Kazakhstan Central Bank Governor on consumer loan rates and NPLs

Consumer loan rates will be reduced in Kazakhstan in the longer run, Kairat Kelimbetov, the country’s Central Bank Governor, told a press-conference in Almaty today, emphasizing that the Central Bank wouldn’t interfere with banks’ financial strategies, with the negotiations process being carried out in a few stages. “We have agreed with second-tier banks to reduce the overheating in the consumer loan segment. Consumer lending shouldn’t grow by more than 30% (…) it’s early to be talking of some precise timing or some precise rate”, he said. He added that the Justice Ministry is working to draft a law on collection companies and the draft is to be submitted to the Parliament before the end of the year. Mr. Kelimbetov emphasized that the National Bank wants to accelerate the drafting process to help solve NPLs-related issues. “NPLs make up 35.8% of the loan portfolio, that is $30.7 billion. Central Bank is negotiating with second-tier banks to reduce the figure down to 15% by January 1, 2015 and further to 10% by January 1, 2016”, he said. Central Bank wants special vehicles – relying on clear procedures of toxic assets being transferred into their balance sheets - to deal with debt collection “so that collection companies wouldn’t turn into entities forcing debtors to pay off, resorting to somewhat criminal force methods”. He said 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 (…) in partnership with lenders and the Association of Financiers we will have drafted by June 1, 2014 a law to simplify bankruptcy procedures and bad debts write-offs”.