
rate that is expected to be charged over the expected period of exposure to the facilities. This estimation takes into account thatmany facilities are repaid in full each month and are consequently not charged interest.
Forward looking information
In its ECL models, the Bank relies on a broad range of forward-looking information (“FLI”) as economic inputs, such as:
•
•
•
•
•
•
•
•

Inflation Rate
Gross Domestic Product (“GDP”) growth
MNT/USD Exchange rate (“FX rate”)
Policy rate
Credit Growth (YoY)
Money M2 Growth (YoY)
Unemployment rate
Credit outstanding of commercial banks

The inputs and models used for calculating ECL may not always capture all characteristics of the market at the date of thefinancial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments whensuch differences are significantly material.
Credit enhancements: Collateral valuation and financial guarantees
To mitigate its credit risks on financial assets, the Bank seeks to use collateral, where possible. The collateral comes in various
forms, such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, other non-financial assets andcredit enhancements such as netting agreements. Collateral, unless repossessed, is not recorded on the Bank’s statement offinancial position.
Cash flows expected from credit enhancements which are not required to be recognised separately by IFRS standards andwhich are considered integral to the contractual terms of a debt instrument which is subject to ECL, are included in themeasurement of those ECL. On this basis, the fair value of collateral affects the calculation of ECL. Collateral is generally
assessed, at a minimum, at inception and re-assessed on annual basis.
To the extent possible, the Bank uses active market data for valuing financial assets held as collateral. Other financial assets
which do not have readily determinable market values are valued using models. Non-financial collateral, such as real estate, isvalued based on data provided by third parties such as mortgage brokers or based on housing price indices.
Guarantees held are included in the measurement of loan ECL when either they are specified in the contractual terms of theloan or else are integral to the loan, in that they formed part of the basis on which the loan was extended.
Guarantees that are not integral to the loan’s contractual terms are accounted as separate units of accounts subject to ECL.

24

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
GrantsGrants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will becomplied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods
that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised
as income in equal amounts over the expected useful life of the related asset.
When the Bank receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released
to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying
asset by equal annual instalments.
Foreclosed properties
The Bank’s policy is to determine whether a foreclosed asset can be 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 at the lower of theirforeclosed value or the carrying value of the original secured asset. Assets for which selling is determined to be a better option
are transferred to “Assets held for sale” at their fair value (if financial asset) or fair value less cost to sell for non-financial
assets at the repossession date. Assets that are expected to be sold beyond twelve months are included in “Other assets” andare measured at the lower of the cost and fair value less costs to sell.
Precious metals
Precious metals represent gold and silver which are carried at the fair value.
Write-offs
Financial assets are written off either partially or in their entirety only when the Bank has no reasonable expectation ofrecovering a financial asset in its entirety or a portion thereof. If the amount to be written off is greater than the accumulated
loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying
amount. Any subsequent recoveries are credited to credit loss expense.
Investment in associate
The Bank’s investment in associate is accounted for using the equity method. An associate is an entity in which the Bank hassignificant influence. Significant influence is the power to participate in the financial and operating policies.
Under the equity method, the investment in an associate is carried on the statement of financial position at cost plus postacquisition changes in the Bank’s share of net assets of the associate. Goodwill relating to the associate is included in the
carrying amount of the investment and is neither amortized nor individually tested for impairment.
The statement of profit and loss and other comprehensive income reflects the Bank’s share on the results of operations of theassociate. When there has been a change recognized directly in the equity of the associate, the Bank recognizes its share of any
changes and discloses this, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting fromtransactions between the Bank and the associate are eliminated to the extent of the interest in the associate.
The Bank’s share of profit of an associate is shown on the face of the statement profit or loss and other comprehensive income.
This is the profit attributable to equity holders of the associate and, therefore, is profit after tax and non-controlling interests inthe subsidiaries of the associate, if any.
The financial statements of the associate 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 recognize an additional impairment loss
on its investment in its associate. The Bank determines at each reporting date whether there is any objective evidence that theinvestment in the associate is impaired. If this is the case, the Bank calculates the amount of impairment as the difference
between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit of an
associate’ in profit and loss.
Upon loss of significant influence over the associate, the Bank measures and recognizes any retaining investment at its fairvalue. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of theretained investment and proceeds from disposal is recognized in profit or loss.

25

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Cash and bank balances
Cash and bank balances in the statement of financial position comprise cash at banks and on hand and short-term deposits witha maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents comprises cash on hand, non-restricted current
accounts with banks and amounts due from banks or with an original maturity of three months or less.
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 isrecognised 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 transaction’s 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. When the counterparty has the right to sell or re-pledge the securities, the Bank reclassifies those securities in
its statement of financial position to indicate that they are pledged as collateral.
Conversely, securities purchased under agreements to resell at a specified future date are not recognised in the statement offinancial position. The consideration paid, including accrued interest, is recorded in the statement of financial position, within‘Reverse repurchase agreements’, reflecting the transaction’s economic substance as a loan by the Bank. The difference
between the purchase and resale prices is recorded in ‘Interest and similar income’ and is accrued over the life of the agreement
using the EIR.
LeasesThe Bank assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right tocontrol the use of an identified asset for a period of time in exchange for consideration.
Bank as a lessee
The Bank applies a single recognition and measurement approach for all leases, except for short-term leases and leases of lowvalue assets. The Bank recognises lease liabilities to make lease payments and right-of-use assets representing the right to use
the underlying assets.
Right-of-use assets
The Bank recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted forany remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unlessthe Bank is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use
assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets
are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Bank recognises lease liabilities measured at the present value of lease payments
to be made over the lease term.
The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable,variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which theevent or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Bank uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of leaseliabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixedlease payments or a change in the assessment to purchase the underlying asset.

26

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Leases (contd.)
Short-term leases
The Bank applies the short-term lease recognition exemption to its short-term leases of certain office spaces (i.e., those leases
that have a lease term of 12 months or less from the commencement date or spaces for ATMs). Lease payments on short-termleases are recognised as expense on a straight-line basis over the lease term.
Determining the lease term of contracts with renewal options
The Bank determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option
to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it isreasonably certain not to be exercised.
The Bank applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers
all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Bank
reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability
to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). The Bank included the renewal period
as part of the lease term for leased office spaces due to the significance of these assets to its branch operations.
Property and equipment
Property and equipment are initially recorded at cost. Such cost includes the cost of replacing part of the property and equipment
when the costs are incurred if the recognition criteria are met. When significant parts of property and equipment are required
to be replaced at intervals, the Bank recognises such parts as individual assets with specific useful lives and depreciation,
respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the property andequipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in
profit or loss as incurred.
Subsequent to initial recognition, items of property and equipment, except for buildings and land are subsequently stated atcost, net of accumulated depreciation and accumulated impairment losses, if any.
Buildings and land are measured at fair value. Valuations are undertaken on a three to five year cycle. Between valuation dates,buildings are depreciated to the extent that reflect erosion of value. Any revaluation reserve is recorded in other comprehensive
income and hence, credited to the asset revaluation reserve in equity, except to the extent that it reverses a revaluation decreaseof the same asset previously recognised in profit or loss, in which case, the increase is recognised in profit or loss. A revaluation
deficit is recognised in profit or loss, except to the extent that it offsets an existing reserve on the same asset recognised in theasset revaluation reserve.
Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net
amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset
being sold is transferred to retained earnings.
Construction in progress is stated at cost which includes cost of construction equipment and other costs less any impairment invalue. Construction in progress is not depreciated nor depleted until such time as the relevant assets are completed and put into
operational use.
Depreciation of property and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual
value over the estimated useful life as follows:
Type of Asset
Buildings and land
Office equipment and vehicles
Computers and others

Estimated Useful Life in Years
25 – 60
3 – 152 – 13

Items of property and equipment are derecognised upon disposal or when no future economic benefits are expected from its
use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statements of profit or loss when the asset is derecognised.
The residual values, useful life and depreciation method are reviewed at each financial year end 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 and equipment.

27

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Intangible assets
The Bank’s intangible assets include the value of computer software.
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. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortisedover the useful economic life. The amortisation period and the amortisation method for an intangible asset with a finite usefullife are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumptionof future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as
appropriate, and treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent
with the function of the intangible asset. Amortisation is calculated using the straight–line method to write down the cost ofintangible assets to their residual values over their estimated useful live of three to ten years.
Investment property
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment
properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes
in the fair values of investment properties are included in profit or loss in the period in which they arise, including thecorresponding tax effect. Fair values are determined based on an annual valuation performed by an accredited external
independent valuer applying a valuation model recommended by the International Valuation Standards Committee.
Investment properties are derecognised either when they have been disposed of (i.e., at the date the recipient obtains control)or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period
of derecognition. In determining the amount of consideration from the derecognition of investment property the Bank considers
the effects of variable consideration, existence of a significant financing component, non-cash consideration, and consideration
payable to the buyer (if any).
Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property
to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owneroccupied property becomes an investment property, the Bank accounts for such property in accordance with the policy statedunder property, plant and equipment up to the date of change in use.
Non-current assets held for sale
The Bank classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a saletransaction rather than through continuing use. Non-current assets classified as held for sale are measured at the lower of theircarrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal ofan asset, excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset is available
for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely thatsignificant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed tothe plan to sell the asset and the sale expected to be completed within one year from the date of the classification.
Impairment of non–financial assets
The Bank assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, orwhen annual impairment testing for an asset is required, the Bank estimate the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or Cash Generating Unit’s (“CGU”) 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 iswritten down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specificto the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

28

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Impairment of non–financial assets (contd.)
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 estimate theasset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in
the assumptions used to determine the asset’s 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 amountthat would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Suchreversal is recognised in the statement of profit or loss and other comprehensive income.
Employee benefits
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 compensatedabsences such as sick leave are recognised when absences occur.
Defined contribution plans
As required by law, companies in Mongolia make contributions to the government pension scheme, social and health fund.
Such contributions are recognised as an expense in profit or loss as incurred.
Provisions
Provisions are recognised when the Bank has a present obligation (legal or constructive) as a result of a past event, and it isprobable 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 profit or loss netof any reimbursement.
Segment reporting
An operating segment is a component of the Bank that engages in business activities from which it may earn revenues andincur expenses, including revenues and expenses that relate to transactions with any of the Bank’s other components. All
operating segments’ operating results are regularly reviewed by the Bank’s chief operating decision maker (“CODM”) to makedecisions about resources to be allocated to the segment and assess its performance and for which discrete financial information
is available.
Taxes
Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from orpaid 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 statement of financial position date.
Deferred tax
Deferred tax is provided on temporary differences at the statement of financial position date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable
temporary differences, except for:• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction thatis not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit orloss.
• 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 theforeseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position 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 statement of financial position date and are recognised to theextent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

29

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Taxes (contd.)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realisedor the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement offinancial position date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items arerecognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
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.
EquityShare capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity
as a deduction, net of tax, from the proceeds.
Share premium
The amount of contribution in excess of par value is accounted for as “Share premium”. Share premium also arises fromadditional capital contribution from the stockholders.
Retained earnings
Retained earnings represent accumulated profits or losses, reduced by dividend declarations. These may also include priorperiod adjustments and effects of changes in accounting policies.
Asset revaluation reserve
The revaluation reserve is used to record the reserve arising from the revaluation of the Bank’s land and buildings.
Regulatory reserve
Regulatory reserve mainly represents a difference between impairment provision determined for loan loss and impairment offoreclosed assets in accordance with the regulations of BoM and impairment provision determined under IFRS. This reserve
represents a part of other reserve and is distributable to shareholder of the Bank subject to BoM's approval.
Fair value reserves
The fair value reserves comprise of the cumulative net change in the fair value of the debt instruments classified at FVOCI,
less the allowance for ECL, and the cumulative net change in fair value of equity instruments at FVOCI.
Earnings per share
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the Bankby the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders of the
Bank (after adjusting for interest on the convertible preference shares and interest on the convertible bond, in each case net oftax, if any) by weighted average number of shares outstanding during the year plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

30

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
2.5 Summary of significant accounting policies (contd.)
Transactions with related parties
A related party is a person or entity that is related to the Bank:
A person or a close member of that person’s family is related to a Bank if that person:• has control or joint control of the Bank;• has significant influence over the Bank; or• is a member of the key management personnel of the Bank or of a parent of the Bank.
An entity is related to a Bank if any of the following conditions applies:• The entity and the Bank are members of the same group (which means that each parent, subsidiary and fellow subsidiary
is related to the others).
• One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group ofwhich the other entity is a member).
• Both entities are joint ventures of the same third party.
• One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
• The entity is a post-employment benefit plan for the benefit of employees of either the Bank or an entity related to the Bank.
If the Bank is itself such a plan, the sponsoring employers are also related to the Bank.
• The entity is controlled or jointly controlled by a person who has control or joint control of the Bank.
• A person who has control or joint control of the Bank has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
• The entity, or any member of a group of which it is a part, provides key management personnel services to the Bank or to
the parent of the Bank.
All material transactions and balances with the related parties are disclosed in the relevant notes to financial statements and thedetail is presented in Note 35.
3. Significant accounting judgments, estimates and assumptions
The preparation of the Bank’s 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 thedisclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require amaterial adjustment to the carrying amount of assets or liabilities affected in future periods. In the process of applying theBank’s accounting policies, management has made the following judgements and assumptions concerning the future and otherkey sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year.
Existing circumstances and assumptions about future developments may change due to circumstances beyond the Bank’s
control and are reflected in the assumptions if and when they occur. Items with the most significant effect on the amounts
recognised in the financial statements with substantial management judgement and/or estimates are collated below with respect
to judgements/estimates involved.
Impairment losses on financial assets
The measurement of impairment losses across all categories of financial assets in scope requires judgement, in particular, theestimation of the amount and timing of future cash flows and collateral values when determining impairment losses and theassessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can
result in different levels of allowances.
The Bank’s ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choiceof variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements andestimates include:
•
•
•
•
•
•

The Bank’s internal credit grading model, which assigns PDs to the individual grades
The Bank’s criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets
should be measured on a LTECL basis and the qualitative assessment
The segmentation of financial assets when their ECL is assessed on a collective basis
Development of ECL models, including the various formulas and the choice of inputs
Determination of associations between macroeconomic inputs, such as GDP, unemployment rates and inflation rates, andthe effect on PDs, EADs and LGDs
Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs
into the ECL models

It is the Bank’s policy to annually review its models in the context of actual loss experience and adjust when necessary.
31

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
3. Significant accounting judgments, estimates and assumptions (contd.)
Fair value of derivative financial instruments
When the fair value of derivative financial instruments recorded in the statement of financial position cannot be measured
based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash
flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, adegree of judgement is required in establishing fair values. Changes in assumptions could affect the reported fair value ofderivative financial instruments. See Note 34 for further disclosures.
Revaluation of properties
The Bank carries its investment properties at fair value, with changes in fair value being recognised in the statement of profit
or loss. In addition, the Bank measures its land and buildings at revalued amounts, with changes in fair value being recognisedin OCI. The Bank engages an independent valuation specialist to assess fair value of both investment properties and the landand buildings. Properties were valued principally by reference to market-based evidence, using comparable prices and income
approaches adjusted for specific market factors such as nature, location and condition of the buildings. The Bank engaged an
independent valuation specialist to assess fair values as at 31 December 2022 for the investment properties and as at 31
December 2021 for land and buildings.
This valuation assessment requires exercise of judgment from management and independent valuer based on their experienceof those properties as well as other assumptions described in Note 34.
Determination of significant influence over an entity in which Bank holds less than 20% voting right
The Bank considers that it has significant influence over MIK even though it owns less than 20% of the voting rights. This isbecause the Bank is one of the largest shareholders of MIK with a 10% equity interest (effective interest of 13.58%) while
majority of the other shareholders hold less than 10% equity interest. Additionally, certain related parties of the Bank holdaround 31.82% (effective interest of 43.21%) equity interest in MIK, thus the voting power of the Bank together with its relatedparties are larger than that of any other shareholder of MIK. Furthermore, the Bank enters into material transactions with MIK
throughout the year on regular basis. Although these transactions are entered into during ordinary course of business, thevolume and amount are considered material.

4. Interest and similar income

Interest income calculated using the effective interest method
Loans and advances to customers
Debt instrument at FVOCI
Debt instrument at amortised cost
Cash and balances with BoM
Due from banks and financial institutions
Reverse repurchase agreements

Other interest and similar income
Financial assets at FVTPL
Loans and advances to customers measured at FVTPL

2022
MNT’000

2021
MNT’000

475,595,163
79,036,606
65,525,281
13,062,605
8,711,102
816,267
642,747,024

379,891,417
76,877,070
105,874,414
5,018,183
2,346,939
778,428
570,786,451

19,544,616
11,786,412
31,331,028

14,754,616
11,566,398
26,321,014

In 2022, interest income from debt instruments at amortised cost and FVOCI includes interest income from government bonds
amounting to MNT 63,598,005 thousand and MNT 3,342,958 thousand, respectively (2021: MNT 105,874,414 and MNT
1,097,905 thousand respectively) which are tax exempt incomes.

32

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
5. Interest and similar expenses

Due to customers
Borrowed funds
Repurchase agreements
Debt securities issued
Due to banks and financial institutions
Lease liabilities (Note 22)2022
MNT’000

2021
MNT’000

227,586,554
93,256,863
19,796,976
6,326,356
6,521,237
990,130
354,478,116

257,645,983
116,374,067
15,057,398
12,800,000
2,539,483
1,219,631
405,636,562

2022
MNT’000

2021
MNT’000

34,325,781
16,846,301
4,831,542
6,356,065
2,857,941
65,217,630

26,654,212
13,229,064
7,455,936
4,596,024
2,345,760
54,280,996

9,871,697
2,871,948
12,743,645

9,222,144
1,733,855
10,955,999

22,960,261
4,552,412
27,512,673

16,719,066
4,081,789
20,800,855

50,448,602

44,436,140

2022
MNT’000

2021
MNT’000

97,805,076
6,053,482
232,737
125,429
95,125(65,052,424)(13,861,532)(8,464,794)(7,781,905)(4,541,099)(102,101)(133,393)
–
–
–
–
–
–
9,550,324
13,924,925

21,067,389
1,253,189–(509,109)433,617
19,776,375(17,805,897)(15,381,806)(6,754,302)
204,152
3,391,791
10,997,768
6,063,066
5,434,794(27,650,688)(14,508,803)(2,123,116)(1,745,195)
4,451,177(13,405,598)

6. Net fees and commission income

Fees and commission income from providing financial services at a point intime:
Card service
Wire transfer
Loan related service
Mobile and internet-banking service
OthersFee income earned from services that are provided over time
Financial guarantee
Card service
Fees and commission expenses
Card service charges
OthersNet fees and commission income
7. Trading and other operating income/(expenses)

Unrealised gain on fair valuation of derivatives
Precious metal trading gain, net
Amortisation of deferred grant (Note 29)
Gain/(loss) of fair value of financial investments at FVOCIValuation gain on investment property (Note 19)
Foreign exchange gain/(loss), net
Modification loss on other loans receivables (Note 18)
Net swap interest expense
Net modification loss from project mortgage loans (Note 17)
Gain/(loss) on disposal of foreclosed properties, net
Gain/(loss) on disposal of asset-held-for sale, net
Gain/(loss) on disposal of property and equipment, net
Gain on disposal of investment property
Gain on partial disposal of investment in associate, net (Note 15)
Impairment of foreclosed properties
Loss on initial recognition of equity investment
Write-off of foreclosed properties
Revaluation loss on property and equipment (Note 21)
Others33

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
8. Credit loss expense reversal

Loans and advances to customers (Note 17)
Other assets (Note 18)
Credit commitment (Note 32)
Debt instrument measured at amortised cost (Note 14)
Debt instrument measured at FVOCI (Note 14)
Due from other banks and financial institutions (Note 13)
Balances with BoM (Note 12)2022
MNT’000

2021
MNT’000(40,484,584)
14,566,431(2,380,577)(278,876)
226,875
349
52,543(28,297,839)(65,509,851)
17,082,876(9,248,189)(385,577)
331,301(1,805)25,696(57,705,549)

2022
MNT’000

2021
MNT’000

77,025,204
14,778,631
13,182,054
7,473,497
7,225,692
7,153,613
5,686,303
5,345,669
4,179,474
4,040,166
3,184,130
2,292,005
1,644,302
1,324,706
1,196,952
967,593
907,891
583,593537,900
395,602247,803
1,685
13,416,426
172,790,891

56,426,251
8,914,953
13,653,950
7,806,738
154,371
5,885,907
5,498,594
5,128,494
4,774,133
2,008,763
2,637,928
2,845,457
2,373,456
1,041,039
258,830
567,943
124,539568,269
347,218
182,003
236,587–
9,503,140
130,938,563

2022
MNT’000

2021
MNT’000

52,883,282(8,775,015)

14,601,281–

1,541,839
45,650,106

1,127,785
15,729,066

9. Operating expenses

Personnel expense
Advertising and public relations
Depreciation on property and equipment (Note 21)
Insurance
Write-off of property and equipment (Note 21)
Professional services fee
IT maintenance
Depreciation of right-of-use assets (Note 22)
Technical assistance and foreign bank remittance fee
Stationery and supplies
Communication
Repairs and maintenance
Amortisation of intangible asset (Note 23)
Utility expenses
Reception and entertainment
Cash handlingBusiness travel expenses
Transportation
Rental expense
Training expenses
Security
Write-off of intangible assets (Note 23)
Others10. Income taxes
10.1 Income tax expense
The income tax expense for the year ended 31 December 2022 is:Income tax:
Current income tax
Adjustment in respect of current income tax of prior years
Deferred tax:
Relating to temporary differences (Note 10.3)

34

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
10. Income taxes (contd.)
The Bank provides for income taxes on the basis of its income for financial reporting purposes, adjusted for items which are
not assessable or deductible for income tax purposes. The income tax rate for profits of the Bank is 10% (2021: 10%) for the
first MNT 6 billion (2021: MNT 6 billion) of taxable income and 25% (2021: 25%) on the excess of taxable income over MNT
6 billion (2021: MNT 6 billion). Interest income on government bonds is not subject to income tax.
A reconciliation of income tax expense applicable to profit before tax at the statutory income tax rate to income tax expense at
the effective income tax rate of the Bank for the year ended 31 December 2022 is as follows:

Profit before income tax

2022
MNT’000

2021
MNT’000

239,898,799

120,539,499

Tax at statutory rate of 25% (2021: 25%)
59,974,700
30,134,875
Effect of expenses not deductible for income tax purpose
15,244,967
19,567,730
Special tax rate
1,047,492
2,166,083
Tax rate difference(1,703,595)(1,578,177)
Effect of non-taxable income(957,973)(7,728,804)
Effect of income exempted from taxation(16,735,241)(26,743,079)
Effect of tax credit(37,852)(89,562)
Adjustment in respect of current income tax of prior years(8,775,015)–
Utilisation of previously unrecognised tax losses(2,407,377)–
Tax expense
45,650,106
15,729,066
As at 31 December 2022, the Bank has no available tax losses of (2021: MNT 9,629,506 thousand) that are available to offset
against future taxable profits for the next four financial years. The annual amount of tax loss deductible from taxable income
is limited to 50% of the taxable income in a given year.
The effective income tax rate for 2022 is 19.03% (2021: 13.05%).
10.2 Income tax liabilities

Income tax liabilities as at 1 January
Income tax expense for the year
Adjustment in respect of current income tax of prior years
Withheld by third parties
Income tax liabilities as at 31 December

2022
MNT’000

2021
MNT’000

12,499,999
52,883,282(8,775,015)(866,148)
55,742,118

111,957
14,601,281–(2,213,239)
12,499,999

10.3 Deferred tax liabilities

As at 31 December 2022

As at 1January 2022 .
MNT’000

Recognised inothercomprehensive
income .
MNT’000

Recognised in
profit or loss .
MNT’000

As at 31
December 2022
MNT’000

429,612(175,393)–

254,219

1,558,458(999,598)
46,872
1,035,344––(175,393)

1,500,000
41,839
–1,541,839

3,058,458(957,759)
46,8722,401,790

Deferred tax (assets)/liabilities
Revaluation of financial investments
measured at FVOCIRevaluation of derivative financial
instruments
Share of profit of an associate
Lease liabilities and ROU asset

35

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
10. Income taxes (contd.)10.3 Deferred tax liabilities (contd.)

As at 31 December 2021

As at 1January 2021 .
MNT’000

Recognised inothercomprehensive
income .
MNT’000

Recognised in
profit or loss .
MNT’000

As at 31
December 2021
MNT’000

2,677,562(2,247,950)–

429,612(548,280)(20,645)
46,872
2,155,509–––(2,247,950)

2,106,738(978,953)–
1,127,785

1,558,458(999,598)
46,872
1,035,344

Deferred tax (asset)/liabilities
Revaluation of financial investments
measured at FVOCIRevaluation of derivative financial
instruments
Share of profit of an associate
Lease liabilities and ROU asset

11. Earnings per share
The following table shows the income and share data used in the basic and diluted earnings per share calculations:2022
MNT’000

2021
MNT’000

Profit attributable to ordinary equity holders - basic and diluted

194,248,693

104,810,433

Adjusted weighted average number of ordinary shares for EPS

48,070,860

48,070,820

MNT

MNT

4,041
4,041

2,180
2,180

Earnings per share
Equity holders of the Bank for the period:
Basic earnings per share
Diluted earnings per share

Basic earnings per share are calculated by dividing the net profit by the weighted average number of ordinary shares in issueduring the year (See Note 30) and adjusted by the share split made after the reporting date (See Note 38).

36

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
12. Cash and balances with Bank of Mongolia

Cash on handCurrent accounts with BoM
Deposit accounts with BoM
Gross carrying amountLess: Allowance for impairment losses on balances with BoM
Net cash and balances with BoM

2022
MNT’000

2021
MNT’000

69,650,934
824,923,439
861,881,738
1,756,456,111(248,817)
1,756,207,294

86,908,373
889,640,138–
976,548,511(196,274)
976,352,237

Current accounts with BoM are maintained in accordance with BoM regulations. The balances maintained with BoM aredetermined at not less than 8.0% (2021: 6.0%) of customer deposits for local currency and not less than 18.0% (2021: 18.0%)
of customer deposits for foreign currency based on average balance of two weeks.
As at 31 December 2022, the average reserves required by BoM for that period of two weeks were MNT 214,059,644 thousand(2021: MNT 204,051,735 thousand) for local currency and MNT 646,037,152 thousand (2021: MNT 513,533,692 thousand)for foreign currency maintained on current accounts with BoM.
Impairment allowance for cash and balances with BoM
The table below shows the credit quality and the maximum exposure excluding cash on hand to credit risk based on the Bank’s
internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances. As at 31
December 2022 and 2021, the balances have credit rating of B- and classified as stage 1. Details of the Bank’s internal grading
system and policies about whether ECL allowances are calculated on an individual or collective basis are set out in Note 33:

12 month
PD range
31 December 2022
31 December 2021

2.373%
2.409%

Total
Exposure atdefault
Stage 1
MNT’000
1,686,805,177
889,640,138

ECL
Stage 1
MNT’000(248,817)(196,274)

An analysis of changes in the ECL allowance as at 31 December 2022 and 2021 are as follows:

At 1 January
Net charge for the year (Note 8)
At 31 December

2022
MNT’000

2021
MNT’000

196,274
52,543248,817

170,578
25,696196,274

2022
MNT’000

2021
MNT’000

1,756,456,111
767,073,137
949,566,385
3,473,095,633

976,548,511
504,422,698
1,661,230,725
3,142,201,934(860,096,796)(188,969,117)(308,646,228)
2,115,383,492(717,585,428)(159,292,237)(538,216,577)
1,727,107,692

Additional cashflow information

Cash and balances with BoM (Note 12)
Due from banks and financial institutions (Note 13)
Unquoted BoM treasury bills - less than three months (Note 14)
Gross carrying cash and cash equivalents amountLess: Minimum reserve with the BoM not available to finance the Bank's day
to day operations
Less: Placement with foreign bank as cash collateral
Less: Unquoted BoM treasury bills - less than three months held as collateral
Net cash and cash equivalents

37

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
13. Due from other banks and financial institutions

Current accounts with foreign banks and financial institutions
Placement with foreign bank as cash collateral
Current accounts with local banks and financial institutions
Placement with foreign banks and financial institutions
Gross carrying amountLess: Allowance for impairment losses
Net due from banks and other financial institutions balance2022
MNT’000

2021
MNT’000

411,613,586
188,969,117
3,921,113
162,569,321
767,073,137(5,497)
767,067,640

244,856,076
159,292,237
889,908
99,384,477
504,422,698(5,148)504,417,550

Impairment allowance for due from other banks and financial institutions
The table below shows the credit quality and the maximum exposure to credit risk based on the Bank’s internal credit rating
system and year-end stage classification. The amounts presented are gross of impairment allowances. Details of the Bank’s
internal grading system and policies about whether ECL allowances are calculated on an individual or collective basis are set
out in Note 33.

12 month
PD range

Total
Exposure atdefault
Stage 1
MNT’000

ECL
Stage 1
MNT’000

At 31 December 2022
Internal rating grade
A- to AA+ rated
BBB- to BBB+
B- to BB+Not rated

0.008% - 0.033%
0.140%
0.604% - 2.6%
11.18%

737,773,958
2,244,155
8,902,522
18,152,502
767,073,137

1,940
6
243
3,308
5,497

0.022% - 0.076%
0.257%
0.875% - 2.974%
10.11%

447,407,252
27,913,686
16,513,689
12,588,071
504,422,698

2,440
111
542
2,055
5,148

At 31 December 2021
Internal rating grade
A- to AA+ rated
BBB- to BBB+
B- to BB+Not rated

An analysis of changes in the ECL allowance as at 31 December 2022 and 2021 are as follows:

Gross carrying amount as at 1 January
New assets originated or purchased
Repaid amounts
Foreign exchange adjustments
At 31 December
ECL allowance as at 1 January
New assets originated or purchased
Assets derecognised or repaid (excluding write-offs)
Changes to assumptions
Net charge/(reversal) for the year (Note 8)
At 31 December
38

2022
Stage 1
MNT’000

2021
Stage 1
MNT’000

504,422,698
393,377,371(160,522,920)
29,795,988
767,073,137

570,008,607
106,773,411(174,317,103)
1,957,783
504,422,698

5,148
3,558
(168)
(3,041)
349
5,497

6,953
2,664
(4,324)(145)(1,805)
5,148

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
14. Financial investments

Debt instruments measured at FVOCI:
Government USD bond (a)Bank of Mongolia bills (b)MIK USD bond (c)Equity instruments measured at FVOCI
Unquoted equities (d)Quoted equities (e)Debt instruments at amortised cost
Government bonds (f)Development Bank of Mongolia bonds (g)Loan backed securities - Senior tranche (i)Financial assets at FVTPL
Residential mortgage-backed securities (h)Loan backed securities - Junior tranche (i)2022
MNT’000

2021
MNT’000

102,883,542
949,566,385
27,362,835
1,079,812,762

58,774,436
1,661,230,725
34,429,486
1,754,434,647

3,168,532
70,359,946
73,528,478

3,395,537
54,267,410
57,662,947

242,599,801–
7,953,415
250,553,216

544,984,309
45,694,979–
590,679,288

260,184,968
5,832,160
266,017,128

199,870,221–
199,870,221

1,669,911,584

2,602,647,103(a) Quoted government bonds represent investment in government bonds listed on foreign market.
(b) Unquoted BoM treasury bills are purchased either at par, premium or discount.
(c) Quoted corporate bond represent investment in Mongolian Mortgage Corporation (“MIK”) bond listed on foreign market.
(d) Unquoted equity securities represent investments made in unquoted private companies. The Bank holds non-controllinginterests in these companies. These investments were irrevocably designated at fair value through OCI as the Bank
considers these investments to be strategic in nature.
(e) Quoted equity securities represent investments made in quoted companies such as Visa Inc. and Mongolian Mining
Corporation. In 2021, the Bank repossessed 4.215% shares of Mongolian Mining Corporation for loan repayment.
(f) Government bonds are unquoted interest-bearing bonds issued by the Government of Mongolia (“GoM”).
(g) Development Bank of Mongolia (“DBM”) bonds are unquoted interest-bearing long-term bonds issued by DBM under the
ASEM project and fully paid within 2022.
(h) Residential mortgage-backed securities (“RMBSs”) represent Junior and Senior tranche of an interest-bearing long-term
securities issued by MIK (see Note 17).
(i) Loan-backed securities (“LBSs”) represent Junior and Senior tranches of and interest-bearing, long-term securities issued
by wholly owned special purpose companies of Securities Financing Corporation LLC (“SFC”). The Bank transferred
fixed rate repurchase agreement financed business loans to SFC without recourse and received the LBSs in exchange (seeNote 17).

39

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
14. Financial investments (contd.)
Impairment allowance for financial investment
The table below shows the fair value of the Bank’s debt instruments measured at FVOCI and measured at amortised cost by
credit risk including ECL allowance, based on the Bank’s internal credit rating system and year-end stage classification. As at
31 December 2022 and 2021, both debt instruments have credit rating of B- to B+ and classified as stage 1. Details of theBank’s internal grading system and policies on whether ECL allowances set out in Note 33.
2022
Fair value/
Gross carrying
amount
MNT’000

ECL
MNT’000

2021
Fair value/
Gross carrying
amount
MNT’000

ECL
MNT’000

Debt instruments at FVOCI
As at 1 January
New assets originated or purchased
Payments and assets derecognised
Changes in fair value
Foreign exchange adjustments
Net charge/(reversal) for the year (Note 8)
As at 31 December

1,754,434,647
10,855,406,821(11,531,546,548)(18,175,222)
19,693,064–
1,079,812,762

490,561
485,116(258,241)––
226,875
717,436

714,034,384
17,439,418,686(16,397,237,146)(1,775,408)(5,869)–1,754,434,647

159,260
5,543,849(5,212,548)––
331,301
490,561

Debt instruments at AC
As at 1 January
New assets originated or purchased
Payments and assets derecognised
Net charge/(reversal) for the year (Note 8)
As at 31 December

591,136,516
25,860,700(366,265,648)–
250,731,568

457,228
49,096(327,972)(278,876)
178,352

835,875,835–(244,739,319)–
591,136,516

842,805–(385,577)(385,577)
457,228

15. Investment in associate
As of 31 December 2022, the Bank holds 10.00% (2021: 10.00%) (or effective holding around 13.58% (2021: 13.58%) taking
into account of the effect of treasury shares) in MIK.
During 2021, in order to comply with the requirement of the Banking law, the Bank disposed part of its investment in MIK to
one of the related parties of the Bank, for total consideration of MNT 17,013,040 thousand. Nevertheless, the Bank continued
to have significant influence over MIK, even though it owns less than 20% of the voting rights (See Note 3).
MIK’s principal activities include purchasing of mortgage pools by issuing RMBS securitised by those mortgage pools in
Mongolia or proceeds from its senior notes issued in the international capital market. MIK is a public entity that is listed on
the Mongolian stock exchange (“MSE”). The Bank holds a total of 2,070,932 MIK shares as of 31 December 2022 (2021:
2,070,932 shares), the closing price of MIK shares at MSE at 31 December 2022 was MNT 20,260 per share (2021: MNT
14,990 per share).
As of the date of this report, MIK has not issued its audited financial statements for the year ended 31 December 2022. The
Bank’s interest in MIK is accounted for using the equity method based on MIK’s most recent available financial information
as at 31 December 2022, adjusted for any significant events as appropriate. MIK’s audited financial statements may be different
from the information used by the Bank and any difference will be adjusted for by the Bank in 2023.

40

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
15. Investment in associate (contd.)
The following table illustrates the summarised financial information of the Bank’s investment in MIK:
MNT’000
40,813,475(17,646,059)
23,167,416(17,013,040)
5,434,794(11,082,873)
506,297418,388924,685

At 1 January 2021
Share of loss of an associate until partial disposal
Fair value of net identifiable assets of an associate as at the date of the disposal
Proceeds from partial disposal of equity interest
Gain on partial disposal of equity interest (Note 7)
Share of loss of an associate after partial disposal
At 31 December 2021 and 1 January 2022
Share of profit of an associate for the year
At 31 December 2022
2022
MNT’000

2021
MNT’000

Investee: MIK
Total assets
Total liabilities
EquityBank's share of equity 13.58% (2021: 13.58%)

4,551,197,297(4,544,388,129)
6,809,168
924,685

4,225,506,608(4,221,778,353)
3,728,255
506,297

Net interest income for the year
Total comprehensive income/(loss) for the year

80,832,933
3,080,311

88,685,106(146,584,510)

16. Derivative financial instruments
The table below shows the fair values of derivative financial instruments recorded as assets or liabilities together with their notionalamounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, reference rate or index and is thebasis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions
outstanding at the year end and are indicative of neither the market risk nor the credit risk.
Notional
amount
MNT'000
At 31 December 2022
Derivatives held for trading
Cross-currency interest rate swaps with MIK and BoM (a)Cross-currency interest rate swaps with BoM (b)Forwards
At 31 December 2021
Derivatives held for trading
Cross-currency interest rate swaps with MIK and BoM (a)Cross-currency interest rate swaps with BoM (b)Commodity swap (c)Forwards

Fair value
AssetsMNT'000

Liabilities
MNT'000

515,730,880
514,981,550
91,916,250
1,122,628,680

164,487,198
98,664,180
2,223,053
265,374,431

163,873,260
17,4392,312,838
166,203,537

777,151,290
422,800,045
14,244,000
98,077,347
1,312,272,682

69,916,420
1,969,251
28,522,286
1,239,541
101,647,498

75,951,189
2,084,772––
78,035,961

At their inception, derivatives often involve only a mutual exchange of promises with little or no transfer of consideration.
However, these instruments frequently involve a high degree of leverage and are very volatile. A relatively small movementin the value of the asset, rate or index underlying a derivative contract may have a significant impact on the profit or loss of
the Bank.
The Bank’s exposure under derivative contracts is closely monitored as part of the overall management of its market risk. The
Bank’s risk management strategy and how it is applied to manage its risks is disclosed in Note 33.

41

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
16. Derivative financial instruments (contd.)(a) On 28 March 2019, the Bank entered into cross-currency interest rate swap agreements with MIK (derivative financial
liability) and entered into respective offsetting position with BoM (derivative financial asset) on the same day, whereby the
Bank has acted as an intermediary institution. At initiation, the Bank received USD funds from MIK and paid MNT funds atthe spot rate, simultaneous to which the Bank has paid USD funds to BoM and received MNT funds at the spot rate. During
the term of the agreement with BoM, the Bank receives interest on USD funds at LIBOR/SOFR plus certain margin and pays
interest on MNT funds at the central bank policy rate. Whereas during the term of the agreement with MIK, the Bank pays
interest on USD funds at rate equal to the rate received from BoM and receives interest on MNT funds at central bank policy
rate plus 0.1%. At the end of the term of both agreements, the Bank shall pay or receive the difference incurred by the exchange
rates at the end of the term.
(b) The Bank enters into cross-currency interest rate swap agreements with BoM. At initiation, the Bank has paid USD funds
to BoM and received MNT funds at the spot rate. During the term of the agreement with BoM, the Bank receives interest on
USD funds at SOFR (2021: LIBOR) plus certain margin and pays interest on MNT funds at the central bank policy rate. At
the end of the term of agreements, the parties shall exchange the principal payments at the exchange rate of the initialtransaction.
(c) On 11 November 2021, the Bank signed a gold purchase and sales financing agreement with a mining company. Under theagreement, the Bank made advance payment and is due to receive cash payment equivalent to pre agreed fixed ounces of gold
in 2022. The contract period was 12 months from the date of advance payment and it has expired on 30 November 2022.

17. Loans and advances to customers
2022
MNT’000

2021
MNT’000

Corporate
Retail loan
Small and Medium-sized enterprise (SME)
Loans to executives, directors and staffs
Gross loans and advances to customers
Allowance for impairment losses
Net loans and advances to customers

3,238,302,119
609,782,895
419,507,830
19,397,814
4,286,990,658(480,684,826)
3,806,305,832

3,672,863,022
548,255,161
535,436,302
23,922,698
4,780,477,183(530,333,951)
4,250,143,232

Loans and advances to customers at FVTPL
Total loans and advances to customers

330,876,566
4,137,182,398

338,322,173
4,588,465,405

Transferred financial assets that are derecognised in their entirety
Sale of mortgage pools
During the year (on 4 August, 30 November and 16 December 2022) the Bank sold 100% of the rights of the cash flows arisingfrom portfolios of fixed rate mortgage loans to wholly owned special purpose companies of MIK in exchange for RMBS. The
Bank derecognised the loan portfolio and recognised the Senior RMBS and Junior RMBS received as financial assets (see Note
14). Bank’s continuing involvement in the transferred assets is also to act as servicer of the transferred assets until its maturity,with an quarterly servicing fee of 2.5% of serviced amount. The total servicing fee recognised in 2022 amounts to MNT 2,003
million (2021: MNT 2,791 million) included within Fees and commission income. The Bank may become obligated torepurchase the derecognised financial assets in the unlikely event of liquidation of the special purpose companies. The
undiscounted cash outflows that may be required to repurchase derecognised financial assets amounts to MNT 1,023,403
million as of 31 December 2022 (2021: MNT 900,824 million).
Sale of business loan pools
On 20 February 2021, the GoM has approved a MNT 10 trillion “Economic recovery plan and citizen’s health protection
program”. The program consisted of 5 components supporting SMEs, housing, strategically important projects, agricultural
productions and access to education, expected to continue until 2023. Out of these 5 sub-programs, the sub-program insupporting SMEs and agricultural production began in May 2021.

42

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
Transferred financial assets that are derecognised in their entirety (contd.)
Sale of business loan pools (contd.)
As part of sub-program in supporting SMEs, the Bank participated in securitisation transactions with wholly owned special
purpose companies of SFC in selling SME loan pools. The Bank originated a total of MNT 28,561 million of SME loans withan interest rate of 10.5% p.a and maturity of 2-3 years, in return for which the Bank received LBS. The Bank did not retain all
the risks and rewards related to the loans sold to SFC within these transactions. The Bank has transferred the control of theassets to SFC. Therefore, the Bank derecognised the loan portfolio and recognised the Senior LBS and Junior LBS received as
financial assets bearing an interest rate of 9.5% p.a with a maturity of up to 3 years (see Note 14).
Bank’s continuing involvement in the transferred assets is to also act as servicer of the transferred assets until its maturity, withan quarterly servicing fee of 0.5% of serviced amount. The total servicing fee recognised in 2022 amounts to MNT 96,047
thousand (2021: nil) included within Fees and commission income. The Bank may become obligated to repurchase thederecognised financial assets in the unlikely event of liquidation of the special purpose companies. The undiscounted cash
outflows that may be required to repurchase derecognised financial assets amounts to MNT 11,258,455 thousand as of 31
December 2022 (2021: nil).
Loans and advances to customers at FVPLThe Bank holds mortgage portfolio of loans and advances to customers to be sold to MIK amounting to MNT 319,335 million(2021: 338,322 million) and portfolio of loans and advances to customers to be sold to SFC amounting to MNT 11,541 million.
These loans and advances were classified as measured at FVTPL.
Transferred financial assets that are not derecognised in their entirety
Furthermore, the Bank participated in monetisation transactions with MIK for selling of loan pools collateralised by immovable
assets with recourse. The Bank sold MNT 119,683 million of loans to MIK in 2021 (none in 2022), for which the Bank received
funding bearing interest rate of 13.8% p.a. The Bank retained all the risks and rewards related to the loans sold to MIK withinthese transactions. Therefore, the assets do not qualify for derecognition. The assets not qualified for derecognition amounted
to MNT 143,281 million as at 31 December 2022 (2021: MNT 215,070 million) (See Note 29).
Government implemented Covid-19 relief program
Throughout 2021 and 2022, the GoM had implemented Covid-19 relief program together with BoM, under which it was
resolved to provide an interest payment holiday to project mortgage loan holders. Under the program, the mortgage loanborrowers were given interest free period of up to six to eight months, whereas the payments deferred in the period is to be
paid later by extending the original maturity of the loan. The relief program had ended on 31 December 2022 and net
modification loss of MNT 7,782 million (2021: MNT 6,754 million) (see Note 7) was recognised in relation to this amendment.
Impairment allowance for loans and advances to customers
The tables below show the credit quality and the maximum exposure to credit risk based on the Bank’s internal credit rating
system and year-end stage classification. The amounts presented are gross of impairment allowances. Details of the Bank’s
internal grading system and policies on whether ECL allowances are calculated on an individual or collective basis are set out
in Note 33.
At 31 December 2022

Gross carrying amount as at 1 January 2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Write-offs
Foreign exchange adjustments
At 31 December 2022

Corporate
MNT’000

SME
MNT’000

RetailMNT’000

Total
MNT’000

3,672,863,022
878,273,917(1,382,812,916)(63,199,291)
4,787,430(10,417,350)
138,807,307
3,238,302,119535,436,302
91,766,582(198,453,620)(2,602,198)(4,787,430)(1,407,856)
215,598
420,167,378

572,177,859
394,879,755(337,847,573)(804,538)–(305,713)
421,371628,521,161

4,780,477,183
1,364,920,254(1,919,114,109)(66,606,027)–(12,130,919)
139,444,276
4,286,990,658

43

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
Impairment allowance for loans and advances to customers (contd.)
At 31 December 2022

Corporate
MNT’000

SME
MNT’000

RetailMNT’000

Total
MNT’000

460,582,583
15,671,639(114,561,275)(12,911,072)

51,525,615
2,256,615(20,154,936)(142,381)

18,225,753
1,992,656(6,891,084)(3,271)

530,333,951
19,920,910(141,607,295)(13,056,724)

85,290,145
2,568,811(23,941,752)(10,417,350)
2,952,828
429,176,309

4,477,993(2,568,811)(16,131,520)(1,407,856)
4,586
33,990,825

4,490,387–(411,312)(305,713)
8,964
17,517,692

94,258,525–(40,484,584)(12,130,919)
2,966,378
480,684,826

Corporate
MNT’000

SME
MNT’000

RetailMNT’000

Total
MNT’000

Gross carrying amount as at 1 January 2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Foreign exchange adjustments
At 31 December 2021

3,531,609,201
1,251,410,506(1,074,123,381)(51,840,234)
17,214,861(1,407,931)
3,672,863,022

410,377,769
306,211,403(168,159,872)
4,263,263(17,214,861)(41,400)
535,436,302

530,905,759
337,049,995(304,018,829)
8,940,559–(699,625)
572,177,859

4,472,892,729
1,894,671,904(1,546,302,082)(38,636,412)–(2,148,956)
4,780,477,183

ECL allowance as at 1 January 2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
Net charge for the year (Note 8)
Write-offs
At 31 December 2021

488,614,295
22,097,256(64,771,351)(6,391,581)

64,257,285
5,667,582(17,607,646)(56,112)42,977,643
1,667,634(17,254,975)(451,348)

595,849,223
29,432,472(99,633,972)(6,899,041)

18,153,833
2,885,552(28,026,291)(5,421)
460,582,583

2,150,058(2,885,552)(12,731,670)–
51,525,615(8,713,201)–(24,751,890)–
18,225,753

11,590,690–(65,509,851)(5,421)
530,333,951

Corporate
MNT'000

SME
MNT'000

Retail
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

2,032,577,414
420,687,760
267,708,014
118,910,776
398,418,155
3,238,302,119

371,098,063
3,437,427
18,176,509
4,807,424
22,647,955
420,167,378

603,925,636
2,965,130
6,639,945
3,111,008
11,879,442
628,521,161

3,007,601,113
427,090,317
292,524,468
126,829,208
432,945,552
4,286,990,658

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

1,950,286,113
914,493,950
537,494,386
22,409,676
248,178,897
3,672,863,022

453,712,950
894,910
43,392,192
7,487,855
29,948,395
535,436,302

532,227,178
492,238
26,386,059
3,165,775
9,906,609
572,177,859

2,936,226,241
915,881,098
607,272,637
33,063,306
288,033,901
4,780,477,183

ECL allowance as at 1 January 2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
Net charge for the year (Note 8)
Write-offs
Foreign exchange adjustments
At 31 December 2022
At 31 December 2021

44

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)

The tables also include an analysis of changes in the gross carrying amount and the corresponding ECL allowances
including the credit quality of the financial assets under IFRS 9, as follows:Business loan

Gross carrying amount as at 1 January2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Write-offs
Foreign exchange adjustments
At 31 December 2022
ECL allowance as at 1 January 2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
Write-offForeign exchange adjustments
At 31 December 2022
Gross carrying amount as at 1 January2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Foreign exchange adjustments
At 31 December 2021
ECL allowance as at 1 January 2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
Write-off
At 31 December 2021

Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

1,574,487,903
878,273,917(581,366,888)
3,901,533(727,841)
75,927,046(555,898,005)(72,626,767)–
66,234,388
1,388,205,286

1,290,292,160–(684,527,844)(80,913,548)
2,123,893(47,500,848)
617,145,416(75,823,366)(10,417,350)
54,681,375
1,065,059,888

808,082,959–(116,918,184)
13,812,724
3,391,378(28,426,198)(61,247,411)
148,450,133–
17,891,544
785,036,945

3,672,863,022
878,273,917(1,382,812,916)(63,199,291)
4,787,430–––(10,417,350)
138,807,307
3,238,302,119

30,901,015
15,671,639(15,028,306)(222,445)
11,352,133(9,624,292)(1,585,671)

166,019,042

263,662,526(78,294,000)(9,777,029)(6,373,551)
9,837,771(18,095,540)(21,238,969)(2,911,598)(4,978,582)(213,479)
19,681,211

460,582,583
15,671,639(114,561,275)(12,911,072)–––(1,235,577)(120,900)–
1,408,995
31,516,591

50,473,223
175,762(10,417,350)
1,163,229
104,711,557

36,052,499
2,513,949–
380,604
292,948,161

85,290,145
2,568,811(10,417,350)
2,952,828
429,176,309

1,090,151,437
1,251,410,506(468,657,181)(49,759,636)
9,183,417
213,588,863(292,703,309)(177,394,697)(1,331,497)
1,574,487,903

1,726,741,323–(376,145,101)(4,922,580)–(129,529,654)
311,827,127(237,633,326)(45,629)
1,290,292,160

714,716,441–(229,321,099)
2,841,982
8,031,444(84,059,209)(19,123,818)
415,028,023(30,805)
808,082,959

3,531,609,201
1,251,410,506(1,074,123,381)(51,840,234)
17,214,861–––(1,407,931)
3,672,863,022

7,475,613
22,097,256(5,259,995)(438,032)
6,073,399(389,103)(216,241)

221,333,691–(25,845,499)(2,498,385)(2,792,186)
5,841,411(17,536,648)

259,804,991–(33,665,857)(3,455,164)(3,281,213)(5,452,308)
17,752,889

488,614,295
22,097,256(64,771,351)(6,391,581)–––

1,499,586
63,953(5,421)30,901,015(12,483,342)––
166,019,042

29,137,589
2,821,599–
263,662,526

18,153,833
2,885,552(5,421)
460,582,583

45

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
Business loan (contd.)
Credit quality of gross carrying amounts as at 31 December 2022 and 2021:
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

1,388,205,286––––
1,388,205,286

644,372,128
420,687,760–––
1,065,059,888––
267,708,014
118,910,776
398,418,155
785,036,945

2,032,577,414
420,687,760
267,708,014
118,910,776
398,418,155
3,238,302,119

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

1,574,487,903––––
1,574,487,903

375,798,210
914,493,950–––
1,290,292,160––
537,494,386
22,409,676
248,178,897
808,082,959

1,950,286,113
914,493,950
537,494,386
22,409,676
248,178,897
3,672,863,022

Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

427,617,381
91,766,582(160,580,996)(1,126,042)
727,841
15,520,843(15,252,372)(4,424,514)–
214,983
354,463,706

26,990,479–(10,574,657)
1,159,388(2,123,893)(8,156,258)
17,184,379(4,408,269)–
615
20,071,784

80,828,442–(27,297,967)(2,635,544)(3,391,378)(7,364,585)(1,932,007)
8,832,783(1,407,856)–
45,631,888

535,436,302
91,766,582(198,453,620)(2,602,198)(4,787,430)–––(1,407,856)
215,598
420,167,378

8,395,206
2,256,615(5,056,420)(308,867)
4,683,675(372,052)(74,492)

2,705,110

40,425,299(649,334)(53,362)(1,025,237)
1,297,115(672,348)(14,449,182)
219,848(3,658,438)(925,063)
746,840

51,525,615
2,256,615(20,154,936)(142,381)–––(3,408,869)
120,900–
4,573
6,240,269(264,265)(175,762)–
13
1,161,930

8,151,127(2,513,949)(1,407,856)–
26,588,626

4,477,993(2,568,811)(1,407,856)
4,586
33,990,825

SME loans

Gross carrying amount as at 1 January2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Write-offs
Foreign exchange adjustments
At 31 December 2022
ECL allowance as at 1 January 2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
Write-offs
Foreign exchange adjustments
At 31 December 2022

46

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
SME loan (contd.)

Gross carrying amount as at 1 January2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Movement from segment change
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Foreign exchange adjustments
At 31 December 2021

ECL allowance as at 1 January 2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
Impact on ECL from segment changes
At 31 December 2021

Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

205,574,549
306,211,403(99,641,475)
1,171,302(9,183,417)
41,402,935(11,678,388)(6,198,807)(40,721)427,617,381

96,263,487–(37,887,057)
1,537,982–(33,456,070)
16,830,986(16,298,454)(395)
26,990,479

108,539,733–(30,631,340)
1,553,979(8,031,444)(7,946,865)(5,152,598)
22,497,261(284)
80,828,442

410,377,769
306,211,403(168,159,872)
4,263,263(17,214,861)–––(41,400)
535,436,302

3,627,090
5,667,582(3,074,753)(289,866)
9,914,310(302,911)(117,146)

14,686,840–(3,563,188)
33,194(6,544,743)
2,044,203(2,909,786)

45,943,355–(10,969,705)
200,560(3,369,567)(1,741,292)
3,026,932

64,257,285
5,667,582(17,607,646)(56,112)–––(6,965,147)(63,953)
8,395,206(1,041,410)–
2,705,110

10,156,615(2,821,599)
40,425,299

2,150,058(2,885,552)
51,525,615

Credit quality of gross carrying amounts as at 31 December 2022 and 2021:
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

354,463,706––––
354,463,706

16,634,357
3,437,427–––
20,071,784––
18,176,509
4,807,424
22,647,955
45,631,888

371,098,063
3,437,427
18,176,509
4,807,424
22,647,955
420,167,378

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

427,617,381––––
427,617,381

26,095,569
894,910–––
26,990,479––
43,392,192
7,487,855
29,948,395
80,828,442

453,712,950
894,910
43,392,192
7,487,855
29,948,395
535,436,302

47

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
Retail loan

Gross carrying amount as at 1 January2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Write-offs
Foreign exchange adjustments
At 31 December 2022
ECL allowance as at 1 January 2022
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
Write-offs
Foreign exchange adjustments
At 31 December 2022
Gross carrying amount as at 1 January2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Foreign exchange adjustments
At 31 December 2021
ECL allowance as at 1 January 2021
New assets originated or purchased
Assets derecognised or repaid
Net movement on accrued interest
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Impact on ECL from stage transfers andinput changes
At 31 December 2021

Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

505,837,818
394,879,755(312,635,484)(554,620)
17,146,921(10,210,860)(3,326,133)–
351,601
591,488,998

26,881,598

39,458,443(10,832,718)
101,807(10,245,380)
12,628,260(3,149,064)–
17,265
15,401,768(14,379,371)(351,725)(6,901,541)(2,417,400)
6,475,197(305,713)
52,505
21,630,395

572,177,859
394,879,755(337,847,573)(804,538)–––(305,713)
421,371628,521,161

2,317,412
1,992,656(1,823,368)(223,187)
2,324,860(104,344)(26,666)

1,527,671

14,380,670(478,403)(22,168)(525,050)
724,417(343,740)(4,589,313)
242,084(1,799,810)(620,073)
370,406

18,225,753
1,992,656(6,891,084)(3,271)–––(1,816,815)–
7,480
2,648,028(121,558)–
367
761,536

6,428,760(305,713)
1,117
14,108,128

4,490,387(305,713)
8,964
17,517,692

374,377,456
337,049,995(244,142,434)
2,886,495
55,638,674(10,459,698)(8,813,463)(699,207)
505,837,818

116,782,795–(48,310,008)
5,282,663(50,741,061)
15,691,000(11,823,665)(126)
26,881,598

39,745,508–(11,566,387)
771,401(4,897,613)(5,231,302)
20,637,128(292)
39,458,443

530,905,759
337,049,995(304,018,829)
8,940,559–––(699,625)
572,177,859

3,265,442
1,667,634(5,958,781)(480,122)
12,721,291(315,271)(319,083)

21,513,367–(6,657,591)(30,521)(10,561,297)
2,099,155(2,178,112)

18,198,834–(4,638,603)
59,295(2,159,994)(1,783,884)
2,497,195

42,977,643
1,667,634(17,254,975)(451,348)–––(8,263,698)
2,317,412(2,657,330)
1,527,671

2,207,827
14,380,670(8,713,201)
18,225,753

48

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
17. Loans and advances to customers (contd.)
Retail loan (contd.)
Credit quality of gross carrying amounts as at 31 December 2022 and 2021:
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

591,488,998––––
591,488,998

12,436,638
2,965,130–––
15,401,768––
6,639,945
3,111,008
11,879,442
21,630,395

603,925,636
2,965,130
6,639,945
3,111,008
11,879,442
628,521,161

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

505,837,818––––
505,837,818

26,389,360
492,238–––
26,881,598––
26,386,059
3,165,775
9,906,609
39,458,443

532,227,178
492,238
26,386,059
3,165,775
9,906,609
572,177,859

Impairment of loans receivables from Mongolian Copper Corporation LLC and Kanetic Pte Ltd
As at the reporting date, the Bank has total outstanding loan receivable from Mongolian Copper Corporation LLC (“MCC”) of
MNT 183.7 billion (2021: MNT 205.5 billion) and loan receivable from Kanetic Pte Ltd was fully settled during the year
(2021: MNT 228.1 billion). The recoverability of the loan is highly dependent on the favourable outcome of the ongoing
discussions between MCC and the GoM regarding the takeover of the 49% equity interest in Erdenet Mining Corporation LLC.
As of 31 December 2022, the Bank has provided an allowance for expected credit losses for the loan receivable from MCC of
MNT 25.8 billion (2021: MNT 40.5 billion).

18. Other assets
2022
MNT’000

2021
MNT’000

Prepaid expenses and advances
Settlement receivables
Deferred employee benefit
Consumables and other office supplies
Precious metals
Prepayment made for construction
Other receivables
Less: Allowance for other receivables

24,500,292
17,526,442
1,863,786
4,169,503
84,65763,652,848
115,878,710(38,884,014)
188,792,224

14,064,547
7,701,212
2,332,243
3,954,658
10,133,400
41,793,722
115,815,812(45,846,848)
149,948,746

Foreclosed properties, net of impairment

277,158,336
277,158,336

50,102,847
50,102,847

Total other assets

465,950,560

200,051,593

Included in prepaid expenses and advances are guarantee deposits held for international card payment organisations amounting
to MNT 12,900 million (2021: MNT 10,667 million).
Settlement receivables mainly relate to the amount of receivables on cash and settlements services. Related balances weresettled on next working day.

49

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
18. Other assets (contd.)
Deferred employee benefit represents outstanding fair value adjustments of the loans granted to its employees at preferential
rates. In accordance with IFRS, fair value adjustments at initial recognition are recognised as deferred employee benefits andare amortised according to the terms of the loan.
Prepayment made for construction represents advance payments made to Riverstone Properties LLC (“Riverstone”) toconstruct the Bank’s new office building. Total of 56% (2021: 52%) of the total contract fee has been prepaid according to theconstruction agreement, from which 76% (2021: 83%) of the prepayment has been recorded as construction-in-progress (seeNote 21) according to the actual construction progress. The construction is estimated to be complete by 2025.
Foreclosed properties represent real estate assets acquired by the Bank in settlement of overdue loans. The Bank expects todispose of these assets in the foreseeable future.
Other receivables include other loan receivables that represent interest free or lower interest rate receivables from various
entities for which the Bank recognised a day 1 loss at initial recognition and modification loss upon the extension of term of
these receivables and classified them as Stage 2. The total loss recognised with respect the receivables amount to MNT
13,861,532 thousand as of 31 December 2022 (2021: MNT 17,805,897 thousand) (See Note 7).
A reconciliation of the allowance for impairment losses is as follows:

Impairment allowance on other loan receivables
At 1 January
Charge for the year
Reversal
Net charge for the year (Note 8)
Write-off during the year
At 31 December

2022
MNT’000

2021
MNT’000

45,846,848
19,479,072(4,912,641)
14,566,431(21,529,265)
38,884,014

31,291,054
17,268,611(185,735)
17,082,876(2,527,082)
45,846,848

The tables below show the credit quality and the maximum exposure to credit risk of other receivables based on the Bank’s
internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances.
Details of the Bank’s internal grading system are set out in Note 33.
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

13,810,066––––
13,810,066

1480,801,229–––
80,801,243––
539,917
31,033
20,696,451
21,267,401

13,810,080
80,801,229
539,917
31,033
20,696,451
115,878,710

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

16,164,144––––
16,164,144

25,324,490
28,775,240–––
54,099,730––
795,115
1,103
44,755,720
45,551,938

41,488,634
28,775,240
795,115
1,103
44,755,720
115,815,812

2022
MNT’000

2021
MNT’000

79,902,629––
95,12579,997,754

148,990,218(20,898,204)(48,623,002)
433,61779,902,629

19. Investment property

At 1 January
Disposal
Transfer
Change in fair value (Note 7)
At 31 December
50

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
20. Assets held for sale

Buildings and real estate
Vehicle2022
MNT’000

2021
MNT’000

24,581,450
84,267
24,665,717

3,216,435
389,5293,605,964

The Management assessed that those buildings, real estates and vehicles are available for immediate sale and can be sold tothe buyer in its current condition. The actions to complete the sale were initiated and expected to be completed within one year
from the date of initial classification. A potential buyer has been identified and negotiations as at reporting date are at anadvanced stage.
21. Property and equipment
OfficeBuildings equipment and Computers andand landvehiclesothersMNT'000
MNT'000
MNT'000

Constructionin-progress
MNT'000

Total
MNT'000

At 31 December 2022
At cost/valuation
At 1 January 2022
Additions
DisposalsWrite-offs (Note 9)
Transfer
Reclassification
At 31 December 2022

246,797,379–(8,986,075)(7,035,000)––
230,776,304

16,168,462
6,788(533,322)(173,576)–
1,982,146
17,450,498

62,124,835
16,172,877(4,290)(3,645,835)(1,111,576)(1,982,146)
71,553,865

198,634,383
4,052,030––––
202,686,413

523,725,059
20,231,695(9,523,687)(10,854,411)(1,111,576)–
522,467,080–
5,623,684(156,581)–
5,467,103

8,950,205
1,441,144(437,239)(153,221)
9,800,889

33,936,421
6,117,226(4,204)(3,475,498)
36,573,945

–
–
–
–
–

42,886,626
13,182,054(598,024)(3,628,719)
51,841,937

225,309,201

7,649,609

34,979,920

202,686,413

470,625,143

At cost/valuation
At 1 January 2021
Additions*
Disposals*Write-offs (Note 9)
Reclassification
Transfer from prepayment
Impairment (Note 7)
Revaluation surplus (Note 30)
At 31 December 2021

254,033,081
34,749,130(40,428,964)–
593,884–(1,745,195)(404,557)
246,797,379

16,053,322
431,460(684,436)(224,593)
592,709–––
16,168,462

44,224,612
20,163,989(311,751)(1,359,306)(592,709)–––
62,124,835

195,184,101
3,743,502(2,409,040)(15,000)(593,884)
2,724,704––
198,634,383

509,495,116
59,088,081(43,834,191)(1,598,899)–
2,724,704(1,745,195)(404,557)
523,725,059

Accumulated depreciation
At 1 January 2021
Charge for the year (Note 9)
DisposalsWrite-off (Note 9)
Revaluation (Note 30)
At 31 December 2021

13,337,362
6,121,359(4,210,594)–(15,248,127)–

8,235,479
1,469,867(558,610)(196,531)–
8,950,205

29,278,264
6,062,724(156,570)(1,247,997)–
33,936,421

–
–
–
–
–
–

50,851,105
13,653,950(4,925,774)(1,444,528)(15,248,127)
42,886,626

Net carrying amount as at 31 December 2021

246,797,379

7,218,257

28,188,414

198,634,383

480,838,433

Accumulated depreciation
At 1 January 2022
Charge for the year (Note 9)
DisposalsWrite-offs (Note 9)
At 31 December 2022
Net carrying amount as at 31 December 2022
At 31 December 2021

51

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
21. Property and equipment (contd.)*In 2021, the Bank disposed of a premises with net book value of MNT 30,109,991 thousand to MIK in exchange for premises
valued at MNT 34,069,934 thousand. The transaction had resulted in gain on disposal of MNT 3,959,943 thousand included
within gain on disposal of property and equipment in Note 7.
Construction‑in‑progress account mainly consists of costs for construction of the Bank’s new office building. The Bank madea contract to build its new corporate head office with Riverstone (see Note 18). The building is expected to be completed in
2025.
Buildings are carried at fair value. Had these buildings been recognised under the cost model as at 31 December 2022, thecarrying amount of land and buildings would have been MNT 141,827 million (2021: MNT 147,792 million). In 2021, theBank engaged an accredited independent valuer, to determine the fair value of its land and buildings. The fair value isdetermined based on market comparable approach. Fair value hierarchy disclosures and valuation techniques used in measuring
the fair value, including the description of significant inputs used are presented in Note 34.
22. Right-of-use assets and Lease liabilities
The Bank has lease contracts for branch office spaces used in its operations. These leases on average have lease term of four
years. The Bank’s obligations under its leases are secured by the lessor’s title to the leased assets. The Bank also has certain
leases of office spaces, garages and ATM spaces with lease terms of 12 months or less. The Bank applies the ‘short-term lease’recognition exemption for these leases.
Set out below are the carrying amounts of right-of-use assets and lease liabilities and the reconciliation of movements during
the year:
Right-of-use assets .
MNT’000

Lease liabilities
MNT’000

As at 1 January 2021
AdditionsLease modification
Termination of lease
Depreciation charge for the year (Note 9)
Accretion of interest (Note 5)
Lease payments
As at 31 December 2021 and 1 January 2022

10,132,850
2,636,768
575,218(313,649)(5,128,494)––
7,902,693(11,384,522)(2,636,768)(575,218)
366,393–(1,219,631)
6,450,083(8,999,663)

AdditionsLease modification
Termination of lease
Depreciation charge for the year (Note 9)
Accretion of interest (Note 5)
Lease payments
As at 31 December 2022

13,267,832
156,856(532,577)(5,345,669)––
15,449,135(13,267,832)(156,856)
578,632–(990,130)
6,966,066(15,869,783)

The Bank recognised rent expense from short-term leases of MNT 537,899 thousand for the year ended 31 December 2022
(2021: MNT 338,465 thousand). Also included within Utility expenses of Operating expenses are variable lease payments that
do not depend on an index or rate of MNT 417,286 thousand for the year ended 31 December 2022 (2021: MNT 330,267
thousand). The maturity analysis of lease liabilities are disclosed in Note 36.

52

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
23. Intangible assets
2022
MNT’000

2021
MNT’000

At costAt 1 January
AdditionsWrite-offs (Note 9)
At 31 December

16,810,552
732,935(1,390,210)
16,153,277

16,495,667
333,455(18,570)
16,810,552

Accumulated amortisation
At 1 January
Charge for the year (Note 9)
Write-offs (Note 9)
At 31 December

14,476,139
1,644,302(1,388,525)
14,731,916

12,121,253
2,373,456(18,570)
14,476,139

Net carrying amount

1,421,361

2,334,413

2022
MNT’000

2021
MNT’000

32,154,080
966,154
33,120,234

12,924,589
1,014,124
13,938,713

24. Due to banks and other financial institutions

Current accounts from banks and financial institutions
Time deposits from banks and financial institutions

At 31 December 2022, time deposits included deposit from local banks denominated in MNT with interest rate of 11.00% perannum and original maturity from 3 months (2021: time deposits denominated in MNT with interest rate of 7.80% per annum
on MNT and original maturity from 16 to 25 months).
25. Repurchase agreements

Asset backed securities program

2022
MNT’000

2021
MNT’000

316,804,791

289,792,528

The Bank entered into long-term reverse repurchase agreement with BoM, whereas as of 31 December 2022 the Bank soldunquoted BoM bills amounting MNT 308 billion in total (2021: MNT 248 billion). The agreements were conducted under anasset backed security program being implemented, upon which the Bank shall disburse the financing to eligible borrowers andcould sell these loans to SFC in return for LBS (See Note 17). The agreements bear annual interests ranging between 6% to10.5% and latest one shall mature in February 2025.

53

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
26. Due to customers

Government deposits- Current accounts- Time deposits- Guarantee and LC fundPrivate sector deposits- Current accounts- Time deposits- Guarantee and LC fund
- Other- Demand deposits
Individual deposits- Time deposits- Current accounts- Demand deposits- Guarantee and LC fund
- Other

54

2022
MNT’000

2021
MNT’000

200,593,243
149,942,889
12,577,697

261,563,528
129,848,194
10,460,656

1,689,010,924
424,943,942
37,019,564
1,014,659–

1,570,264,127
743,461,733
46,873,848
1,330,218
13,116

2,702,594,819
546,925,896
441,745,295–
940,477
6,207,309,405

2,588,822,991
444,023,215
467,962,077
876,737
810,079
6,266,310,519

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
27. Borrowed funds

Borrowed funds from foreign banks and financial institutions
VTB Bank Russia*
Commerzbank AG
Cargill financial services international, INC
Cargill International Trading Pte Ltd
China Development BankInternational Investment Bank
Exim Bank of Russia
International Bank for Economic Co-operation
Huishang Bank
Bunge Asia Pte Ltd
Asian Development BankJapan International Cooperation Agency
Liger Holding International Co.Ltd
Credit Bank of Moscow
Atlantic Forfaitierungs AG
Sumitomo Mitsui Banking Corporation
Erste Group Bank AG
Fintertech Co., Ltd
Intesa Sanpaolo SPA
Crowdcredit Estonia OU
Kreditanstalt fuer Wiederaufbau
International Development Association
China Trade Solutions
Deutsche Zentral-Genossenschaftsbank
Oddo BHF AG
The Export-Import Bank of Republic of China
World BankTranskapitalbank
Crown Agents Bank Limited
Borrowed funds from government organizations
Mortgage Financing Programme by BoM and the Ministry of FinanceBank of Mongolia - Petroleum project
Employment support programme
Ministry of Finance
Education loan fund"Gold-2" programme financing by BoM
Development Bank of Mongolia

2022
MNT’000

2021
MNT’000

241,357,148
176,150,962
86,300,410
76,846,806
58,912,615
53,027,218
46,497,004
34,452,229
31,190,651
28,798,867
22,194,269
14,754,155
14,247,696
11,347,971
10,091,983
6,691,150
5,459,048
3,991,596
3,144,687
1,564,481
1,545,300
1,175,667
980,810469,301
386,853
272,746
153,960––

196,497,229
149,087,042
71,245,689–
29,460,000
42,946,483
37,973,265
41,231,474–
77,558,817
23,623,213
16,381,458
11,395,200
13,051,403
17,203,873–
1,014,785
2,872,198
5,431,571–
3,204,355
1,040,862
1,042,136–
6,586,173
561,877
184,668
21,373,394
19,715,815

270,355,583
212,351,132
3,300,000
817,247
1,650––
1,418,831,195

245,032,794
100,032,877–
788,392
2,453
271,199,386
1,001,247
1,408,740,129

Borrowings are all unsecured except for the funds obtained from Commerzbank AG with outstanding balance of USD 50
million (2021: USD 50 million). The funds obtained from Commerzbank AG is secured by a cash deposit amounting to MNT
172.2 billion included within the placement with foreign bank as cash collateral (Note 13). The funds obtained from BoM
under “Gold-2” programme was secured by unquoted BoM treasury bills with face value of MNT 247.1 billion in 2021 which
was fully settled in 2022.
*In February 2023, the borrowings obtained from VTB Bank Russia with an outstanding balance of MNT 241 billion as of 31
December 2022 had matured and was fully repaid by the Bank.

55

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
27. Borrowed funds (contd.)
Some of the borrowing agreements require compliance with certain debt covenants, which can be grouped into the following
categories:• capital related ratios (such as risk weighted capital adequacy ratio, ratio between tier 1 capital and total capital);• financial risks related ratios (such as aggregate foreign currency open position, single currency foreign exchange risk ratio,liquidity ratio);• credit related ratios (such as single largest borrowers to the equity ratio, related party lending ratio and aggregate large
exposures ratio);• Other ratios (non-current assets to total assets, non-performing loans to total loan ratio, etc.).
In the case of non-compliance with covenants, the borrowing may become payable on demand, subject to the outcome of
remedial actions of the Bank and waiver negotiations between the lender and the Bank. For this reason, the Bank monitors its
compliance with BoM prudential ratios and other debt covenants on a monthly basis (See Note 37).
As at 31 December 2022, the Bank has breached the financial covenant specifying Non-performing loan ratio and Open credit
exposure ratio requirements on borrowings from China Development Bank and International Investment Bank respectively.
The Bank is currently in a process of obtaining the respective waiver from the foreign banks.
28. Debt securities issued
2022
MNT’000

2021
MNT’000–

160,140,274

Debt securities issued in domestic market

Under Troubled Asset Relief Program, the Bank issued MNT 160 billion debt securities to BoM on 28 June 2016. The debt
securities bore annual interest rate of 8.0% and had matured and fully repaid on 29 June 2022.

29. Other liabilities

Liabilities for loans sold to MIK with recourse (Note 17)
Delay on clearing settlement
Payables to entities and individuals
Taxes payable other than income tax
Provision on off-balance sheet commitments (Note 32)
Deferred revenue and income
Contract liability (unearned fees and commission)
Deferred grant
Computer lease payable
Others2022
MNT’000

2021
MNT’000

158,847,086
70,634,681
8,354,609
8,251,077
4,941,386
5,208,858
2,735,890
385,873
85,271
1,038,854
260,483,585

200,678,622
47,268,907
22,908,279
1,221,633
7,321,963
5,790,831
2,451,940–
450,982
976,808
289,069,965

Delay on clearing settlement accounts mainly related to the amount of payables on cash and settlements services. Relatedbalances were settled on next working day.
The Bank entered into a grant support agreement in support of the Green Climate Fund (“GCF”) Readiness and Preparatory
Support Program: “Upscale the Sustainable and Green Finance Practices in Mongolia” with United Nations Office for Project
Services (“UNOPS”) on 27 May 2022. As part of the Readiness Support programme, UNOPS has granted the Bank total
amount of USD 291,772 to accelerate the private sector's contribution to achieving Mongolia's critical climate and development
policy targets. The implementation period of this grant is for 2 years. The Bank received the first tranche of the grant in an
amount of USD 180,000 upon signing of the agreement, and as of 31 December 2022 the outstanding balance of the grant was
USD 122,023. The total amortisation for the year amounted to MNT 232,737 million (See Note 7).
Deferred revenue and income pertains to partial advances received for sale of foreclosed properties.
All unearned fees and commissions at the end of the previous year have been recognised as revenue in the current year.

56

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
30. Share capital, Share premium and Other reserves
Share capital and share premium
Number ofordinary shares
2022
2021
At 1 January
Issued during the year
Transfer
At 31 December

4,807,082
6–
4,807,088

Share capital
2022
2021
MNT'000
MNT'000

4,807,082––
4,807,082

323,809,925
404–
323,810,329

Share premium
2022
2021
MNT'000
MNT'000

72,723,171–
251,086,754
323,809,925

–
664
–
664

251,086,754–(251,086,754)–

The Bank has 5,000,000 shares authorized for issue (2021: 5,000,000 shares) from which total of 4,807,088 shares were issued
and outstanding as of 31 December 2022 (2021: 4,807,082 shares). All issued shares were fully paid and have a par value of
MNT 67,361.01 (2021: MNT 67,361.01).
On 22 April 2022, the shareholders of the Bank approved to issue additional 6 number of shares at MNT 178,000 per share at
total cash consideration of MNT 1,068,000 to its existing shareholder, thus increasing its issued share capital.
The shareholders of the Bank as of 31 December 2022 and 2021 and percentage of ownership are as follows:

The Globull Investment and Development PTE Ltd (Globull)
TDB Capital LLC (former United Banking Corporation LLC)
GS Mongolia Investment Limited (Goldman Sachs)
Other individual and shareholders

2022

2021

64.00%
31.25%
3.28%
1.47%
100.00%64.00%
31.25%
3.28%
1.47%
100.00%Regulatory
reserve
MNT'000

Total
MNT'000

Other reserves
Asset revaluation
FVOCI
reserve .revaluation reserve
MNT'000
MNT'000
At 1 January 2022
Net loss on FVOCI instruments
Deferred tax liability
Transfer of revaluation reserve due todisposal
Net changes in allowance for ECL on debt
instruments at FVOCI
Movement on regulatory reserve
At 31 December 2022

151,189,070––

4,357,074(1,753,929)
175,393

54,597,188––

210,143,332(1,753,929)
175,393(5,537,618)––(5,537,618)––
145,651,452

226,875–
3,005,413–
55,654,927
110,252,115

226,875
55,654,927
258,908,980

At 1 January 2021
Gain on revaluation of premises (Note 21)
Net loss on FVOCI instruments
Deferred tax liability
Transfer of revaluation reserve due todisposal
Net changes in allowance for ECL on debt
instruments at FVOCI
Movement on regulatory reserve
At 31 December 2021

168,958,820
14,843,570––

24,257,321–(22,479,498)
2,247,950

27,165,494–––

220,381,635
14,843,570(22,479,498)
2,247,950(32,613,320)––(32,613,320)––
151,189,070

331,301–
4,357,074–
27,431,694
54,597,188

331,301
27,431,694
210,143,332

As of 31 December 2022 and 2021, the regulatory reserve consist of impairment for foreclosed assets and loans and advances
to customers.

57

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
30. Share capital, Share premium and Other reserves (contd.)
Dividend
On 21 April 2022, the Bank has declared a dividend of MNT 34,995,557 thousand to its shareholders in proportion to theirownership. The BoM had approved the dividend disbursement on 7 July 2022. As of 31 December 2022, MNT 1,154,440
thousand of dividend has not yet been paid out and is included within other liabilities.
On 1 October 2021, the Bank has declared a dividend of MNT 9,998,730 thousand to its shareholders in proportion to theirownership. The BoM had approved the dividend disbursement on 9 November 2021 and respectively the Bank has distributed
the dividend on 18 November 2021.
31. Segment reporting
Segment information is presented in respect of the Bank's business segments. The primary format, operating segments, is basedon the Bank's management and internal reporting structure.
Operating segments pay to and receive interest from the Treasury on an arm's length basis to reflect the allocation of capitaland funding costs.
Segment capital expenditure is the total cost incurred during the period to acquire property and equipment and intangible assets
other than goodwill.
Operating segments
The Bank comprises the following main operating segments:
Corporate Banking: Includes loans, deposits and other transactions and balances with corporate customers. The Bank classifies
its customer as Corporate Banking customer, where the loan amount is greater than MNT 3 billion, or the borrower’s sales
amount reported in the financial statements is greater than MNT 6 billion (or, for customers whose financial statements areunavailable to the Bank, two-year average total income transacted through the current account held with the Bank is greaterthan 4 billion), and State-owned enterprises.
Small and Medium sized Enterprise (“SME”) Banking: Includes loans, deposits and other transactions and balances with SME
customers (both individuals and entities). The Bank classifies its customer as SME Banking customer, where the loan amountis below MNT 3 billion, or the borrower’s sales amount is below MNT 6 billion (or, for customers whose financial statements
are unavailable to the Bank, two-year average total income transacted through the current account held with the Bank is below
4 billion), and individuals receiving products and services with business nature.
Retail Banking: Includes individual’s mortgage, consumers loans and deposits and other transactions and digital banking withretail customers. The Bank classifies its salary and fixed income customers as retail. Retail segment consists sub segments,
depending on their income, deposits and asset level: Premier, VIP, Comfort and classic.
International Banking: Includes the Bank's trading, corporate finance, borrowing from foreign financial institutions, issues ofdebt securities and bond in the international capital market.
Treasury: Undertakes the Bank's funding and centralised risk management activities through borrowings, use of derivatives
for risk management purposes and investing in assets such as short-term placements and corporate and government debt
securities. Operation is the Bank's funds management activities.
Others: Includes Headquarter operations and central shared services operation that manages the Bank's premises and certain
corporate costs.
As the Bank’s operations are located in Mongolia, no further geographical segment information is provided. No revenue fromtransactions with a single external customer or counterparty amounted to 10% or more of the Bank’s total revenue in 2022 or
2021.

58

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
31. Segment reporting (contd.)
Corporate
Banking .
MNT'000

SME
Banking .
MNT'000

RetailBanking .
MNT'000

International
Banking .
MNT'000

Treasury
MNT'000

Other
MNT'000

Total
MNT'000

Segment results
External revenue
Interest income
Interest expense
Fee and commission income
Fee and commission expenses
Trading and other operating income/(expense), net
Intersegment revenue/(expense)
Total segment revenue/(expense)
Operating expense
Share of profit of an associate
Credit loss expense on financial assets
Profit/(loss) before tax
Income tax expense
Net profit/(loss) for the year

304,387,400(88,200,886)
20,408,452(1,906)(28,156,169)(126,831,588)
81,605,303
8,665,149–(34,120,698)
107,060,852–
107,060,852

56,261,659(15,415,103)
16,569,869–
2,608,559(9,332,893)
50,692,091
3,176,080–(20,727,029)
68,243,040–
68,243,040

103,970,776(181,398,267)
21,438,904–(4,780,723)
134,859,869
74,090,559
7,043,423–(1,083,596)
68,130,732–
68,130,732–(42,973,852)
237,071–
231,257
52,683,986
10,178,462
3,557,898––
6,620,564–
6,620,564

203,607,492(26,319,217)
10,706,922(23,104,064)
45,715,867–
210,607,000
3,369,524–
17,860207,219,616–
207,219,616

5,850,725(170,791)
8,600,057(4,406,703)(1,693,866)(51,379,374)(43,199,952)
146,978,817(418,388)
27,615,624(217,376,005)
45,650,106(263,026,111)

674,078,052(354,478,116)
77,961,275(27,512,673)
13,924,925–
383,973,463
172,790,891(418,388)(28,297,839)
239,898,799
45,650,106
194,248,693

Segment assets
Segment liabilities

3,151,006,341
2,262,065,368

415,621,165
874,190,809

899,853,374
3,762,806,775

31,326914,642,725

4,467,505,648
572,649,032

720,759,848
90,411,729

9,654,777,702
8,476,766,438

45,592–

24,604–28,923–21,752–

16,418732,935

20,034,736
33,499,527

20,172,025
34,232,462

At 31 December 2022

Depreciation and amortisation
Capital expenditure*59

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
31. Segment reporting (contd.)
Corporate
Banking .
MNT'000

SME
Banking .
MNT'000

RetailBanking .
MNT'000

International
Banking .
MNT'000

Treasury
MNT'000

Other
MNT'000

Total
MNT'000

Segment results
External revenue
Interest income
Interest expenses
Fee and commission income
Fee and commission expenses
Trading and other operating income/(expense), net
Intersegment revenue/(expense)
Total segment revenue
Operating expense
Share of loss of an associate
Credit loss expense/(reversal) on financial assets
Profit/(loss) before tax
Income tax expense
Net profit/(loss) for the year

230,125,054(150,616,576)
18,483,593(2,543)(21,379,859)(79,985,571)(3,375,902)
9,910,135–(48,443,708)
35,157,671–
35,157,671

61,153,689(21,876,275)
13,291,538–
2,352,915(880,553)
54,041,314
2,613,950–(2,274,800)
53,702,164–
53,702,164

98,545,040(196,492,636)
17,803,697(16,719,066)(6,734,783)
160,145,132
56,547,384
5,296,645–(24,307,745)
75,558,484–
75,558,484–(20,832,262)
9,735,152(57)–
24,175,169
13,078,002
4,211,034––
8,866,968–
8,866,968

205,649,650(15,517,778)
518,897(140,497)
7,905,694(163,375,933)
35,040,033
2,809,330–(30,386)
32,261,089–
32,261,089

1,634,032(301,035)
5,404,118(3,938,692)
4,450,435
59,921,756
67,170,614
106,097,469
28,728,932
17,351,090(85,006,877)
15,729,066(100,735,943)

597,107,465(405,636,562)
65,236,995(20,800,855)(13,405,598)–
222,501,445
130,938,563
28,728,932(57,705,549)
120,539,499
15,729,066
104,810,433

Segment assets
Segment liabilities

3,321,669,894
2,766,670,792

479,270,138
992,344,518

935,808,687
3,544,265,433

23,289759,100,506

4,112,722,977
424,148,842

699,176,830
42,033,004

9,548,671,815
8,528,563,095

27,282
2,424

14,866816

5,149,002–

14,078
5,128

9,047
880

15,941,625
25,342,353

21,155,900
25,351,601

At 31 December 2021

Depreciation and amortisation
Capital expenditure**Represents total cash additions to property and equipment and intangible assets.

60

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
32. Contingent liabilities and commitments
To meet the financial needs of customers, the Bank enters into various irrevocable commitments and contingent liabilities.
Even though these obligations may not be recognised on the statement of financial position, they do contain credit risk and are
therefore part of the overall risk of the Bank (see Note 33).

Uncovered Guarantees and Letters of credit
Undrawn credit lines

2022
MNT’000

2021
MNT’000

321,497,517
248,247,384
569,744,901

352,804,653
297,095,737
649,900,390

The table below shows the movement on allowance for impairment losses recognised on off-balance commitments:
Uncovered
Guarantees andLetters of credit
MNT’000

Undrawn credit
lines
MNT’000

Total
MNT’000

ECL allowance as at 1 January 2022
New exposures
Exposures derecognised or matured/lapsed
Net charge/(reversal) for the year (Note 8)
Foreign exchange adjustments
At 31 December 2022

3,302,522
2,066,586(2,802,500)(735,914)–
2,566,608

4,019,441
1,194,407(2,839,070)(1,644,663)–
2,374,778

7,321,963
3,260,993(5,641,570)(2,380,577)–
4,941,386

ECL allowance as at 1 January 2021
New exposures
Exposures derecognised or matured/lapsed
Net charge/(reversal) for the year (Note 8)
Foreign exchange adjustments
At 31 December 2021

14,824,112
2,515,836(14,037,775)(11,521,939)
349
3,302,522

1,745,691
3,316,564(1,042,814)
2,273,750–
4,019,441

16,569,803
5,832,400(15,080,589)(9,248,189)
349
7,321,963

An analysis of changes in the outstanding exposures and the corresponding ECL allowance as at 31 December 2022 and 31
December 2021 including credit quality is, as follows:
Uncovered Guarantees and Letters of credits
Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

Outstanding exposure as at 1 January2022
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2022

312,654,951
247,969,388(194,816,405)
11,200,744(68,239,049)–
308,769,629–
2,433,577(58,863,400)–
68,239,049–
11,809,226

40,149,702–(28,030,296)(11,200,744)––
918,662

352,804,653
250,402,965(281,710,101)–––
321,497,517

ECL allowance as at 1 January 2022
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2022

2,538,355
2,043,902(1,054,469)–(1,015,812)–
2,511,976–
22,684(983,864)–
1,015,812–
54,632

764,167–(764,167)––––

3,302,522
2,066,586(2,802,500)–––
2,566,608

61

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
32. Contingent liabilities and commitments (contd.)Uncovered Guarantees and Letters of credits (contd.)Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

Outstanding exposure as at 1 January2021
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2021

223,239,601
248,684,732(169,210,170)
39,131,553–(29,190,765)
312,654,951

11,471,531–(11,003,209)––(468,322)–

54,854,484–(5,232,316)(39,131,553)–
29,659,087
40,149,702

289,565,616
248,684,732(185,445,695)–––
352,804,653

ECL allowance as at 1 January 2021
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
Foreign exchange adjustment
At 31 December 2021

785,998
2,515,836(10,238,947)
10,244,129–(769,010)
349
2,538,355

2,603,661–(2,603,661)
–
–
–
–
–

11,434,453–(1,195,167)(10,244,129)–
769,010–764,167

14,824,112
2,515,836(14,037,775)
–
–
–
349
3,302,522

Credit quality of gross carrying amounts as at 31 December 2022 and 2021:
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

308,769,629––––
308,769,629–
11,809,226–––
11,809,226––
918,662––
918,662

308,769,629
11,809,226
918,662––
321,497,517

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

312,654,951––––
312,654,951

–
–
–
–
–
–

–
40,149,702–––
40,149,702

312,654,951
40,149,702–––
352,804,653

62

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
32. Contingent liabilities and commitments (contd.)
Undrawn credit balances
Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

Outstanding exposure as at 1 January2022
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2022

284,295,098
122,319,732(163,126,077)
767,165(724,592)(186,520)
243,344,806

11,612,186
4,044,473(11,154,106)(453,445)
769,941(1,991)
4,817,058

1,188,453–(932,375)(313,720)(45,349)
188,51185,520297,095,737
126,364,205(175,212,558)–––
248,247,384

ECL allowance as at 1 January 2022
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2022

3,983,938
1,167,930(2,816,054)
13,737(7,825)(739)
2,340,987

35,503
26,477(22,256)(13,737)
7,825(30)
33,782

–
–
(760)
–
–
769
9

4,019,441
1,194,407(2,839,070)–––
2,374,778

Stage 1
MNT’000

Stage 2
MNT’000

Stage 3
MNT’000

Total
MNT’000

Outstanding exposure as at 1 January2021
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2021

249,364,112
166,605,550(131,455,487)
1,419,311(651,704)(986,684)
284,295,098

21,129,401
10,895,014(18,613,031)(1,024,747)
718,483(1,492,934)
11,612,186

5,053,877–(5,883,699)(394,564)(66,779)
2,479,618
1,188,453

275,547,390
177,500,564(155,952,217)–––
297,095,737

ECL allowance as at 1 January 2021
New exposures
Exposures derecognised or matured/lapsed
Transfer to/(from) Stage 1
Transfer to/(from) Stage 2
Transfer to/(from) Stage 3
At 31 December 2021

1,566,649
3,284,190(972,924)
109,380(2,242)(1,115)
3,983,938

173,398
32,374(67,357)(103,736)
2,242(1,418)35,5035,644–(2,533)(5,644)–
2,533–

1,745,691
3,316,564(1,042,814)–––
4,019,441

63

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
32. Contingent liabilities and commitments (contd.)
Undrawn credit balances (contd.)
Credit quality of gross carrying amounts as at 31 December 2022 and 2021:
Stage 1
MNT'000

Stage 2
MNT'000

Stage 3
MNT'000

Total
MNT'000

At 31 December 2022
Performing
Special mention
Substandard
Doubtful
Loss
Total

243,344,806––––
243,344,806–
4,817,058–––
4,817,058––
85,520––85,520243,344,806
4,817,058
85,520––248,247,384

At 31 December 2021
Performing
Special mention
Substandard
Doubtful
Loss
Total

284,295,098––––
284,295,098–
11,612,186–––
11,612,186––
1,188,453––
1,188,453

284,295,098
11,612,186
1,188,453––
297,095,737

As of 31 December 2022, the Bank had capital commitments for construction in progress of USD 89 million (2021: USD 98
million) (Note 18 and 21) and other contractual commitments of MNT 1,030 million (2021: nil).
Contingent liabilities
Guarantees and letter of credits commit the Bank to make payments on behalf of customers in the event of a specific act,
generally related to tender and bid auction. They generally carry the same risk as loans even though they are of a contingent
nature.
Commitments
Commitments to extend credit represent contractual commitments to make loans and revolving credit. Commitments have
fixed expiry dates or other termination clauses. Since commitments may expire without being drawn upon and require thecustomer to meet specific requirements, the total contract amounts do not necessarily represent future cash requirements.
Undrawn credit lines
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Commitments toextend credit represent unused portions of authorized credit line. With respect to credit risk on commitments to extend credit,
the Bank can be exposed to loss in an amount equal to the total unused credit commitments. However, the likely amount ofloss is less than the total unused commitments since most commitments to extend credit are contingent upon customers
maintaining certain specific credit standards.
Legal claims
Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The Bank has formal
controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss can bereasonably estimated, the Bank makes provision to account for any adverse effects on its financial statements.
As at 31 December 2022 and 2021, there were no major litigation cases involving the Bank.
Tax legislation
Mongolian tax legislation is subject to varying interpretations, and changes, which can occur frequently. Management's
interpretation of such legislation as applied to the transactions and activity of the Bank may be challenged by tax authorities.
Mongolian tax authorities may be taking a more assertive position in their interpretation of the legislation and assessments, and
it is possible that transactions and activities that have not been challenged in the past may be challenged by tax authorities. As
a result, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by theauthorities in respect of taxes for five calendar years preceding the year of review. Under certain circumstances reviews may
cover longer periods.

64

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
32. Contingent liabilities and commitments (contd.)
Tax legislation (contd.)
Mongolian transfer pricing legislation provides the possibility for tax authorities to make transfer pricing adjustments andimpose additional tax liabilities in respect of all controllable transactions, including those related to domestic transfer pricing.
In case of deviation of transaction terms from market terms, the tax authorities have the right to adjust taxable items and to
impose additional taxes, fines and interest penalties. Given the brief nature of the current Mongolian transfer pricing rules, theimpact of any such challenge cannot be reliably estimated. However, it may be significant to the financial position and/or theoverall operations of the entity.
Mongolian tax legislation does not provide definitive guidance in certain areas, specifically in areas such as VAT, withholding
tax, corporate income tax, personal income tax and other areas. From time to time, the Bank adopts interpretations of such
uncertain areas that reduce the overall tax rate of the Bank. As noted above, such tax positions may come under heightened
scrutiny as a result of recent developments in administrative and court practices. The impact of any challenge by the tax
authorities cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operationsof the entity.
Management performs regular re-assessment of tax risks and its position may change in the future as a result of the change in
conditions that cannot be anticipated with sufficient certainty at present.
33. Risk management(1) Introduction
The main risks inherent in the Bank’s operations are credit risks, liquidity risks and market risks. The Bank’s Credit
Underwriting Department ("CUD") is responsible for managing the Bank’s credit risks, while Risk Management Policy andValidation Department is responsible for managing market and liquidity risks. This note provides information about the Bank's
exposure to each of the above risks, the Bank's objectives, policies and processes for measuring and managing risk, and theBank's management of capital.
Risk management structure
The Board of Directors (“BoD”) is responsible for the overall risk management approach and for approving the risk policy andcredit policy which specify risk appetite and tolerances. However, there are separate independent bodies responsible formanaging and monitoring risks.
Representative Governing Board (“RGB”)
The Bank’s Representative Governing Board is responsible for monitoring compliance with the Bank’s risk management
policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by
the Bank. The RGB is assisted in these functions by Internal Audit.
Internal Audit
Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the result of which arereported to the RGB. Internal audit examines both the adequacy of the procedures and the Bank's compliance with theprocedures.
Executive Committee
The Executive Committee consists of all the executive management of the Bank and is chaired by the CEO and holds regularmeetings to discuss and decide the Bank’s strategic issues and planning required for sustainable business management.
Asset and Liability Committee ("ALCO")ALCO is responsible for providing centralized asset and liability management of the funding, liquidity, foreign currency
exposure, maturity and interest rate risks to which the Bank is exposed. The purpose of ALCO is to set up the asset and liability
structure of the Bank’s balance sheet conducive for sustainable growth of the Bank, its profitability and liquidity throughcomprehensive management of the Bank’s assets and liabilities and monitoring of the foreign currency, interest rate and othermarket risks.
Risk Management Committee (“RMC”)
RMC is responsible for anticipating and managing new and ongoing financial risk across business departments and maintaining
appropriate limits on risk taking, adequate systems and standards for measuring operational risk, credit risk and performance,
comprehensive risk reporting and management review process.

65

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)
Credit Committees
The Bank’s Credit Committee’s structure was established to manage the Bank’s credit risk at various levels. The Bank has
following types of credit committees for loan approval and monitoring:
1.
2.
3.
4.
5.
6.

Credit committee is responsible for the overall credit policies and procedures of the Bank and currently approves all credit
exposures above MNT 1 billion.
Credit subcommittee is responsible for approving all credit exposures above MNT 500 million and up to MNT 1 billion.
Credit council is responsible for approving all credit exposures exceeding branch credit authorization limit and up to MNT
500 million.
Branch credit council approves all loans except for salary and pension loan that amounts exceeding authorization limitsof Branch director and up to authorization limit of Branch credit council
Credit council approves salary and pension loans exceeding MNT 30 million.
Branch credit council, depending on the branch size approves credit exposures from MNT 60 million up to MNT 180
million.

The Bank’s risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly
to reflect changes in market conditions, products and services offered. The Bank, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees
understand their roles and obligations.
Risk measurement and reporting system
The Bank’s risks are measured using a method which reflects both the expected loss likely to arise in normal circumstances
and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models. The models make use ofprobabilities derived from historical experience, adjusted to reflect the economic environment.
Monitoring and controlling risks are primarily performed based on limits established by the Bank. These limits reflect thebusiness strategy and market environment of the Bank as well as the level of risk that the Bank is willing to accept, withadditional emphasis on selected industries. In addition, the Bank monitors and measures the overall risk bearing capacity inrelation to the aggregate risk exposure across all risk types and activities.
Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks.
This information is presented and explained to the BOD, RGB, ALCO, RMC and Credit Committees, and the head of eachbusiness departments. The reports include the aggregate credit exposure, credit metric forecasts, liquidity ratios and risk profilechanges.
Both ALCO and RMC receive a comprehensive risk report every quarter which is designed to provide all the necessary
information to assess and conclude on the risk exposure of the Bank. Bi-weekly briefing is presented to the ALCO on theutilisation of market limits, analysis, and liquidity, and any other risk developments.
Risk mitigation
As part of its overall risk management, the Bank uses basis sensitivity analysis to measure and analyse exposures resulting
from changes in interest rates, foreign currencies, credit risks, and exposures arising from forecast transactions. The Bank
actively utilizes collaterals and personal guarantees to reduce its credit risks.
Excessive Risk Concentration
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the samegeographic region or have similar economic features that would cause their ability to meet contractual obligations to be
similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of theBank’s performance to developments affecting a particular industry or geographical location.
In order to avoid excessive concentrations of risk, the Bank’s policies and procedures include specific guidelines to focus on
maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.
At the individual basis, BoM sets the standards of limitation as follows:• The maximum amount of the overall credit exposures issued and other credit-equivalent assets to an individual creditor
and his/her related persons shall not exceed 20% of the equity of the Bank.
• The maximum amount of the credit exposures issued, and other credit-equivalent assets shall not exceed 5% of the equity
for one related person to the Bank, and the aggregation of overall lending to the related persons shall not exceed 20% of
the equity of the Bank.
The Bank’s policy requires it to maintain sufficient liquidity corresponding to the level of deposit concentration.
66

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk
Credit risk is the risk that the Bank will incur a loss because its customers, clients or counterparties fail to fulfil their contractual
obligations. The Bank manages and controls credit risk by carefully screening credit applications, setting interest rate adjusted
for risk level, and setting limits on credit exposures for individual counterparties, geographical area, and industry, andmonitoring exposures in relation to such limits.
The Bank has established a credit quality review process to provide early identification of possible changes in thecreditworthiness of counterparties, including regular collateral revisions. The credit quality review process allows the Bank to
identify potential losses and take early corrective actions.
The Bank regularly examines and improves credit policies and procedures to keep its lending activities in line with the bestpractice.
Credit-related Commitments Risks
The Bank makes available to its customers guarantees that may require that the Bank makes payments on their behalf andenters into commitments to extend credit lines to secure their liquidity needs. Letters of credit and guarantees (including standby
letters of credit) commit the Bank to make payments on behalf of customers in the event of a specific act, generally related tothe import or export of goods. Such commitments expose the Bank to similar risks to loans and are mitigated by the same
control processes and policies.
Impairment assessment
Definition of default, impaired and cure
The Bank considers exposure to be in default for ECL calculations in all cases when the borrower becomes 90 days past dueon its contractual payments, or where the obligor is unlikely to repay the exposure fully without the Bank’s realisation ofcollaterals.
As part of the qualitative assessment of whether an exposure is credit-impaired, the Bank also considers a variety of instancesthat may indicate unlikeliness to pay. When such events occur, the Bank carefully considers whether the event should result intreating the customer as defaulted and therefore assessed as Stage 3 for ECL calculations or whether Stage 2 is appropriate.
Such events include:
•
•
•
•
•
•
•

An exposure is forborne or modified due to financial difficulties of the borrower
The debtor’s exposure to the Bank is more than 90 days past due
Internal rating of the borrower indicating default or near-default
The borrower is deceased or became disabled
The borrower’s operations had experienced unexpected operational risks
A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of thecollateral
The debtor filing for official bankruptcy

It is the Bank’s policy to consider a financial instrument as ‘cured’ and therefore re-classified out of Stage 3 when none of thedefault criteria have been present for at least six consecutive months. The decision whether to classify an asset as Stage 2 orStage 1 once cured depends on the updated credit grade, at the time of the cure, and whether this indicates there has been asignificant increase in credit risk compared to initial recognition.
The Bank’s internal rating and PD estimation process
The Bank’s Credit Underwriting Department operates its internal rating models. The models incorporate both qualitative andquantitative information and, in addition to information specific to the borrower, utilise supplemental external information that
could affect the borrower’s behaviour. Where practical, they also build on information from international rating agencies, suchas Moody’s, Standard & Poor’s and/or Fitch rating. These information sources are first used to determine the stage classificationof the exposures.
The PD for loans and advances to customers is derived from historical data and adjusted to incorporate forward looking
information using available forecasts projected from relevant macroeconomic factors, when applicable. The PD is defined asconditional PD given that the account has not defaulted in prior periods taking into account full and partial prepayments,
therefore the marginal PD’s are considered to build the PD curve. Further, the Bank uses cohort analysis to estimate the multiperiod PD curves.
The PD model used for financial assets other than loans and advances are based on rating matrices and are derived using
international credit ratings of the counterparties, which intrinsically contains forward-looking information.

67

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk (contd.)
Treasury, trading and interbank relationships
The Bank’s treasury, trading and interbank relationships and counterparties comprise financial services institutions, banks,
broker-dealers, exchanges and clearing-houses. For these relationships, the Bank’s Risk Management Policy and Validation
Department analyses publicly available external information such the ratings of international rating agencies, e.g. Moody’s,
and assigns the internal rating.
Corporate and SME loans
For corporate and SME loans, the borrowers are assessed by loan specialists under the supervision of the credit risk analysts
from CUD. The credit risk assessment takes into account various historical, current and forward-looking information such as:

•

•
•
•

Historical financial information together with forecasts and budgets prepared by the client. This financial information
includes realised and expected results, solvency ratios, liquidity ratios and any other relevant ratios to measure the client’s
financial performance. Some of these indicators are captured in covenants with the clients and are, therefore, measured
with greater attention.
Any publicly available information on the clients from external parties.
Any macro-economic or geopolitical information relevant to the borrower and/or portfolio
Any other objectively supportable information on the quality and abilities of the client’s management relevant for the
borrower’s performance.

The complexity and granularity of the rating techniques varies based on the exposure of the Bank and the complexity and sizeof the customer. Some of the less complex small business loans are rated within the Bank’s models for retail products.
Retail loans
Retail loans comprises all types of consumer loans, mortgage loans, credit cards and overdrafts. These products along withsome of the less complex SME loans are rated by methodology primarily driven by days past due. Herein: demographics, credit
history of loan applicants, collateral, current income levels, changes in account income, outstanding liabilities and desired loan
conditions.
The Bank’s internal credit rating grades
Internal
ratingInternal rating
description

International
rating(when applicable)

Performing
Special mention
Substandard
Doubtful
Loss
Not rated
Individually impaired

High grade
Upper medium grade
Lower medium grade
Low grade
Credit impaired
Not rated
Individually impaired

A- to AA+ rated
BBB- to BBB+
B- to BB+
Caa-C
–
–
–

Exposure at default
The EAD represents the estimate of the exposure at a future default date, taking into account expected changes in the exposure
after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected
drawdowns on committed facilities, and accrued interest from missed payments. The EAD of a financial asset represents its
gross carrying amount subject to the impairment calculation, addressing both the client’s ability to increase its exposure while
approaching default and potential early repayments too. EAD for credit cards and other revolving facilities is set out in Note
2.5.
To calculate the EAD for a Stage 1 loan, the Bank assesses the possible default events within 12 months for the calculation of
the 12mECL. For Stage 2 and Stage 3 financial assets, the exposure at default is considered for events over the lifetime of the
instruments.

68

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk (contd.)
Exposure at default (contd.)
The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type:••For amortising product and bullet repayment loans, this is based on the contractual repayments owed by the borrower over
12 month or lifetime basis. This will also be adjusted for any expected overpayments made by borrower. Early
repayment/refinance assumptions are also incorporated into the calculation.
For the revolving products, the EAD is predicted by taking current drawn balance and adding “credit conversion factor”
which allows for the expected drawdown of the remaining limit by the time of default. These assumptions vary by producttype and current limit utilization.

Loss given default
LGD represents the Bank’s expectation of the extent of loss on defaulted exposure. LGD varies by customer segments, which
represents customer potential and credit exposure. LGD is expressed as a percentage loss per unit of exposures at the time ofdefault. LGD is calculated on a 12-month or lifetime basis, where 12-month LGD is the percentage of loss expected to be madeif the default occurs in the next 12 months and Lifetime LGD is the percentage of loss expected to be made if the default occurs
over the remaining expected lifetime of the loan.
LGD varies over time depending on the payments and the value of collateral. The key elements of the LGD coefficient are:••Time dimension (dividing the EAD parameter into a secured and unsecured part) andChange in the value of collateral over time (in the case of such collateral as real estate, the value may remain unchanged)

In the absence of collateral for the financial instrument and sufficient historical data on default, the Bank applies expert
judgment. Depending on the circumstances and completeness of the data at the reporting date, the Bank applies historical dataapproach or historical data from external sources to determine the LGD coefficient in stages.
Significant increase in credit risk
The Bank continuously monitors all assets subject to ECL. In order to determine whether an instrument or a portfolio of
instruments is subject to 12mECL or LTECL, the Bank assesses whether there has been a significant increase in credit risk
since initial recognition.
When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, theBank considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis, based on the Bank’s historical experience and expert credit
assessment and including forward-looking information.
The Bank applies qualitative method for triggering a significant increase in credit risk for an asset, such as the account becoming
forborne. In certain cases, the Bank may also consider that events explained in “Definition of default” are a significant increasein credit risk as opposed to a default. Regardless of the change in credit grades, if contractual payments are more than 30 days
past due, the credit risk is deemed to have increased significantly since initial recognition.
When estimating ECL on a collective basis for a group of similar assets, the Bank applies the same principles for assessing
whether there has been a significant increase in credit risk since initial recognition.
Grouping financial assets measured on collective basis
As explained in Note 2.5 “Overview of the ECL principles” dependant on the factors below, the Bank calculates the allowance
for ECL either on collective or individual basis.
Asset classes where the Bank calculates ECL on an individual basis include:•••

Stage 3 borrowers who have total exposure of more than MNT 5 billion
Stage 3 borrowers with exposure of less than MNT 5 billion, who relate to a group of related parties for which the totalgroup exposure exceed MNT 5 billion
Large and unique exposures of the Corporate loan portfolio regardless of the staging

Asset classes where the Bank calculates ECL on a collective bases include all the remaining exposures not assessedindividually. The bank groups these exposures into smaller portfolios, based on customer segments:•••

Corporate loans
SME loans
Retail loans

69

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk (contd.)Analysis of inputs to ECL model – forward looking information
The Bank has incorporated the effect of future macroeconomic developments into the ECL by applying forward-looking
information on the component of the ECL, the PD. A simple linear model was built to analyse the relationship between theobserved default rates and macroeconomic variables. The data set includes quarterly time series of main macro indicators andprobability of default per customer segment. Macroeconomic variables are taken from the database of the National Statistical
Office and BoM, and PD rates are derived from the bank's internal database. The Bank has selected Policy rate and Inflation
rate with one year quarter lag for Retail and GDP and Credit growth for SME and Corporate loans for 2022 (for 2021, GDP
growth with one year quarter lag and Policy rate for Retail, SME and Corporate loans), which had the highest correlation withthe default rate.
In terms of the methodology, correlation analysis was conducted initially to preselect the suitable macroeconomic variables.
Then coefficients were estimated applying simple regression analysis. From the estimated coefficients and forecasts,
adjustment factors to incorporate forward-looking information into PD were derived as the ratio between the predicted default
rate and historical average default rate. These adjustment factors and adjusted PD rates are considered as Base scenario for
ECL model, as it represents the best prediction of the future economic development. The good and bad scenarios are derived
from historical adjustment factors based on the model predicted default rates and selected as certain quantiles of the adjustment
factor distribution. Expected loss for different scenarios are calculated based on those estimated PD rates under the different
scenarios, and the actual expected credit loss allowance is estimated as weights of 3 scenarios: 20% for Good and Bad, and
60% for Base scenario.
The following table sets out the results of adjustment factors under 3 different scenarios:
31 December 2022
Bad case
Base case
Good case

Corporate loans
2.10481.35740.4406

SME loans
2.10481.35740.4406

Retail loans
1.69811.13630.4922

Corporate loans
2.05151.50490.4702

SME loans
2.05151.50490.4702Retail loans
1.9102
1.43400.542331 December 2021
Bad case
Base case
Good case

Overview of modified and forborne loans
From a risk management point of view, once an asset is forborne or modified, the Bank’s credit risk department and special
department for distressed assets continues to monitor the exposure until it is completely and ultimately derecognised.
The table below shows the gross carrying amount of restructured financial assets with corresponding ECL for the year ended
31 December 2022 and 2021, as follow:

Restructured loans
Gross carrying amountCorresponding ECL

70

2022
MNT’000

2021
MNT’000

56,806,027(21,933,646)

64,091,637(30,898,992)

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk (contd.)Analysis of risk concentration
Disclosure of credit quality and maximum exposure for credit risk based on the Bank’s internal credit rating system and yearend stage classification are disclosed in Notes 12, 13, 14 and 17 where relevant.
The table below show the analysis per industry sector of the Bank’s loans and advances to customers (Note 17) in grossamounts, before taking into account the fair value of the loan collateral held or other credit enhancements.
Gross maximum exposure

Trading
Mining and quarrying
Construction
Financial service
Manufacturing
Mortgage loan
Card loan
Hotel, restaurant and tourism
Transportation and communication
Deposit collateralized loan
Health
Education
Electricity and thermal energy
Agriculture
Other

2022
MNT’000%

2021
MNT’000%

989,179,347
618,573,404
473,147,282
355,983,175
523,074,747
515,069,970
278,200,090
151,931,463
168,262,695
100,641,414
30,018,101
58,040,193
19,875,704
23,345,917
312,523,722
4,617,867,224

21%
13%
10%
8%
11%
11%
6%
3%
4%
2%
1%
1%
0%
1%
7%
100%

1,183,191,976
910,296,524
520,921,588
373,142,568
515,616,099
517,222,290
251,922,005
166,213,301
137,752,916
93,026,232
43,576,125
80,961,554
31,187,578
22,047,101
271,721,499
5,118,799,356

23%
18%
10%
7%
10%
10%
5%
3%
3%
2%
1%
2%
1%
0%
5%
100%

*The Bank classified the holding company that only owns shares of companies in other industries as financial services inaccordance with the Bank’s sector codification.
Collateral and other credit enhancements
The amount and type of collateral required depends on the assessment of the credit risk of the borrower or counterparty andthe type of loan granted. The main types of collateral obtained are as follows:• corporate lending: charges over real-estate properties, equipment and machineries;• retail lending: charges over automobiles and assignment of income; charges over real estate properties; and mortgages overresidential properties;• small and medium-sized enterprise lending: charges over real estate properties.
The Bank regularly monitors the market value of collateral and requests additional collateral when necessary in accordancewith the underlying agreement.
It is the Bank’s policy to dispose of foreclosed properties in an orderly fashion. The proceeds are used to reduce or repay theoutstanding claim. The Bank does not occupy foreclosed properties for business use.
Disclosure of credit quality and the maximum exposure for credit risk per categories based on the Bank’s internal credit rating
system and year end stage classification are further disclosed in Notes 12, 13, 14 and 17.
Where financial instruments are recorded at fair value the amounts shown in Note 14 represent the current credit risk exposure
but not the maximum risk exposure that could arise in the future as a result of changes in values.

71

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(2) Credit risk (contd.)
Collateral and other credit enhancements (contd.)
The table below summarise the Bank's collateral for loans and advances:
2022
Gross
MNT’000
Corporate
SME
Retail

3,238,302,119
420,167,378
628,521,161
4,286,990,658

2021
Fair value ofcollaterals .
MNT’000

2,184,315,132
389,174,705
647,754,740
3,221,244,577

Gross
MNT’000

Fair value ofcollaterals
MNT’000

3,672,863,022
535,436,302
572,177,859
4,780,477,183

2,652,553,356
477,497,748
319,753,238
3,449,804,342

Credit concentration ratio
As stipulated in the Banking Law of Mongolia, the total value of loans, loan equivalent assets and guarantees provided to single
borrower or group of related borrowers shall not exceed 20% of the total equity of the Bank. The maximum value of loans,loan equivalent assets and guarantees provided to a shareholder, the chairman, a member of the Representative Governing
Board, an executive director or a bank officer or any related person thereof shall not exceed 5% of the capital of the Bank, andthe total amount shall not exceed 20% of the capital of the Bank respectively.
As at 31 December 2021, certain loans disbursed to single borrower and its’ group of related borrowers exceeded the regulatory
ratio limit on the single borrower exposure of 20%. The total excess amount was MNT 4,259 million, which was adjusted whenassessing core capital adequacy and risk-weighted capital ratios (See Note 37). There were no such breaches as at 31 December
2022.
(3) Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its payment obligations when they fall due under normal andstressed circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit
base, manages assets with liquidity in mind, and monitors future cash flows and liquidity on a daily basis. This incorporates anassessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding
if required.
The Bank is exposed to frequent calls on its available cash resources from current deposits, maturing deposits and loan
drawdowns. The Bank’s ALCO sets limits on the minimum proportion of maturing funds available to cover such cash outflows
and on the minimum level of interbank and other borrowing facilities that should be in place to cover withdrawals at unexpectedlevels of demand.
Exposure to liquidity risk
The key measure used by the Bank for managing liquidity risk is the ratio of liquid assets to total liabilities, which is in linewith the liquidity ratio described in Banking Law of Mongolia.
For this purpose the Bank maintains a liquidity ratio; calculated as a ratio of a the Bank’s liquid assets, including cash on hand,deposits and placements with banks and other financial institutions, balances with BoM and investment securities to the Bank’s
liquid liabilities; including deposit from customers, deposits and placements from the banks and other financial institutions,loans from foreign financial institutions, taxation and debt securities issued.
Details of the reported ratio at the reporting date were as follows:

At 31 December

2022

2021

43.4%

40.6%

Analysis of financial assets and financial liabilities by remaining contractual maturities
The table below summarizes the maturity profile of the Bank’s financial assets and financial liabilities at 31 December 2022
and 2021 based on contractual undiscounted repayment obligations. However, the Bank expects that many customers will not
request repayment on the earliest date the Bank could be required to pay and the table does not reflect the expected cash flows
indicated by the Bank’s deposit retention history.

72

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(3) Liquidity risk (contd.)Analysis of financial assets and financial liabilities by remaining contractual maturities (contd.)

At 31 December 2022

Financial assets
Cash and balances with Bank of Mongolia
Due from other banks and financial institutions
Financial investments
Gross settled swaps:- Inflows- Outflows
Loans and advances to customers
Other financial assets

Financial liabilities
Due to banks and other financial institutions
Repurchase agreements
Due to customers
Gross settled swaps:- Inflows- Outflows
Borrowed funds
Lease liabilities
Other financial liabilities
Uncovered Guarantees and Letters of credit
Undrawn credit lines

On demand
MNT’000

Less than 3months .
MNT’000

3 to 6 months
MNT’000

6 months to 1
year .
MNT’000

1 to 5 years
MNT’000

Over 5 years
MNT’000

Total
MNT’000

894,574,372
604,503,816–

862,425,315
162,788,478
599,363,877––
342,187,217––
275,776,071––
358,963,322––
684,426,096

1,756,999,688
767,292,294
2,260,716,583––
616,534,166
29,546,378
2,145,158,733

282,913,155(235,350,417)
580,849,138
17,757,526
2,270,747,073

139,256,202(128,895,332)
457,103,700
400,965
810,052,752

218,641,936(196,375,805)
1,459,680,496
615,039
1,758,337,737

790,922,559(606,584,744)
1,683,555,250
116,839,519
2,343,695,906––
1,115,064,950–
1,799,491,046

1,431,733,852(1,167,206,298)
5,912,787,700
165,159,428
11,127,483,247

32,154,100–
2,959,462,153

971,557
34,008,500
909,434,848–
155,797,971
646,073,155–
89,725,369
1,131,845,094–
50,324,598
756,958,947––
18,698,206

33,125,657
329,856,439
6,422,472,402––
112,757,080––
321,497,517
248,247,384
3,674,118,234

18,964,043(22,893,227)
357,969,027
1,762,365
80,113,415––
1,380,330,528

18,775,430(16,498,851)
4,711,828
1,762,365–––
810,621,899

39,471,074(35,609,830)
667,258,150
3,478,172
180,389,295––
2,076,557,324

537,066,596(693,809,266)
252,205,602
11,843,553–––
914,590,030––
74,734,328–––
93,432,534

614,277,143(768,811,174)
1,469,636,016
18,846,455
260,502,710
321,497,517
248,247,384
8,949,650,548(1,528,959,501)

890,416,545(569,147)(318,219,587)

1,429,105,876

1,706,058,513

2,177,832,699

73

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(3) Liquidity risk (contd.)Analysis of financial assets and financial liabilities by remaining contractual maturities (contd.)

At 31 December 2021

Financial assets
Cash and balances with Bank of Mongolia
Due from other banks and financial institutions
Financial investments
Gross settled swaps:- Inflows- Outflows
Loans and advances to customers
Other financial assets

Financial liabilities
Due to banks and other financial institutions
Repurchase agreements
Due to customers
Gross settled swaps:- Inflows- Outflows
Borrowed funds
Debt securities issued
Lease liabilities
Other financial liabilities
Uncovered Guarantees and Letters of credit
Undrawn credit lines

On demand
MNT’000

Less than 3months .
MNT’000

3 to 6 months
MNT’000

6 months to 1
year .
MNT’000

1 to 5 years
MNT’000

Over 5 years
MNT’000

Total
MNT’000

976,548,511
405,038,221
60,692,439

8,017,940
101,772,804
1,271,633,439––
93,249,457––
241,384,642––
939,200,934––
634,783,058

984,566,451
506,811,025
3,240,943,969––
649,683,374
126,484,571
2,218,447,116

863,327,381(798,718,006)
638,054,503
7,701,212
2,091,789,273

1,245,156(2,623,675)
479,178,506–
571,049,444

2,147,447(3,897,800)
1,119,480,176–
1,359,114,465

135,860,418(137,754,694)
2,815,075,468–
3,752,382,126––
1,385,374,372–
2,020,157,430

1,002,580,402(942,994,175)
7,086,846,399
134,185,783
12,012,939,854

12,938,713–
2,810,243,953––
1,117,061,112––
704,809,250

1,057,485
31,917,764
1,169,427,606–
279,002,309
617,578,194––
23,249,103

13,996,198
310,920,073
6,442,369,218––
117,283,832–––
352,804,653
297,095,737
3,590,366,888(802,772,467)
872,643,457
112,766,644–
1,703,352
73,958,633––
1,375,360,731––
17,883,897
166,382,466
1,703,352–––
890,778,965(9,298,099)
2,687,736
257,832,573–
3,394,578–––
1,457,019,643(310,630,156)
301,286,951
965,512,018–
3,751,781
255,519,365––
2,112,020,462––
46,555,619––
1,300,946––
71,105,668(1,122,700,722)
1,176,618,144
1,517,834,583
166,382,466
10,553,063
330,778,944
352,804,653
297,095,737
9,496,652,357(1,371,919,772)

716,428,542(319,729,521)(97,905,178)

1,640,361,664

1,949,051,762

2,516,287,497

74

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(4) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates will affect the Bank’s
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return on risk.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect bank’s profitability, future cash flows or
the fair values of financial instruments. The Bank’s lending, funding and investment activities give rise to interest rate risk.
The immediate impact of variation in interest rate is on Bank’s net interest income, while a long term impact is on the Bank’s
net worth since the economic value of the Bank’s assets, liabilities and off-balance sheet exposures will be affected. Interest
rate risk is managed by increasing or decreasing positions within limits specified by the Bank’s management. These limits
restrict the potential effect of movements in interest rates on interest margin and on the value of interest sensitive assets andliabilities.
The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank’s
financial assets and liabilities to various standard and non-standard interest rate scenarios. An analysis of the Bank’s sensitivity
to a 100 basis point (BP) increase or decrease in market interest rates (assuming no asymmetrical movement in yield curves
and a constant statement of financial position) is as follows:
Sensitivity of
net interest Risk limit set forincome .
profit or loss .
MNT'000
MNT'000

Sensitivity of Risk limit set for
equity .
equityMNT'000
MNT'000+/- 100+/- 100+/- 100+/- 153,528+/- 29,217,621+/- 687,465+/- 275,730,685+/- 275,730,685+/- 275,730,685+/- 138,175+/- 26,295,859+/- 618,719+/- 275,730,685+/- 275,730,685+/- 275,730,685+/- 100+/- 100+/- 100+/- 5,740,349+/- 32,308,020+/- 2,215,464+/- 241,711,954+/- 241,711,954+/- 241,711,954+/- 5,166,314+/- 29,077,218+/- 1,993,918+/- 241,711,954+/- 241,711,954+/- 241,711,954

Change inbasis points
At 31 December 2022
Currency
USD
MNT
OTHER
At 31 December 2021
Currency
USD
MNT
OTHER
Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. ALCO
sets limits on the level of exposure by currencies (primarily USD), which are monitored on a frequent basis. The Bank manages
its currency risk primarily through ensuring compliance with the prudential ratio for foreign currency open position establishedby the BoM and through assessing the impact of foreign currency exchange rate movements on the Bank’s liquidity andprofitability. Also the Bank uses limits, calculated using Value-at-Risk method, for foreign exchange risk management. ALCO
approves stop loss limits for overall currency positions on a quarterly basis. Market Risk Department oversees that the currency
exchange operations are managed within the approved limits.
Objectives and limitations of the VaR Methodology
The use of VaR has limitations because it is based on historical correlations and volatilities in market prices and assumes that
future price movements will follow a statistical distribution. Due to the fact that VaR relies heavily on historical data to provide
information and may not clearly predict the future changes and modifications of the risk factors, the probability of large market
moves may be underestimated if changes in risk factors fail to align with the normal distribution assumption. VaR may also be
under or over-estimated due to the assumptions placed on risk factors and the relationship between such factors for specificinstruments. Even though positions may change throughout the day, the VaR only represents the risk of the portfolios at theclose of each business day, and it does not account for any losses that may occur beyond the 99% confidence level.

75

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(4) Market risk (contd.)
Currency risk (contd.)Objectives and limitations of the VaR Methodology (contd.)
VaR limits have been established for all foreign currency open positions and exposures are reviewed daily against the limits
by management. The estimated potential one-day losses on its foreign currency denominated financial instruments, ascalculated in the VAR models are the following:

31 December
Average Daily
HighestLowestHistorical
Simulation
2022
MNT’000

2021
MNT’000(249,173)(1,080,401)(2,842,583)(152,528)(708,488)(843,269)(1,237,652)(83,473)

The table below summarizes the Bank's exposure to foreign exchange risk as at 31 December 2022 and 2021. Included in thetable are the Bank’s financial assets and liabilities at carrying amounts.
2022
Foreigncurrencies
MNT’000

Total .
MNT’000

MNT
denominated .
MNT’000

2021
Foreigncurrencies
MNT’000

Total
MNT’000

254,823,322

1,501,383,972

1,756,207,294

217,353,302

758,998,935

976,352,237–
1,539,613,538

767,067,640
130,298,046

767,067,640
1,669,911,584–
2,509,400,449

504,417,550
93,246,654

504,417,550
2,602,647,103

265,374,431–

265,374,431

87,403,498

14,244,000

101,647,498

3,268,342,745
89,000,307
5,417,154,343

868,839,653
18,420,858
3,286,010,169

4,137,182,398
107,421,165
8,703,164,512

3,584,773,816
74,311,973
6,473,243,038

1,003,691,589
14,026,959
2,388,625,687

4,588,465,405
88,338,932
8,861,868,725

3,241,357
316,804,791
3,162,766,558

29,878,877–
3,044,542,847

33,120,234
316,804,791
6,207,309,405

3,018,387
289,792,528
4,033,034,308

10,920,326–
2,233,276,211

13,938,713
289,792,528
6,266,310,519

166,203,537
526,637,791–
15,869,783
218,064,284
4,409,588,101–
892,193,404––
20,896,217
3,987,511,345

166,203,537
1,418,831,195–
15,869,783
238,960,501
8,397,099,446

78,035,961
660,996,891
160,140,274
8,999,663
261,454,257
5,495,472,269–
747,743,238––
13,182,997
3,005,122,772

78,035,961
1,408,740,129
160,140,274
8,999,663
274,637,254
8,500,595,041

MNT
denominated .
MNT’000
Financial assets
Cash and balances withBank of Mongolia
Due from other banks andfinancial institutions
Financial investments
Derivative
financial
instruments
Loans and advances tocustomers
Other financial assets

Financial liabilities
Due to banks and otherfinancial institutions
Repurchase agreements
Due to customers
Derivative
financial
instruments
Borrowed funds
Debt securities issued
Lease liabilities
Other financial liabilities

Off-balance foreign currency exposure, net
Net foreign currency exposure

616,786,705(84,714,471)

425,866,057(190,631,028)

76

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
33. Risk management (contd.)(4) Market risk (contd.)
Currency risk (contd.)
An analysis of the Bank’s open position sensitivity to a 10 percent appreciation or depreciation of MNT against USD (assuming
all other variables constant) is as follows:

Change in .
currency rate

Sensitivity of Risk limit for net
open position .
positions
MNT'000
MNT'000+/- 10%+/- 10%+/- 7,875,319+/- 352,184+/- 230,000,000+/- 230,000,000+/- 10%+/- 10%+/- 6,978,181+/- 9,553,834+/- 230,000,000+/- 230,000,000

At 31 December 2022
Currency
USD
OTHER
At 31 December 2021
Currency
USD
OTHER
Prepayment risk
Prepayment risk is the risk that the Bank will incur a financial loss because its customers and counterparties repay or request
repayment earlier or later than expected.
The Bank uses the simplified approach to project the impact of varying levels of prepayment on its net interest income. If 20%
of repayable financial instruments were prepaid at the beginning of the year, with all other variables held constant, the interest
income for the year would be reduced by MNT 134,815,610 thousand (2021: MNT 114,665,796 thousand).
Operational risk
Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail tooperate effectively, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial
loss. The Bank cannot expect to eliminate all operational risks, but it endeavours to manage these risks through a control
framework and by monitoring and responding to potential risks. Controls include effective segregation of duties, access,authorisation and reconciliation procedures, staff education and assessment processes, such as the use of internal audit.

34. Fair value disclosures
Determination of fair value and fair value hierarchy
Fair value is the amount at which a financial instrument or other asset could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation, and is best evidenced by an active quoted market price. Where quoted
market prices are not available, the Bank used valuation techniques.

77

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
34. Fair value disclosures (contd.)
Determination of fair value and fair value hierarchy (contd.)
The following table shows an analysis of financial instruments and other assets recorded at fair value by level of the fair value
hierarchy.
At 31 December 2022

Financial assets
Debt instruments measured at FVOCI
Quoted government bonds
Unquoted BoM treasury bills
MIK USD bondEquity instruments measured at FVOCI
Unquoted equities
Quoted equities
Financial assets at FVTPL
Residential mortgage-backed securities
Loan backed securities - Junior tranche
Loans and advances to customers at FVTPL
Derivative financial instruments
Non-financial assets
Revalued properties
Investment properties

Financial liabilities
Derivative financial instruments

Level 1
MNT’000

Level 2
MNT’000

Level 3
MNT’000

Total
MNT’000

102,883,542–
27,362,835–
949,566,385
–

–
–
–

102,883,542
949,566,385
27,362,835–
70,359,946––

3,168,532–

3,168,532
70,359,946

–
–
–
–

–
–
330,876,566
265,374,431

260,184,968
5,832,160––

260,184,968
5,832,160
330,876,566
265,374,431––
200,606,323––
1,545,817,382

225,309,201
79,997,754
574,492,615

225,309,201
79,997,754
2,320,916,320––

166,203,537
166,203,537––

166,203,537
166,203,537

58,774,436–
34,429,486–
1,661,230,725
–

–
–
–

58,774,436
1,661,230,725
34,429,486–
54,267,410––

3,395,537–

3,395,537
54,267,410

–
–
–

–
338,322,173
101,647,498

199,870,221––

199,870,221
338,322,173
101,647,498––
147,471,332––
2,101,200,396

246,797,379
79,902,629
529,965,766

246,797,379
79,902,629
2,778,637,494––

78,035,961
78,035,961––

78,035,961
78,035,961

At 31 December 2021

Financial assets
Debt instruments measured at FVOCI
Quoted government bonds
Unquoted BoM treasury bills
MIK USD bondEquity instruments measured at FVOCI
Unquoted equities
Equity securities, at fair value
Financial assets at FVTPL
Residential mortgage-backed securities
Loans and advances to customers at FVTPL
Derivative financial instruments
Non-financial assets
Revalued properties
Investment properties

Financial liability
Derivative financial instruments

Transfers between level 1, 2 and 3
There were no transfers between level 1, 2 and 3 of the fair value hierarchy for the assets and liabilities which are recorded atfair value.
78

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
34. Fair value disclosures (contd.)
The description of valuation technique and description of inputs used in the fair value measurement for level 2 measurements
at 31 December 2022 and 2021:
Fair value2022
MNT'000

2021
MNT'000

Valuationtechnique

Inputs

1,661,230,725

Market value
approachCentral bank policy andrepo rates

Financial assets
949,566,385

Unquoted BoM treasury bills

Loans and advances to customers at FVTPL

Derivative financial instruments

338,322,173

Future cash flows, PD,
LGD and market
Discounted Cash Flowinterest rate of
approach
instruments

265,374,431

101,647,498

Libor and SOFR rate,
repo rate, government
bond yield, exchange
rate, commodity
Discounted Cash Flow forward price, USD
approachdiscount rate, PD

166,203,537

Libor and SOFR rate,
repo rate, government
bond yield, exchange
rate, commodity
Discounted Cash Flow forward price, USD
78,035,961
approachdiscount rate, PD

330,876,566

Financial liabilities

Derivative financial instruments

The were no change in valuation technique for level 2 recurring fair value measurements during the years ended 31 December
2022 and 2021.
The disclosure of significant unobservable inputs and sensitivity to reasonably possible changes to inputs used in the fair value
measurement for level 3 financial instrument is described below:
Sensitivity of theReasonable input to fair valuechangeMNT'000

At 31 December 2022

Fair value
MNT`000

ValuationtechniqueSignificant
unobservable inputs

Range of inputs

Financial assets
Residential mortgage-backed
securities

260,184,968+/- 1%+/- 2,601,850

Discounted Cash
Flow method

Market interest rates

7.0% - 9.0%

Loan backed securities - Juniortranche5,832,160+/- 1%+/- 58,322

Discounted Cash
Flow method

Market interest rates

9.5%

Unquoted equities

3,168,532+/- 10%+/- 316,853 Net assets valueMarket share price, Transaction
price

MNT 1,000 - MNT
5,691,675

Non-financial assets

Revalued properties

Investment properties

225,309,201

79,997,754+/- 10%+/- 10%+/- 22,530,920+/- 7,999,775

79

Market proxy

Equivalent property
prices/Market proxy with
MNT 0.5 million appropriate adjustments for2.4 million per sq
location, condition, and similar meter; MNT 2.5 - 8.7
factors
million per sq.meters

Market proxy

Equivalent property
prices/Market proxy withappropriate adjustments forlocation, condition, and similar
factors

MNT 5.3 million 8.2 million per
sq.metersTRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
34. Fair value disclosures (contd.)
Sensitivity of theReasonable input to fair valuechangeMNT'000

At 31 December 2021

Fair value
MNT`000

Financial assets
Residential mortgage-backed
securities

199,870,221+/- 1%

Unquoted equities

3,395,537+/- 10%+/- 1,998,702

ValuationtechniqueSignificant
unobservable inputs

Range of inputs

Discounted Cash
Flow method

Market interest rates

7.0% - 9.0%

Market share price, Transaction
price

MNT 1,000 - MNT
5,691,675+/- 339,554 Net assets value

Non-financial assets

Revalued properties

Investment properties

246,797,379

79,902,629+/- 10%+/- 10%+/- 24,679,738+/- 7,990,263

Market proxy

Equivalent property
prices/Market proxy with
MNT 0.5 million appropriate adjustments for2.4 million per sq
location, condition, and similar meter; MNT 2.5 - 8.7
factors
million per sq.meters

Market proxy

Equivalent property
prices/Market proxy withappropriate adjustments forlocation, condition, and similar
factors

MNT 5.2 million 8.3 million per
sq.meters

There were no changes in valuation techniques during the year ended 31 December 2022 and 2021. Management believes thatthe fair value of financial assets is unlikely to be materially different from their carrying value as of 31 December 2022.

Movements in fair value measurements within Level 3 during the year
2022
MNT’000

2021
MNT’000

Residential mortgage-backed securities
At 1 January
Addition
Sold
Interest accrued
Interest received
At 31 December

199,870,221
191,776,200(147,530,300)
19,265,652(3,196,805)
260,184,968

127,666,125
102,858,400(36,061,600)
14,266,919(8,859,623)
199,870,221

Loan backed securities - Junior tranche
At 1 January
AdditionInterest accrued
Interest received
At 31 December–
5,746,900
278,965(193,705)
5,832,160

–
–
–
–
–

Unquoted equity
At 1 January
Disposal
At 31 December

3,395,537(227,005)
3,168,532

7,313,358(3,917,821)
3,395,537

80

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
34. Fair value disclosures (contd.)
Movements in fair value measurements within Level 3 during the year (contd.)2022
MNT’000

2021
MNT’000

Revalued properties
At 1 January
AdditionTransfer
Disposal
Depreciation charged in profit or loss
Write-off
Revaluation
At 31 December

246,797,379––(8,829,494)(5,623,684)(7,035,000)–
225,309,201

240,695,719
34,749,130
593,884(36,218,370)(6,121,359)–
13,098,375
246,797,379

Investment properties
At 1 January
Disposal
Transfer
Revaluation
At 31 December

79,902,629––
95,12579,997,754

148,990,218(20,898,204)(48,623,002)
433,61779,902,629

Revaluation of properties and investment properties
The properties’ fair values are based on valuations performed by an accredited independent valuer. The fair value of the landand buildings were determined using market approach. Market approach means that the valuations performed by the valuer
were based on transactions and advertised process for similar buildings in the market, applying comparison adjustments forlocation, condition age, listing, and similar factors.
Fair value of financial assets and liabilities not carried at fair value
The following describes the methodologies and assumptions used to determine fair values for those financial instruments which
are not already recorded at fair value in the financial statements:
Assets for which fair value approximates carrying value
For financial assets and financial liabilities that are liquid or have short term maturity (less than one year), it is assumed thatthe carrying amounts approximate to their fair value. Based on fair value assessments performed by the management, theestimated fair values of due from banks of more than one year approximate their carrying amounts as shown in the statementof financial position. This is due principally to the fact that the current market rates offered for similar deposit products do notdiffer significantly from market rates at inception.
Fixed rate financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest
rates when they were first recognised with current market rates offered for similar financial instruments available in Mongolia.
Set out below is a comparison of the carrying amounts and fair values of the Bank's financial instruments in the financial
statements where there is a significant difference between the two values which are categorized in level 2.

81

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
34. Fair value disclosures (contd.)
Fixed rate financial instruments (contd.)
Carrying amount
MNT’000

Fair value
MNT’000

Financial assets
Loans and advances to customers
Debt instruments at amortised cost

4,137,182,398
250,553,216

4,195,665,298
252,759,224

Financial liabilities
Due to customers

6,207,309,405

6,226,909,035

Financial assets
Loans and advances to customers
Investment securities held to maturity

4,588,465,405
590,679,288

4,639,813,219
601,122,783

Financial liabilities
Due to customers

6,266,310,519

6,249,211,370

As at 31 December 2022

As at 31 December 2021

35. Related party disclosures
The following are considered as related parties of the Bank:• Valiant Art LLC - The Bank’s executive officer’s immediate relative owns Valiant Art LLC• TDB Securities LLC (former TDB Capital LLC), TDB Asset Management SC LLC – The companies are subsidiaries of
TDB Capital LLC (former United Banking corporation LLC), the shareholder of the Bank• MIK – An associate (see Note 15)• Mongol General Leasing LLC and its subsidiaries (“MGLL”) – The Bank owns 10% equity interest in MGLL and thecompany is owned by close family member of beneficial owner of the Bank• National News Corporation LLC (“NNC”) – The Bank owns 9.85% equity interest in NCC and the Bank's beneficial
owner is BOD member of the company• NNC Publishing LLC, JCDecaux LLC - The companies are subsidiaries of NNC• CNB Consulting LLC (“CNB”) – CEO of CNB is immediate family member of the beneficial owner of the Bank
• Absolute Management LLC – The company is owned by close family member of beneficial owner of the Bank
• Times Media Corporation – The company is subsidiary of TDB Capital LLC• Mongolian National Rare Earth Corporation LLC (“MNREC”) - in 2016, the Bank has repossessed the shares of MNREC
in accordance with the terms and conditions of the loan agreement made between the Bank and the shareholders of
MNREC, which stipulate that the shareholders of MNREC transfers 100% ownership of its shares to the Bank in theevent of default on the loan. The repossessed shares were fully written-off in as of 31 December 2019.
• Key management personnel – Key management personnel are those individuals who have the authority and responsibility
for planning and exercising power to directly or indirectly control the activities of the Bank and its employees. The Bank
considers the members of the Board of Directors, Executive officers and their immediate relatives to be related parties.

82

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
35. Related party disclosures (contd.)
Significant transactions and balances with related parties as of 31 December 2022 and 2021 and for the years then ended were as follows:
TDB
US Global
CapitalInvestment JCDecaux
At 31 December 2022
LLC* Globull
LLC
LLC
MNT'000 MNT'000 MNT'000 MNT'000
Balances
Deposit and accrued
interest
1,020,494
Loan and advances,accrued interest
7,857,045
Receivables
andprepayments
547,500
RMBSs–
Quoted USD bonds–
Accruedinterest
payable on swap–
Other liabilities–
Letter of credit andLetter of guarantee–
Undrawn credit line–
Derivative
financialliability–
Transactions
Interest income on
Loans and advances
Financial instruments
RMBSs
Swap
Interest expense on
Deposits
Services obtained
Commission income
Remuneration

361

320 3,629,237

–

–

–

–
–
–

–
–
–

–
–

TDB
Securities
MIK
LLC
MNT'000 MNT'000

TDB
NNC
CNB
Absolute
Leasing
Publishing Consulting Management
LLC
NNC
LLC
LLC
LLC
MNT'000 MNT'000 MNT'000 MNT'000
MNT'000

67,692,020 2,643,944 16,019,311
10,026,377

262,769

13,282107– 18,862,957––
879,178– 260,184,968– 27,362,835–––

54,584–––––– 9,010,151
20,081,613
–
–
–
–
–

–
–

–
3,024,561– 158,847,086–––
85,271

–
–

–
–

–
–

–
–

–
–

–
–

2,540
3,674

–
4,598

–
–

–

–

– 160,848,700––

898,594
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

1,469,179
3,600,173
19,265,652
5,811,621

36
–
–
–

2,405,516
–
–
–

–
–
15
–

–
–
12
–

–
–
12
–

158,302
213,840483–

26,665,840–
2,008,901–

72,084547,498
890–

Beneficial
MongolTimesowner and
GeneralMediaTDB Asset
its
Key
Leasing Corporatio
Valiant Management immediate Management
MNREC
LLC
n LLC Art LLC
SC LLC
family Personnel
MNT'000 MNT'000 MNT'000 MNT'000
MNT'000 MNT'000
MNT'000

7,676 4,828,309
11,811,345
–

675

84

9,951

813

95,618845,952

–

–

–

–

67,651

1,949,644

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

– 3,100,000
–
–
–
–

–
–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
478,216

–
–

–
–

–
–

–
–

–
717,590–
540,681

–

–

–

–

–

–

–

–

–

–

–

–
–
–
–

–
–
–
–

422,844
–
–
–

–
–
–
–

678,061
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

8,716
–
–
–

197,909–––371,276–
718,302 5,850,833
11,689
3,251
–
–

–
–
216
–

–
–
37
–

–
–
36
–

–
–
4,105
–

–
–
26
–

–
263,148
76
–

–
–
320
–

–
–
13
–

313
–
818
–

38,490–4,881
19,703,582*Former United Banking Corporation LLC

83

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
35. Related party disclosures (contd.)

At 31 December 2021

Balances
Deposit and accrued interest
Loan and advances, accrued
interest
Receivables and prepayments
RMBSs
Quoted USD bonds
Accrued interest receivable on
swap
Other liabilities
Letter of credit and Letter ofguarantee
Undrawn credit line
Derivative financial liability
Transactions
Interest income on
Loans and advances
Financial instruments
RMBSs
Swap
Interest expense on
Deposits
Services obtained
Commission income
Remuneration

Globull
United Investment
BankingandCorporationDevelopment
LLC
PTE Ltd
MNT'000
MNT'000

JCDecaux
LLC
MNT'000

MIK
MNT'000

TDB
Securities
LLC
MNT'000

TDB
Leasing
LLC
MNT'000

NNC
MNT'000

NNC
Publishing
LLC
MNT'000

CNB
Absolute
Consulting Management
LLC
LLC
MNT'000
MNT'000

Times Media
Corporation Valiant Art
MNREC
LLC
LLC
MNT'000
MNT'000
MNT'000

Beneficial
owner anditsKey
immediate Management
family Personnel
MNT'000
MNT'000

712,608373

2,729,245 505,688,015

6,175,728

25,541,582

476,703

29,761

139

7,706

7,269

141,874

4,035

680,642972,327

7,069,939
547,500
–
–

–
–
–
–

– 15,451,856–
1,376,014– 199,870,221– 34,429,486

–
–
–
–

35,834,064
–
–
–

–
–
–
–

–
–
–
–

7,248,282
17,751,627
–
–

–
–
–
–

–
–
–
–

–
–
–
–

581,388–––

117,217–––

2,369,648
–
–
–

–
–

–
–

–
2,148,019– 200,678,622–––
450,982

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–
–

–
–
–

–
–
–

–
–
67,586,124

8,540
3,980
–

3,986,557
1,537
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
433,202––265,858–

666,266
–
–
–

–
–
–
–

–
–
–
–

2,060,553
3,278,645
14,266,919
11,448,055

444,128–––

2,747,999–––

408,329
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

76,436
–
–
–

–
–
–
–

21,456–––

221,687––––
100,000
2,522
–

–
–
12
–

68,156–
154–

85,816,540–
2,803,723–

50,922100,000––

1,666,122
776,101
18,194––
2,824,392
2,018
–

–
246,818
227
–

–
–
28
–

–
–
48
–

–
–
2,019
–

–
538,548
101
–

–
–
94
–

922
–
4,747
–

58,150–1,290
14,266,762

84

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
35. Related party disclosures (contd.)Terms and conditions of transactions with related parties
The above outstanding balances and transactions arose in the ordinary course of business. The interest charged to and by relatedparties are at normal commercial rates. Outstanding balances except for loans and advances to related parties at the period-end
are unsecured. There have been no guarantees provided or received for any related party receivables or payables.
Key management have banking relationships with the Bank which are entered into in the normal course of business.

36. Maturity analysis of assets and liabilities
The table shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled.
See Note 33 'Liquidity risk' for the Bank's contractual undiscounted repayment obligations.
At 31 December 2022

Less than
12 months
MNT’000

More than
12 months
MNT’000

Total
MNT’000

AssetsCash and balances with BoM
Due from other banks and financial institutions
Financial assets at fair value through profit or loss
Debt instruments at FVOCI
Equity instruments at FVOCI
Debt instruments at amortised cost
Investment in associate
Derivative financial instruments
Loans and advances to customers
Other assets
Investment property
Assets held for sale
Property and equipment
Right-of-use assets
Intangible assets
Total assets

1,756,207,294
767,067,640
23,785,328
953,832,580–
242,721,212–
90,166,256
2,357,796,491
84,276,486–
24,665,717–––
6,300,519,004––
242,231,800
125,980,182
73,528,478
7,832,004
924,685
175,208,175
1,779,385,907
381,674,074
79,997,754–
470,625,143
15,449,135
1,421,361
3,354,258,698

1,756,207,294
767,067,640
266,017,128
1,079,812,762
73,528,478
250,553,216
924,685
265,374,431
4,137,182,398
465,950,560
79,997,754
24,665,717
470,625,143
15,449,135
1,421,361
9,654,777,702

Liabilities
Due to banks and other financial institutions
Repurchase agreements
Due to customers
Derivative financial instruments
Borrowed funds
Other liabilities
Lease liabilities
Income tax liabilities
Deferred tax liabilities
Total liabilities

33,120,234
273,521,721
5,514,573,270
2,330,277
1,129,029,788
101,064,523–
55,742,118–
7,109,381,931–
43,283,070
692,736,135
163,873,260
289,801,407
159,419,062
15,869,783–
2,401,790
1,367,384,507

33,120,234
316,804,791
6,207,309,405
166,203,537
1,418,831,195
260,483,585
15,869,783
55,742,118
2,401,790
8,474,364,648

Net*(808,862,927)

1,986,874,191

1,180,413,054

85

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
36. Maturity analysis of assets and liabilities (contd.)
At 31 December 2021

Less than
12 months
MNT’000

More than
12 months
MNT’000

Total
MNT’000

AssetsCash and balances with BoM
Due from other banks and financial institutions
Financial assets at fair value through profit or loss
Debt instruments at FVOCI
Equity instruments at FVOCI
Debt instruments at amortised cost
Investment in associate
Derivative financial instruments
Loans and advances to customers
Other assets
Investment property
Assets held for sale
Property and equipment
Right-of-use assets
Intangible assets
Total assets

976,352,237
504,417,550
7,631,221
1,663,846,240–
299,482,131–
99,678,247
2,297,395,568
53,580,450–
3,605,964–––
5,905,989,608––
192,239,000
90,588,407
57,662,947
291,197,157
506,297
1,969,251
2,291,069,837
146,471,143
79,902,629–
480,838,433
7,902,693
2,334,413
3,642,682,207

976,352,237
504,417,550
199,870,221
1,754,434,647
57,662,947
590,679,288
506,297
101,647,498
4,588,465,405
200,051,593
79,902,629
3,605,964
480,838,433
7,902,693
2,334,413
9,548,671,815

Liabilities
Due to banks and other financial institutions
Repurchase agreements
Due to customers
Derivative financial instruments
Borrowed funds
Debt securities issued
Other liabilities
Lease liabilities
Income tax liabilities
Deferred tax liabilities
Total liabilities

13,938,713
41,331,885
5,681,330,229
75,951,189
495,290,103
160,140,274
81,615,708–
12,499,999–
6,562,098,100–
248,460,643
584,980,290
2,084,772
913,450,026–
207,454,257
8,999,663–
1,035,344
1,966,464,995

13,938,713
289,792,528
6,266,310,519
78,035,961
1,408,740,129
160,140,274
289,069,965
8,999,663
12,499,999
1,035,344
8,528,563,095

Net*(656,108,492)

1,676,217,212

1,020,108,720*Certain classification of financial assets and liabilities were based on contractual obligations. However, the Bank expects thatmany customers will not request repayment on the earliest date the Bank could be required to pay and the table does not reflect
the expected cash flows indicated by the Bank’s deposit retention history.
37. Capital adequacy
The adequacy of the Bank’s capital is monitored using the rules and ratios established by BoM.
Capital management
The primary objectives of the Bank's capital management are to ensure that the Bank complies with externally imposed capitalrequirements and that the Bank maintains healthy capital ratios to be able to absorb negative shocks.
The Bank manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk
characteristics of its activities.

86

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
37. Capital adequacy (contd.)
Regulatory capital
BoM requires commercial banks to maintain a minimum core capital adequacy ratio of 9% (2021: 9%) and risk weighted
capital ratio of at least 12% (2021: 12%) compiled on the basis of total capital and total assets as adjusted for their intrinsic
risk characteristics. The capital adequacy ratios of the Bank as at 31 December were as follows:

Core capital adequacy ratio
Risk-weighted capital ratio

Tier I Capital
Share capital
Share premium
Retained earnings
Adjustment (See Note 33)
Total Tier I Capital
Tier II capital
Revaluation surplus
Total Tier II Capital
Total capital /capital base

2022

2021

15.15%
15.15%

13.03%
13.03%

2022
MNT'000

2021
MNT'000

323,810,329
664
595,291,291–
919,102,284

323,809,925–
486,155,463(4,258,874)
805,706,514

–
–

–
–

919,102,284

805,706,514

The breakdown of risk weighted assets into the various categories of risk weights as at 31 December was as follows:

%
0
20
50
100
150
Adjustments:
Operational risk ratio
Foreign exchange risk ratio
Total

2022
Risk Assets
MNT'000

Weighted
MNT'000

2021
Risk Assets
MNT'000

Weighted
MNT'000

3,312,908,980
781,046,774
1,420,900,075
3,627,626,768
967,597,227–
156,209,355
710,450,039
3,627,626,768
1,451,395,840

3,360,928,946
532,097,176
1,248,466,378
4,300,089,528
621,453,461–
106,419,435
624,233,189
4,300,089,528
932,180,192

10,110,079,824

78,694,871
42,571,900
6,066,948,773

10,063,035,489

86,819,388
133,595,360
6,183,337,092

87

TRADE AND DEVELOPMENT BANK OF MONGOLIA LLC
Notes to the financial statements - 31 December 2022
38. Events after reporting date
Management is not aware of other events that occurred after the end of the reporting period, which would have any impact onthese financial statements except for:On 11 January 2023, the shareholders of the Bank approved to make 1 for 10 share split, as a result, the Bank`s number ofordinary shares in issue had increased to 48,070,880. The share split has been adjusted in the calculation of EPS for all periods
presented (See Note 11).

39. Mongolian translation
These financial statements are also prepared in the Mongolian language. In the event of discrepancies or contradictions between
the English version and the Mongolian version, the English version will prevail.

88