How Did the Bank Evaluation End?

On February 28, 2020, the Agency for Regulation and Development of the Financial Market published «The Final Report on the Results of the Asset Quality Review of Kazakhstan’s Tier-Two Banks». Now it’s time to draw come conclusions.

By the way, let us remark that the report itself prepared under the authority of the National Bank of the Republic of Kazakhstan was absent on the latter’s website at the time of this writing. And the texts of both the report and the talking points of the Agency’s Deputy Oleg Smolyakov who, on that same day, spoke at the press-briefing are so voluminous and complex that they are unlikely to be read by anyone but professionals.

Essentially, the talking points of Mr. Smolyakov’s speech include the following (text in bold by

«Today, the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan together with the National Bank of the Republic of Kazakhstan is conducting a briefing devoted to the results of the independent Asset Quality Review (AQR) of two-tier banks of Kazakhstan. The project was launched in the second quarter of 2019 following the order of the First President of the Republic of Kazakhstan Nazarbayev N.A. of April 24, 2019, and President of the Republic of Kazakhstan Tokayev K.K. of April 24, 2019. This order had entrusted us with an ambitious task — to conduct a comprehensive, detailed and, most importantly, objective assessment of the real state of banks in the country before the end of the year».

«The results of the AQR as well as the steps taken to improve the asset quality and maintain the capital of tier-two banks after April 1, 2019, confirm the absence of the capital deficit both on the systemic level and on the level of the individual banks that have participating in the AQR.

The clients of the banks that have undergone the review face no risks due to the fact that, as a result of all the measures taken, the capital adequacy level of all the banks now exceeds the regulator’s requirements.

Based on the AQR results, we have determined the steps to be taken in order to improve the quality of the processes, the data, the policies and the procedures. A comprehensive implementation of the recommendations and correcting measures will guarantee the protection of the clients’ interests, prevent the risk buildup and increase the system’s resilience against internal and external shocks».


In other words, according to the National Bank of the Republic of Kazakhstan and the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan, «all is quiet» in the banking sector of the country.

We could devote a separate article to the Final Report, the methodology employed to conduct it and the correctness of the estimates, nonetheless, we believe this should be a task for those who specialize in the topic precisely and, therefore, are much better informed and immersed in the subject that we are.

From the internal political standpoint, the main result of the AQR was the semi-official division of the 14 Kazakh banks into two groups that can be called «the normal» and «the semi-normal».

In order to understand which banks ended up in the first group and which — in the second, no special financial knowledge is required. It is enough to open the final report and study the tables called «K1 Capital Adjustments» present in each of the 14 subsections describing the results of the individual banks’ analysis. And all will become clear.

Now than, the banks that we have politely called «the normal» have only three checkboxes in these tables while those deemed «semi-normal» have seven. The reason for such discrepancy lies in the fact that, in the first instance, it was enough to adjust the figures while, in the second, they had to take additional measures in order to fix the problems or to promise to fix them (and do it so convincingly that the inspectors had accepted their promises).

The first group includes:

Halyk Bank of Kazakhstan JSC;

Sberbank JSC subsidiary bank;

Kaspi Bank JSC;

Forte Bank JSC;

First Heartland Jysan Bank JSC;


Alfa-Bank JSC subsidiary bank;

Altyn Bank JSC;

Bank Home Credit JSC subsidiary bank;

Bank VTB (Kazakhstan) JSC supplementary office.

The second group includes:

Bank CenterCredit JSC;


Eurasian Bank JSC;

Nurbank JSC.

The nominal division of the 14 banks participated in the AQR into the two groups was performed not from the point of view of their current financial standing, sustainability and reliability but based on the fact that, in the second instance, the regulators had to take additional steps to ensure that the tested banks match their strict requirements. We believe the latter testifies to an aggravated political risk that’s looming over the banks’ controlling shareholders. And may be converted into real threats and losses in the future.


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