Kazakh Banks May Be Asked to Make Provisions for Future Slump

Oct. 15. Bloomberg

By Nariman Gizitdinov

Kazakhstan’s financial-services regulator is examining proposals to require banks to put aside extra provisions to cover an increase in bad loans in a future economic slump.

The Agency for Financial Supervision’s technical committee recommended that Kazakh banks should put aside “dynamic provisions” during an economic pickup that may start in 2011, so they are prepared for a possible downturn, the Almaty-based watchdog said in a statement on its Web site today.

The extra provisions may help to soften the negative impact of a future slowdown as the country looks for ways to avoid a repeat of the damage caused by the global credit crisis. Kazakhstan’s BTA Bank, Alliance Bank and Astana Finance defaulted this year as international financing dried up and a property boom turned to bust.

The additional provisions would be built up alongside ordinary provisions that will comply with international financial reporting standards, the regulator said. The lenders currently put aside reserves in accordance with Kazakh rules.

Kazakhstan’s 37 banks had losses of 2.6 trillion tenge ($17.2 billion) in the year through Sept. 1 as they increased provisions for bad debt.