Two Kazakh Banks Facing Bankruptcy

Kazakh Central Bank Expect Merger Of Banks To Go On

As 2016 winds down, two Kazakh banks—KazInvestBank and KazKommertsBank—are facing the prospect of bankruptcy, one of which is a systemically important bank.

KazInvestBank is facing the biggest problems: the National Bank of Kazakhstan has recently revoked its licence for banking transactions, other operations and activities on the stock market. The main financial regulator of Kazakhstan issued a decree to that effect on December 26. The reason is “systematic (three or more times during 12 consecutive calendar months) inappropriate execution of contractual obligations on payment and transfer operations.”

KazInvestBank ceased all operations on clients’ bank accounts and its financial activities starting December 27; only expenditures provided for in normative bylaws of the regulator and incoming transfers are still being processed.

Meanwhile, the National Bank appeals to the court system to force the problematic financial institution to cease operations. In case the court issues a verdict in favour of the financial regulator, the Kazakh fund of guaranteed deposits would fulfil the liquidated bank’s financial obligations before its clients.
Former clients of KazInvestBank can count of receiving their deposits in the amount of not more than 10m tenges (some USD30,000) if the deposits were made in the national currency and up to 5m tenges (about USD5,000) if the deposits were made in a foreign currency.

KazKommmertsBank (Qazkom), a systemically important bank, is not faring any better although its representatives are trying to convince everyone in the contrary. The bank has recently administered an expensive rebranding process thereby replacing the letter K with Q in its name’s Latinised form to make it as close to the Kazakh pronouncing of the letter as possible. Apparently the bank ran out of money after this because it is closing branches all over the country. Kenes Rakishev, Kazakh Prime Minister Imangali Tasmagambetov’s nephew, controls 71.31 per cent of the bank’s stocks.

Bloomberg reported last week, citing anonymous sources, that the bank has secured an emergency loan. The loan is presumed to be a first step of the special government-run “programme to save the bank” in the amount of 1.5 trillion tenges (about USD4.2b) and is under consideration of the Qazkom and National Bank administrations.

The KazKommertsBank leadership has stated there are no talks underway with the National Bank and government regarding such assistance. However, they did not refute the fact that the National Bank has provided the KazKommertsBank with a short-term loan in the amount of 400.8 billion tenges (some USD1.1b) The loan was issued to provide the bank with reserve liquidity in order to be able to fulfil its financial obligations.

The financial regulator, on the other hand, has made a contradictory statement: “At this time, increasing the banks’ capital is one of the priorities to increase competitiveness in the banking sector. In this connection, the National Bank is holding talks with shareholders as part of the supervision process, including the KazKommertsBank Joint Stock Company, in regards with increasing capitalisation.”

Another confirmation of the current not ideal state of affairs at the bank comes from outsider information about its potential merging with another systemically important financial institution, Halyk Bank (The Popular Bank).

Despite the fact that the participants of the presumed deal continue refuting it, representatives of Halyk Bank (this bank is presumed to absorb KazKommertsBank) have partially confirmed the information: “Indeed, various scenarios of further development of the banking sector of Kazakhstan have been discussed over the course of 2016. In our opinion, this may not be characterised as negotiations. There is no certainty that this would lead to negotiations between the parties. The Popular Bank could consider such deals if they would be held on commercially fair conditions in accordance with international standards and if such deals would serve the interests of shareholders and other interested parties the Popular Bank [works with].”

Dariga Nazarbayeva, the chairwoman of the committee for international relations, defence and security under the Senate, has also hinted at poor state of affairs in the banking sector. To her mind, all problems in financial institutions stem from corruption.

“How many times has the government bailed banks out? And every time that happens using the citizens’ money, because there is corruption in the banking system. No one would issue a credit just like that, right? That means if you are accepting a bribe, you know this person will not pay the credit back. This bank then puts the government on its knees because the population’s interests are involved here and there will be social explosion. And everything then repeats in circles,” President Nazarbayev’s daughter has said.

Fergana international information agency.