How new monetary policy will affect country’s banking system03 september 2015, 00:22
The new monetary policy based on inflation targeting rather than on the earlier practiced currency band is driving Kazakhstan-based banks to merge. Mr. Olzhas Khudaibergenov, Head of the Center for Macroeconomic Studies, told ORTCOM.kz how the country’s banking sector is expected to operate amidst the new conditions.
“Mergers of banks will enable them to cut down on expenses, keeping the revenues at the current level. The country’s Central Bank has been toughening requirements to capitalization. Under such circumstances minor players of the market might opt for merging into bigger entities”, the expert believes.
According to Mr. Khudaibergenov, a substantial share of deposits with banks is still kept in USD and the banks have to offer loans in USD.
According to a recent report issued by the S&P Rating Agency August 31, “throughout 2015 the share of loans offered in foreign currencies (primarily in USD) has been standing at 30% (…) and the figure is expected to rise by the end of the year”.
“Small and middle-sized businesses find it economically unreasonable to take USD loans, so lending operations are shrinking. The situation might change when major depositors opt to keep their money in the tenge, the country’s national currency. However, the latter will only do that when the Gobvernment provides them with a guarantee that they will not face any losses related to the tenge exchange rate changes”, he believes.
According to S&P, “the growth rate of the loan portfolio is expected to be close to zero as of the end of 2015”.
ORTCOM.kz reminds that in the current year Alliance Bank, Temir Bank and Forte Bank have merged to form Forte Group; whereas Kazkommertsbank and BTA completed its merger and Halyk Bank bought HSBC subsidiary [renamed into Altyn Bank].
August 20 the country’s Government and the Central Bank renounced the currency band policy, opting for the free floating of the tenge. The same day the national currency weakened by 26% in one day, reaching 257 tenge for USD 1. Now the exchange rate varies between 240 and 245 tenge for USD 1.