On August 23 2017 chairman of the board of the People’s bank of Kazakhstan Umut Shayakhmetova conducted a press conference on the subject of consolidation of financial results of the banking group headed by her and among other things openly talked about real financial state of Kazkom recently.

Since the best coverage of this event in Almaty was written by Forbes Kazakhstan, in our article we will be referring to their publication.

As follows from the quotes mentioned in the article. Umut Bolatkhanova explained to journalists the reasons, that made previous owners of Kazkom represented by Kenes Rakishev, Nurjan Subhanberdin and FNB of Samruk Kazyna sell their assets, and the government not only take an active role in saving of the financial institution but also to allocate to it a giant sum of 2.4 trillion tenge.

Why the chairman of the board of people’s bank was so honest with journalist is clear: it isn’t just pride for the biggest deal in the banking sector of the republic in all of its existence, but also desire to put a cushion in advance, in case the deal goes not in the way expected by Akorda.

However, it seems that without expecting it herself, Umut Shayakhmetova basically destroyed the reputation of the National bank of RK and its head. We will quote the publication Forbes Kazakhstan:

“Shayakmetova reminded that in 2015 National bank of RK conducted an audit of Kazkom. Basede on results of this audit as a provision for Kazkom financial regulator accounted around 1 tril tenge. This, as the head of People’s bank explained, was evidence, that at the time the capital of the bank was negative and in 2016 it was necessary to provide additional 1 tril. tenge”.

Of course, not a single financial institution is able to generate such a large volume of pure profit and clean the capital. Thus, the problem with negative capital remained. Financial regulator provided Kazkom help in the form of stabilization loan in amount of 400 bil. tenge for supporting the liquidity level of the bank – she notes.

Umut Shayakmetova explained: such situation occurred because  the bank generated negative financial flow and difference between accounted percentage of profits and received ones was over 60% and the cash glow on servicing of percentage profit was negative”.

From what was stated by the chairman of the People’s bank it follows that already in 2015 Kazkomercbank had gigantic problems and was in a critical financial situation. National bank of RK knew about this however hid the information from the market and public. Moreover, it didn’t fulfill its requirement as a regulator, having limited itself with providing stabilizing loan. We remind that Daniyar Akishev is heading the agency from November 2 2015.

The reasons for why National bank RK acted that way are obvious.

First of all it was afraid to cause panic on the financial market of the republic.

Secondly, it was afraid of the outflow of funds of clients from Kazkommercbank and further inevitable crash of the financial institution.

Thirdly, it didn’t want lowering the ratings of Kazakhstan in leading world rating agencies.

However, this means that National bank in its actions isn’t independent and is guided by political motifs.

We cannot judge the actions of National bank and its head Daniyar Akishev from the legal standpoint, i.e. if they had a right to demand from Kazkommerbank allocation of funds in the amount of 1 tril. tenge. Recovery of lost capital as well as keeping the market and public in the blind about critical state of bank.

However, we can now say that you cannot trust regulator especially in difficult critical situation. Due tot his we want to direct your attention to another information bloc, that was announced at the press-conference of August 23 2017 in Almaty.

We cite the publication of Forbes Kazakhstan:

“BTA bank has paid off its debt before Kazkom in the amount of 2.4 tril. tenge. The remainder of the debt in the amount of 64.8 bil. tenge KKB wrote off in the form of formed of funds. Funds received from the payment of debt was allocated by KKB towards:

-Paying off its responsibilities before National bank of RK – 625 bil. tenge,

-acquisition of state budgetary stock of the Ministry of finance of RK – 1 tril. tenge,

-writing off responsibilities on operation REPO on stocks – 202 bil. tenge.

Remained of liquidity in the amount of around 570 bil tenge will allow KKB to serve its responsibilities by the schedule, support operational activities as well as recover the process of crediting of economy, and establishment of small mid-size business and wholesale clients”

We remind that financial institution belonging to Dinara and Timur Kulibaev, middle daughter and son in law of the Kazakh president, has acquired Kazkomercbank from Kenes Rakishev and FNB Samruk Kazyna for 2 tenge and then recapitalized it for 185 bil. tenge. Due to this a question arises, to which we don’t have an answer – can a financial institution let it be quote problematic, but having a liquidity in its balance sheet in the amount of 1.6 tril tenge cost 2 tenge?

In our opinion it can’t. It is possible that in this case Akorda was saving not only Kazkom but also People’s bank of Kazakhstan. The proof for such suspicions is the fact that all four of system-forming institutions of the republic until 2009, and this among the aforementioned banks is also BTA Bank and Alliance Bank, acted in equal market conditions and thus crisis should of affected them all.

Four banks only differed between each other in quality of stockholders, the People’s bank of Kazakhstan had the highest ones, and Kazkom and Alliance bank had slightly worse ones, and BTA had horrible ones. Another difference was quality of management and risk level of lending policy. This is why the first victims of the 2009 crisis were BTA bank and Alliance bank and in 2016-2017 Kazkom’s time has come. Now the country has only one system-forming private bank. However the fact that Akorda essentially threw out 2.4 tril tenge (this sum initially invested into BTA Bank form the beginning was unreturnable, of which around 800 bil. were returned to the government and 1.6 tril. went to ownership of the group

of People’s bank of Kazakhstan is evidence that even in this bank the situation is difficult even if not critical. At the same time, there could be no other way. Kazakh private banks operated under same market conditions thus sharp fall of the market value of real estate including land, devaluation of business assets, caused by fall of world oil prices on major export products and multiple devaluations has affected them in the same way. Thus stem the problems of People’s bank and the entire sector.

Read also: Kazkom was sold questions remain, Why does Kazkom need delisting?, “Disrobing” Rakishev, What is behind onslaught of Kazkom?, Who will gain from the merger of banks?, Which banks will the national fund save?, A giant alliance, Halyk and Qazkom in one bank.