At the plenary session on the morning of Thursday, 1 March 2018, the Kazakh parliament’s Senat (upper chamber) deputy Dariga Nazarbayeva sent a parliamentary inquiry to the Governor of the National Bank of RK, Mr. Daniyar Akishev.
It reads as follows: «Dear Daniyar Talgatovich! One of the tasks laid down by the Head of State in his Address to the People of Kazakhstan on the topic «New Opportunities for Development in the Context of the Fourth Industrial Revolution» is «Reloading of the Financial Sector». It presents the issues before the financial sector, including with respect to cleaning banks’ portfolios of their «bad» loans, considering the responsibility of bank owners, etc. Public authorities were also tasked with reducing the number of various structures subordinate to state institutions (JSC, RSE or the Republican state enterprises).
While taking into account the fact that the task of financial market and financial organizations control and surveillance has been carried out by the National Bank since April 2011, as well as the importance of developing the financial sector of our economy and the role of the state in this process, we are asking you to provide an extensive response to the following questions.
How many support programs for the banking sector have been adopted and implemented by the State (with funding from the Government, the National bank, the National Fund) from 1992 to 2018?
Exactly how much money has been allocated for that purpose in all these years? Which banks have been the beneficiaries of state support, and how much money did they get? What are the conditions under which every single of those state-supported banks was provided with funds (interest, repayment terms, securing repayment, etc.)?
How much of the government (state) financial resources, doled out to the banks in the bailouts, were returned (principal plus interest) in terms of data broken down by individual bank and in what time frame?
What do you estimate the value of losses suffered by our state, while taking into account devaluation of the tenge?
What are the share of state in banks and other financial organizations of the Republic of Kazakhstan?
What are the organizations ((JSC, RSE) in which the National bank has a stake, is a shareholder? What is the cost of their maintenance? What are the financial results of these structures for the period 2014 – 2017?
Does the National Bank plan to establish new structures or reduce the number of existing subordinate structures (time-frame for the closure or establishment)? I request that you provide a list of those organizations.
The existence of serious problems in the banking sector points to the low efficiency of the service that provides regulation and supervision of banking business. What are the shortcomings identified with regard to regulation of financial sector? What is the National Bank going to do about all this? What is the National Bank’s position on the question of restoring a separate state agency on regulation and supervision of financial market and financial organizations?
I request that you submit answers to the Parliament of the Republic of Kazakhstan in accordance with the law.
With respect, Dariga Nazarbayeva, Darkhan Kaletayev, Serik Dzhaksybekov, Tuleubek Mukashev, Talgat Musabayev, Nurzhan Nursipatov, Byrganym Aytimova».
All this reminds of going in circles and raises again the liability question. Although recurrent financial regulation issues are identified through information received, the subsequent process stumbles when it comes to making difficult decisions with the view to address the situation. So it is quite understandable that Kazakh President Nursultan Nazarbayev has to call things by their proper names while speaking about those responsible for today’s challenges in the banking sector. Kazakhstan’s leader lamented the «pervasive theft of the state’s and people’s money» in a speech at the Feb. 9 extended government meeting he chaired. He noted that the state has not to support every bank in need.
«Wealthy people want to have a bank – they engage in banking business. That is their private enterprise. The state has nothing to do with it. And then they become bogged down. Just when the state should come to their rescue? No way! If this is what these people have decided to establish, then they should remain fully liable for it. Yet in the interests of the national economy as a whole, due to the need to credit the economy, we have been faced with having to take the appropriate rescue measures. The National bank has supported the biggest systemically important commercial banks. Henceforth, the job is to see that it does not happen again», Kazakh President Nursultan Nazarbayev said.
He turned to Nurlan Nigmatulin, chairman of the Mazhilis (lower chamber of Kazakhstan’s Parliament) to consider legislation which would give the National Bank the right to conduct a priori checks on the state of a bank and all the money transfers that are taking place there.
The head of the National Bank, Daniyar Akishev, in turn, noted that until 2017 the banking sector had been slow in addressing the accumulated issues, that had been dragging on for a long time, since the crisis of 2008-2009.
According to him, high level of non-performing loans which had reached 33 per cent of the total loan portfolio of banks in 2013 required a systemic solution. Yet in most cases the Kazakh banks took a conservative approach. Instead of paying attention to substantive recognition of the problems, banks went through restructuring, reclassified borrowers and wrote off individual loans. All this became barriers to redressing the balance in the banking system.
«Indeed, some market players continued to pursue a risky policy in providing loans to individuals, associated with shareholders and management. But if in the 2000s, such activities were supported by funds raised in the international credit markets, in recent years, they have been financed out of the State funds. For the time being, State holdings and quasi-public companies have over 7.2 trillion tenge in their accounts in Kazakhstan’s banks», Mr. Akishev said.
But what is noteworthy here is that we in Kazakhstan kind of keep making the same points year after year. A decade ago, there already were strong voices debunking such a practice. It seems that nothing has changed since then. The question is what has been and is being done to address that situation?!