Kazakh government intends to take action to resolve problem loans

ASTANA – The Kazakh government is trying to relieve banks of non-performing loans by transferring bad debts from the National Bank of Kazakhstan, the country’s central bank, to the government. To put the necessary legal framework in place, the Senate, the upper house of Parliament, has approved the first reading of a new draft law.

The new bill is designed to improve civil and banking legislation and the business environment. Kazakh Justice Minister Marat Beketayev said Feb. 16 as he presented the draft law in Parliament, noting banking legislation improvement measures were outlined in President Nursultan Nazarbayev’s recent address to the nation. The measures will focus on restoring a healthy banking sector.

One of the measures ensures transferring the Problem Loans Fund from the National Bank to the government.

“Given that bankruptcy managers are interested in delaying the bankruptcy proceedings, the bill establishes the need to determine the maximum size of their remuneration by an authorised body. To improve the business environment, the law provides an opportunity for small and medium-sized businesses to enter into agreements with banks and insurance companies simultaneously and to open a VAT (value-added tax) account during an online registration,” said Beketayev.

The Problem Loans Fund was founded Jan. 11, 2012 with the main objective to implement measures aimed at improving the quality of the commercial banks’ loan portfolios in accordance with the requirements of normative legal acts. Its main activities include purchasing bad loans from commercial banks, managing its assets and issuing debt securities to finance its activities. Currently, the central bank is a shareholder and owner of the common shares, state property and privatisation committee under the finance ministry, which is also a shareholder and owner of preferred stocks.

In accordance with the legislation being updated, the financial regulator is clearing the bank’s balance sheet of bad loans to ensure the stability of the country’s financial system, said National Bank chairman Daniyar Akishev.

“Unfortunately, the problems of the banking sector, which were saved seven-eight years ago, have not been solved completely. In this regard, together with the government, all the calculations were made relating to bad loans in the banking system and the need to support additional liquidity of the financial institutions. We did all the necessary calculations together with the government and the Council on Economic Policy at a meeting of the National Commission on Economic Modernisation. The decision was made in regards to the amounts, which are now within the budget parametres. We believe that the bank’s financial rehabilitation measures will lead to an improvement of the financial system,” he said.

In February, central bank deputy chairperson Oleg Smolyakov said the government was planning to inject 2 trillion tenge (US$6.2 billion) into the state-owned Problem Loans Fund in order to buy bad assets from local banks.

Kazakh banks’ combined assets are estimated at $80 billion, of which a weighty share is related to construction sector loans, an area that has seen several property price crashes as a result of the energy price plunge. According to official data, borrowers have missed repayments on 12.2 percent of loans, although some analysts believe the total figure could be higher.