Chairman of the National Bank of Kazakhstan Daniyar Akishev has recently presented “A Report on the Financial Stability for the Years 2015-2017”. It is a complex and multi-leveled document that matters not only for what is written, analyzed, noted, and underscored in it but also for what is not said or mentioned in passing.  

The document that consists of 146 pages is intended for the financial market professionals and is quite complex for the general audience to comprehend. Therefore, we have decided to present a series of comments to this document underscoring the points we believe to be most significant.

We will start with the reasons why the Report has appeared at all. In the National Bank’s press release that preceded the document, they are explained as follows (text in bold by kz.expert).

“The financial regulators and central banks of more than 60 countries publish reports on financial stability. The first reports appeared at the turn of the century. They disclose the information on the health of the banking and payment systems, the trends in their development, their sustainability. Chairman of the National Bank of Kazakhstan Daniyar Akishev spoke about this today at the presentation of the report on the financial stability of Kazakhstan for the years 2015 – 2017. The presentation was held in Almaty. He noted that, for the analysts, the market players, and academic researches, the Report may serve as a useful tool in understanding the evolution of the banking system. For the regulators, the Report serves as a platform for explaining their concerns and actions to a wide audience”.

“The Chairman of the National Bank of Kazakhstan said that the purpose of the financial stability report is to elicit the risks in a timely manner, avoid them, analyze their causes, take steps to minimize their consequences.

“It is a completely non-trivial task, but to what extent we will be able to decrease the losses of the financial crisis, increase the potential and the quality of life of the millions of our citizens depend on how successful we can be in solving them. In practice, any financial system faces a number of risks. Some of them are significant, even critical, others are less important. We have learned to work with some of the risks. We still do not know how to approach some of the others, how to measure them. And we can only guess the existence of some other risks and we do not even have a name for them”, said D. Akishev”. 

By our estimates, apart from the mentioned reasons, publishing of the Report aimed to achieve the four important goals.

• To publicly report on the work done by the regulator. Not so much to a wide audience as to the President of the country and the other high-level officials in order to both decrease the political and the career risks as well as ease the pressure on the part of many enemies and opponents in the state apparatus and the ruling elite.
• To give a high-quality explanation to the professional community in order to bring them on their side thus increasing both the level of the National Bank’s plans realization as well as the support of their actions on the part of the professionals.
• To convince the general public (both the domestic and the foreign one) of the correctness and effectiveness of the current National Bank’s policies in order to increase the trust both to the institute itself as well as to the national currency.
• To relieve the National Bank and Akorda of the political responsibility for the events of 2014 – 2017 including the two national currency devaluations, the economy and budget crises, the decrease of the real wages level and of the level of life of the most Kazakhs and so forth.

For this reason, we call the Report a complex and multi-leveled document that matters not only for what is written, analyzed, noted, and underscored in it but also for what is not said or mentioned in passing. This document, too, presents not only the opinion of the National Bank’s analysts as to what and why had happened during those three years in the country and the banking system but also the unofficial position of the agency and perhaps Akorda on the pointlessness of naming the names of those who let the problems grow and did not desire or may be were simply not able to solve them.

For example, the Report completely avoids showing the tight connection between the serious delay of the switching to the floating exchange rate of the national currency with the 2015 early Presidential elections. When either Akorda’s desire not to provoke a mass protests against the devaluation on the eve of Nursultan Nazarbayev’s reelection made the National Bank preserve the fixed rate or perhaps, alternatively, the inevitability of the devaluation made them hold the early election, but the necessity to abide by the procedures stipulated in the Constitution of the Republic of Kazakhstan had led to a rather painful and expensive delay.

Also, the Report does not determine and articulate the personal responsibility of former Chairmen of the National Bank including Grigoriy Marchenko and Kayrat Kelimbetov for the problems of the banking sector. Including the fact that, out of the four systemic banks, during the period before 2008, only Halyk Bank of Kazakhstan had survived, and even that only thanks to the two-time state support. Note that the last support constituted almost $9 bln and was executed via an extremely dubious scheme of the alleged Kazkommertsbank rescue.

These are just two examples of the “omissions”. The rest will be revealed in detail in out further publications.

NOTE FROM EFITOR. We invite our readers to participate in the discussion of this document to make sure it really does finalize the results of the National Bank’s and Daniyar Akishev’s three-year work thus becoming the basis for all-round analysis of the situation both in the banking sector and the financial system of the country.

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