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Kazakhstan banks to start transition to Basel III in 2015

05 january 2014, 11:51
0
Photo courtesy of kursiv.kz
Photo courtesy of kursiv.kz
Kazakhstan banks will start transitioning to Basel III standards starting from January 2015, Tengrinews reports referring to the speech of Kazakhstan’s central bank Governor Kairat Kelimbetov’s at the press-conference in Almaty.

According to Kelimbetov, the transition is being discussed by Kazakhstan's banks. "Today the United States, Eurozone, Great Britain and neighboring Russia are discussing schedules of transitioning to Basel III. Some are setting the deadline to January 1, 2019, others to January 1, 2014. The targets are different. But I think that most of the banks will synchronize these processes," the National Bank Governor said.

Kelimbetov underlined that the participants of the recent meeting on financial stability decided that Basel III will introduced in Kazakhstan starting from January 1, 2015. "To make this happen all the corresponding laws and regulations will have to be discussed and approved by July 1, 2014. What concerns introduction of Basel III in Kazakhstan, in is going be to done in stages, including creation of countercyclical buffers (which would allow national regulators to require up to another 2.5% of capital during periods of high credit growth stimulating it during the decline periods) and raising the capital requirements, starting from January 1, 2015-2016 and finishing on January 1, 2019. Our preliminary calculations showed that second level banks are capable of going through this and will be ready for the transition," Kairat Kelimbetov said.

The Governor believes that introduction of countercyclical buffer may raise some issues. "For example, Russia wants to introduce it only in 2016, some European countries will do it even later. We will synchronize this process, because the countercyclical buffer is an additional burden even for the core banks, and it should be evaluated. Another question is what level of capitalization should be set in general. Whether Kazakhstan’s banking sector is consolidated enough is a separate issue, that we will deals with," the Governor continued.

100 billion tenge (almost $70 million) of own capital is required to get a banking license, he pointed out. "These requirements must be raised. There are 38 banks in Kazakhstan and if we divide their cumulative capital into the number of banks, we get $338 million per one bank. Perhaps, the capital requirements should be raised from January 1, 2019. This means that not all the businessmen will be doing banking business, but only those who have a flawless business reputation, capacities to increase the capitalization and recapitalize their banks and capabilities to withstand different shocks," Kelimbetov said, speaking about difficulties that Kazakhstan's banks might face during the transitioning to Basel III.

Basel III (or the Third Basel Accord) is a global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It was agreed upon by the members of the Basel Committee on Banking Supervision in 2010–11, and was scheduled to be introduced from 2013 until 2015; however, changes from April 1, 2013 extended implementation until March 31, 2018.

The third installment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. Basel III was supposed to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

Basel III is primarily related to the risks for the banks of a run on the bank by requiring differing levels of reserves for different forms of bank deposits and other borrowings. Therefore contrary to what might be expected by the name, Basel III rules do not for the most part supersede the guidelines known as Basel I and Basel II but work alongside them.

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