Speaking at the 8th Summit Idea Exchange & Networking Event, Madina Abylkasymova, the Chairperson of Kazakhstan’s Agency for Regulation and Development of Financial Market, said that the key problems of the country’s banking sector had been resolved.
Let us quote some of her statement as presented in Kapital.kz’ article (text in bold hereinafter by KZ.expert).
«From 2015 until the end of the first quarter of 2021, the assets of the banking sector have increased almost twice. Positive changes have taken place in the structure of the banks’ deposit base, the share of retail deposits has grown from 28% to 41%. The increase of the people’s incomes has also affected the growth of retail lending whose share has increased from 26% to 46%, the share of mortgage lending has grown from 6,6% to 15% in the banks’ loan portfolio», said Madina Abylkasymova».
«The measures taken to rehabilitate the banking sector including the use of the shareholders’ resources, the support of the large and systemic tier-two banks have resulted in reducing the percentage of non-performing loans and improving the actual financial standing of the banks. In the process of cleaning the banks’ balance sheets, from 2016 to 2020, non-performing loans in the amount of more than 6 trillion tenge have been written off, seven insolvent banks have lost their licences. The key problems of the banking sectors have been resolved», said she».
«According to her, as a result of the AQR and other measures taken by the financial regulator from 2019 until 2020, the quality of the banking sector’s loan portfolio has improved. „For the past two years, the level of non-performing loans (NLP 9and 0+) has been reduced been from 7,4% to 6,9%. According to the results of the AQR, bad loans, in other words, the loans with reduced probability of debt repayment, constitute 21% and, based on the results of 2020, the level of such loans has been reduced to 14%“, said the head of the financial regulatory body».
Moreover, according to Ms. Abylkasymova, the prospects of Kazakhstan’s banking sector are cloudless. To confirm it, here is another quote.
«Last year, the Agency took regulatory measures to ensure further reduction of the distressed assets. «Individual plans to reduce the non-performing loans from 2.7 trillion tenge to 0.9 trillion tenge by the year 2025 have been finalised. The time allowed for keeping distressed assets on balance has been limited to five years. This will allow to significantly accelerate writing off distressed assets and sell mortgaged property at fair value», said Madina Abylkasymova».
We are not going to quote Madina Abylkasymova any further especially since her statements are regularly repeated by her deputes and other staff members of the agency. We will, however, point out that she is speaking not only on behalf of the structure she chairs but also as a narrowly focused specialist. On one hand, this is quite understandable and justified, on the other, it seems to be inflicting a serious damage on the country.
The thing is that, after the crisis of 2008 — 2009, Kazakhstan’s banking sector, from the driver of the national economy, has gradually turned into its holding brake. We are not going to reflect on how and why this happened but the fact remains — Kazakh banks develop their businesses, improve them and strengthen but that’s about it. Even though it is banks that serve as the very base for accelerating a country’s economic development.
However, in the heat of rescuing the banking sector (or rather its individual structures belonging to Nursultan Nazarbayev’s relatives and allies), Akorda handed a blank check, first, two the National Bank of the Republic of Kazakhstan and then to the Agency for Regulation and Development of Financial Market. And, if we are to believe Ms. Abylkasymova, they have completed (or almost completed) their task.
Albeit at a rather heavy cost.
According to the Chairperson of the Agency, in the recent years, the role of the banking sector as the economy’s loan provider has diminished with respect to the GDP. A forced increase of state investments and loans to the economy through all kinds of quasi-governmental structures functioning in different economic sectors was one of the results of the said diminishing.
This kind of differentiation of labour between the banking sector (that is mostly privately-owned) and the state budget has done and continues to do damage to all — the taxpayers, the state, the banks.
In view of this, the question arises — how can we turn the banking sector into the driver of the national economy again? Neither the National Bank of the Republic of Kazakhstan nor the Agency for Regulation and Development of Financial Market seems to know an answer.
In our opinion, it can be done provided that Akorda and the Library employ force against those very near and dear to them. But there is zero probability that Timur and Dinara Kulibayevs, Kayrat Satybaldy, Bulat Utemuratov, all other Nazarbayev’s close relatives and allies and the banks they control will be forced to increase loan provision to the economy, among other things, through easing the lending terms.
To do so would be synonymous if not with hard-kiri then with inflicting a serious pain on oneself. Therefore, in the climate of the Kazakh authoritarian political system, the question of what can be done to persuade the banks to increase loan provision to the economy is hanging in mid-air.
In our opinion, Akorda and the Library may start pushing the country’s banking sector towards consolidation so that the number of the banks shrinks and the banks themselves become much bigger. Hypothetically, this may help to combine the private interests of individual players and the interests of the national economy as a whole.
The problem, however, lies in the fact that any person suggesting this idea and trying to implement it will immediately step on a critical number of toes.
As for the Agency for Regulation and Development of Financial Market and its Chair, they have no political weight in the country. And their recent decision to revoke Capital Bank Kazakhstan’s licence to perform banking and stock-exchange operations or, rather, its several-year delay confirms it for the nth time.
For this reason, one no point in hoping that Ms. Abylkasymova will start pressurising say Bank TsentrCredit or First Heartland Jusan Bank whose financial standing, in our opinion, raises a number of questions. For her, it would be easier to stabilise the banks’ finances and oversee them than to solve the task of accelerating the national economic development.
