Central Bank Governor on Kazakhstan-based banks

Today the country’s Central Bank Governor Kairat Kelimbetov voiced his vision of the banking sector. He elaborated that the current 38 Kazakhstan-based banks could be divided into three groups in terms of their size. “As you remember, before the crisis there were 4-5 major banks …these were Halyk, Kazkommertsbank, Alliance, BTA, ATF …against the backdrop of the global financial crisis Kazakhstan nearly lost 2 of the major banks due to failures in corporate governance, risk management, transactions with affiliated entities, delimitation of powers among shareholders, boards of directors and management boards”, he said.

According to him, only Halyk Bank could be considered as truly important for the entire banking system as of today, with the new entity of merged KazKommertsbank and BTA having some prospects.

Central Bank Governor also broached the subject of NPLs. “In two years’ time those banks that fail to reduce the share of NPLs down to 10% of their respective loan portfolios will be deprived of their licenses”, he said.

Mid-February 2014 at the extended government sitting Kazakhstan’s President Nursultan Nazarbayev commissioned banks’ heads to reduce the share of NPLs “in any possible ways” to 15% of their portfolio by 2015 and further to 10% by 2016.
As of the end of 2013, the share of NPLs throughout the country’s banking sector stood at 31.2%. According to Fitch Ratings, in February the indicator grew to 33%.

Among other things Central Bank Governor elaborated that Kazakhstan-based bank assets make up 5% of the bank assets within the Customs Union of Kazakhstan, Russia and Belarus. “When it comes to competitive ability of Kazakhstan-based banks, they should be able to meet competition on the part of Kazakhstan subsidiaries of banks based in other member states of the Customs Union, let alone subsidiaries of global banks”, he said.

According to Mr. Kelimbetov, “small banks are only responsible for 5% of deposits and lending operations (…) There are no plans to close down such banks. They will continue their operations. However, they may be transformed into microlending organizations or consider merging with other financial institutions”.

“We believe the current 15-20 middle-sized banks will face tougher competition in the years to come. There are subsidiaries of banks based in Russia and China. They are expected to compete with each other more aggressively. When it comes to subsidiaries of other foreign banks, they have been leaving the Kazakh market in the recent years as they plan to cut down on their global chains”, he said.