Banking sector of Kazakhstan operates in a stable mode. The equity capital of the banking sector amounted to 4.6 trillion tenge. Today, the capital adequacy of banks is more than three times higher than the minimum requirements established by law. Highly liquid assets amounted to about 12.3 trillion tenge, or 33.4% of assets. The current values of liquidity ratios of banking institutions sector in Kazakhstan exceed the values established by law by more than four times.
In order to create an additional reserve of liquidity in the banking sector as part of the implementation of monetary policy, the National Bank will resume daily operations with second-tier banks to provide and withdraw liquidity, including direct and reverse repo operations, a deposit auction, and the issuance of short-term notes of the National Bank. If necessary, the mechanism of emergency liquidity provision through repo and swap operations for up to three months on the Kazakhstan Stock Exchange will be applied in the money market. To date, there are no risks for bank depositors. The Agency will continue enhanced monitoring of the situation in the banking sector in order to ensure the protection of the rights of consumers of financial services.
Banking Field Development and Main Operations
Over the past years, financial institutions that do not comply with prudential standards and regulatory requirements have left the market (for example, Qazaq Banki and Delta Bank, and already this year, AsiaCredit Bank and Tengri Bank). Currently, only one second-tier bank, Capital Bank Kazakhstan, does not comply with prudential standards.
In addition, many banks went through mergers and acquisitions, which led to the emergence of larger and more stable financial institutions in the banking sector. Therefore, for example, ForteBank, Alliance Bank and Temirbank merged into a single ForteBank, and the problematic BTA Bank became part of Kazkommertsbank, which then merged with the giant Halyk Bank. Other financial institutions have changed owners and gone through a complete rebranding: for example, the former Tsesnabank, today Jusan Bank.
Last winter, shortly before the outbreak of the global crisis associated with the COVID-19 pandemic, National bank presented the results of its work on assessing the quality of STB assets – AQR. The program covered 14 STBs, which accounted for 87% of assets and 90% of the total loan portfolio of banks: 9 Kazakh banks and 5 foreign ones. The AQR results as of April 1, 2019 confirmed that both at the system level and at the level of individual banks participating in the AQR, there was no capital deficit in the sector, and there were no risks for depositors.
In a troubled year for the whole world, 2020, RRAFM, as part of early response measures, monitored the level of non-performing loans (NPL) to prevent exceeding the limit of 10% of the loan portfolio. Together with banks, 17 individual action plans were developed and agreed to reduce the level (sale) of non-performing assets and responsible managers of STBs of the Republic of Kazakhstan were identified. According to these plans, within five years, by the beginning of 2026, it is planned to reduce distressed assets from 9.3% to 2.5% of the assets of the banking system. Given the current dynamics and ongoing measures, the goal is quite feasible.
ADF conducts both individual supervision of the work of banks directly, and consolidated supervision of the work of bank conglomerates is also carried out.
A bank conglomerate is a group of legal entities that includes a bank and its subsidiaries, as well as legal entities in which the bank or holding owns 20 percent or more of the main shares. Thus, capital and liquidity requirements are also assessed by ADF on a consolidated basis. ADF may request, and members of a banking conglomerate must provide, all required documents that may affect the operation of the bank and its conglomerate. PRA may also regulate the bank and the members of the banking conglomerate.
License Revocation and Forced Liquidation
If the AFR determines that the current resolution mechanisms are not effective, it may apply to the court to revoke the bank license of the insolvent bank and its further liquidation.