Nurbol Nazarbayev’s Bank Drowns In Fine

On February 11, 2021, the Agency for Regulation and Development of Financial Market of the Republic of Kazakhstan finally revoked AsiaCredit Bank’s licence to conduct banking and stock market operations. And it looks like Capital Bank Kazakhstan’s turn to bite the dust will come next.

We have already touched upon this topic. The topic that is sensitive for some Nazarbayev’s family members. The latest publication titled «What’s Keeping „Phantom“ Banks Afloat?» was released on December 2020. Here are some quotes from it.

«We are not going to comment on these appointments as well as insist that, sooner of later, Capital Bank Kazakhstan JSC and AsiaCredit Bank JSC will lose their licences. The thing is that, according to our insiders, it is Nurbol Nazarbayev, the son of Bolat Nazarbayev and the „Leader of the Nation’s“ nephew, who is standing behind Shadiyev Orifdzhan Kabulovich, the sole shareholder of these two financial institutes. And even though the former has, allegedly, refused to give the money for their rescue, nonetheless, he still seems to be backing them.  

We can see no other plausible explanation as to why these banks continue their existence. Not surprisingly, the market players cannot help but wonder why this is happening and when the Regulator will finally start doing what it is supposed to be doing. (See this link for instance).

To us, the reasons why the people backing Capital Bank Kazakhstan JSC and AsiaCredit Bank JSC do not let state agencies revoke their licenses are clear — if this happens, the sole shareholder and the top-management of the financial institutes will lose control over them. In other words, the control over these banks will end up in the hands of the liquidation committee (the outsiders) who may uncover something that can do damage to those who have been using these two banks as their pockets».

Judging by the fact that the Agency for Regulation and Development of Financial Market had revoked AsiaCredit Bank’s licence to conduct banking and stock market operations, Akorda and the Library were unable to find a way to solve this problem.

In other words, they had not been able to make the bank’s sole shareholder Orifdzhan Shadiyev and standing behind him Nurbol Nazarbayev invest tens of millions of dollars of their own money in the bank’s capital. At the same time, they didn’t dare to rescue yet another private bank at public expense.

By the by, the official press-release of February 12, 2021, confirms the fact that AsiaCredit Bank JSC had been staying afloat only thanks to the inaction on the part of the Agency for Regulation and Development of Financial Market. Let us quote some shocking passages from the document (text in bold by

«The licence has been revoked in accordance with Subsection 7), 15) of Section 1 of Article 48 of the Kazakh banking law due to the following reasons — 

— the systematic (three and more times per twelve consecutive months) violations of prudential norms and (or) other mandatory restrictions;

— the systematic (three and more times per twelve consecutive months) failures to comply with enforcement measures;

— the failure of the Bank’s shareholder to increase the Bank’s capital.

As of the day of the license revocation, the size of the Bank’s assets constituted 45.4 bln tenge, the Bank’s loan portfolio constituted 45.0 bln tenge (31.6 bln tenge or 70% of the loan portfolio represents non-performing loans with more than 90 days overdue time period). The size of the Bank’s liquid assets constitutes 75 mln tenge; with that, the size of the unsatisfied payment obligations surpasses 8.0 bln tenge.

Starting from October 2019, due the deficit of liquid assets needed to cover the outflow of the clients’ funds, the Banks had begun violating the prudential norms established by the regulator. 

Starting from this period, the Agency had imposed 14 compliance enforcement measures against the Bank. They were aimed to improve the Bank’s standing. Also, 73 administrative violations had been registered.  

In October 2019, the National Bank imposed a compliance enforcement measure against the Bank’s shareholder demanding to increase the Bank’s capital. The requirement had not been met. In 2020, due to the non-improvement of the Bank’s financial condition, the Agency categorised it as a bank with unstable financial standing and requested the Bank and its shareholder to implement the measures aimed to improve the Bank’s financial situation».

Now when the problem called AsiaCredit Bank JSC has almost been solved, the time has come to ask this simple question — why did Akorda and the Library not go for the drastic measure of revoking the licenses of both «drowning» banks (Capital Bank Kazakhstan JSC and AsiaCredit Bank JSC) simultaneously?

In our opinion, it may have to do with a strong resistance on the part of the said Bolat Nazarbayev who understands full well how badly the collapse of both banks may affect his son. So, willingly or not, the Agency for Regulation and Development of Financial Market is now «cutting the tail» piece by piece.

And since Capital Bank Kazakhstan’s shareholders’ chances to find the funds for the bank’s rescue are very small, it is quite possible that the bank’s license will be revoked in a couple of months.

Therefore, all that is left to do is register a sad fact: the Agency for the Regulation and Development of Financial Market (reconstructed last year) has continued the unfortunate tradition created by its predecessors a long time ago. Instead of performing the function of the regulator, it executes political will of the power holders. And it looks like there is no way of getting around it.

Thus, to all foreign banks daring to come to Kazakhstan, we recommend remembering that, in this country, every law has a loophole that can be used used against them if their business-interests come into conflict with the business-interests of the banks controlled by the Nazarbayev family. We are talking, first and foremost, about Halyk Bank and First Heartland Jýsan Bank.

The case of AsiaCredit Bank that has recently bitten the dust serves as a vivid confirmation of it.


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