Fitch Ratings on October 18 placed Development Bank of Mongolia (DBM’s) Long-Term Issuer Default Ratings (IDRs) of 'B' and Government Support Rating (GSR) of 'b' on Rating Watch Negative (RWN). Fitch also placed the rating of DBM's senior unsecured debt of 'B' on RWN.

The RWN, said Fitch, reflected heightened refinancing risk.

The rating agency said: “We believe the Mongolian sovereign (B/Stable) has the ability and propensity to support DBM, but a lack of timely preparedness for two major bond maturities amid unfavorable market conditions, including a US-dollar bond maturing on 23 October 2023, has raised refinancing risk and has led Fitch to reassess DBM's importance to the state as a policy bank, despite DBM's 100% government ownership.

“The timeliness of government support, which may be impeded by operational obstacles, is important to our support assessment and presents risk to the support-driven ratings. The RWN also relates to DBM's capacity to perform its policy role in light of the perceived challenges in refinancing and resolving non-performing loans, which may impact our assessment of the sovereign's propensity to support DBM. This may take more than six months to resolve. Once resolved, DBM's ratings could remain unchanged or be downgraded. DBM has not disbursed any new loans since early 2022.”

Fitch said the ratings woud be downgraded if it perceived the risk of default to be a possibility. The ratings could also be downgraded if it came to believe DBM's policy role and importance to the state have diminished, even if the full government ownership remains unchanged, it added.