Central Bank Governor on Toxic Assets Fund29 october 2014, 14:39
When speaking in the country’s Majilis (lower chamber), Kazakhstan’s Central Bank Governor Kairat Kelimbetov voiced criteria second tier banks should meet to be eligible for state support to deal with NPLs, a Tengrinews.kz journalist reports.
“Why are the problems banks are facing being solved with taxpayers’ money once again? When is $1.3 billion [to be allocated by the Government] to finance the Toxic Assets Fund going to be paid off? Is there a clear procedure to follow when using the money?”Mukhtar Tinikeev, a Majilis deputy asked Mr. Kelimbetov.
Mr. Kelimbetov elaborated that “the money will only be provided to banks that have accumulated the most of NPLs. Kazkommertsbank and BTA to be shortly merged are among them as they jointly account for 62% of NPLs in the banking sector. As these two major banks are of paramount importance for the entire banking sector, the issue of NPLs poses a threat to the entire financial sector. Therefore, the Central Bank and the Government have decide the money first of all will go to bolster these two lenders, with most of the other banks coping with NPLs on their own.
According to him, the money out of the Toxic Assets Fund will be backed by the banks’ shares for a ten-year period. “Following the merger, the two banks will form the biggest bank with a market share of 22%. Should the money not be paid off, the shares will be foreclosed. I believe it is a transparent scheme enabling us to solve the NPLs-related issues within the following 2 years”, he said.
The toxic assets fund under the National Bank of Kazakhstan was launched in April 2012.
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%.
Early February Kairat Kelimbetov, the country’s Central Bank Governor, said that Kazakhstan would follow into the steps of other nations: “one of best practices to consider is that of South Korea, wherein the share of NPLs shouldn’t exceed 2%. All the NPLs in excess of 2% are bought out forcibly by special entities like stressed assets funds”.