As of today, concentration of banking capital in Kazakhstan is beating all records – after acquiring of Kazkommercabank by People’s bank, Timur and Dinara Kulibaev’s group will control two fifths of the banking system, on such parameters as assets, passives and depositary portfolio. How does that threaten the financial system of the country?
We asked the leading analyst of the GK TeleTrade Mark Goykhman to answer that question, as well as whether a similar turn of events is possible in Russia.
“This process (of concentration of the banking capital) isn’t just becoming stronger, but becomes a mainstream of the development of the banking sector of republic” Goykhman thinks.
He reminds that in the “past months 8 out of 33 banks announced their preparedness to unite. At different extents, there are processes on the market of merging of such banks as AO Bank RBK and AO Qazaq Banki, Tsesnabank and BCK, Capital Bank and Tengri Bank. But the main event, of course, is the purchas of the system-forming Kazkomercbank by People’s bank.
In Goykhman’s opinion, enlargement of credit institutions is “a complex measure of overcoming of a crisis in the banking sector”. “It is much easier, – he says – to do this by the way of merging rather than through gradual growth. A bigger bank has more opportunities for large-scale operations, distribution of assets and attracting of passives, less in terms of relative cost and higher endurance. Thus, both banks receive additional advantages”.
By paying attention to the fact that National bank supports these processes (mergers, purchases, etc.) Goykhman thinks that they happen “in accordance with the overall global trend of enlargement, globalization of financial markets and integration of participants”. For regulator, in his opinion, it is important, that “concentration increases an overall sustainability of the system. Through inner resources of banks, the necessity of their outer decapitalization under necessity of curing”.
The last part he is sure, is extremely important in the case of Kazkommercbank. “Since its severe problems with liquidity and solvency threaten the work of the financial sector and economy as a whole. “People’s bank” will implement decapitalization of Kazkom in the sum of 185 bil. tenge, in accordance with regulatory requirements of the National bank. Thus, this deal has to be viewed, largely as a forced one”.
Analyst agrees with the fact that as a result of the deal, an extremely large for RK banking structure will occur. In May of 2017, assets of Kazkommercbank were 18,3% of second-tier banks, and People’s banks -18.5%]. Thus given the merger an organization occurs, that has almost 37% of assets of the entire system. If we compare it to the nearest neighbor – Russia, there is no such high concentration there – Goykhman noted. The largest bank in Russia is Sberbank which has as of. May 2017 28% of assets. Even though together, five of the largest government bank control over half of assets.” For Kazakhstan, in his opinion, such situation may have both pros and cons. “One pro, for example, is besides domestic sustainability, is in the ability of stronger positions on the international arena. This is especially crucial due to potential strengthening of foreign competition following country’s joining of WTO. But there is a possible con. It is related to possible consequences of monopoly domination on the market. In Russia, major banks, first of all, compete with each other, and secondly they are state-run, which gives them wider possibilities of anti-monopoly regulation. But in Kazakhstan, such a powerful structure is capable of making up the rules of the game largely in their own interest – on conditions, rate, products ,etc. Will such fears come to life and which position will National bank of RK take, only further real practice will show – Goykhman concluded.