Tag Archives: central bank

Kazakh Central Bank pulls KazInvestBank licence

ALMATY, DEC. 27 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank revoked the licence of KazInvestBank, triggering concern over the stability of the Kazakh banking sector.

The Central Bank tried to play down the implications of pulling KazInvestBank’s licence but analysts said the failure of Kazakhstan’s 20th largest bank may be symptomatic of structural problems across the sector.

And, ominously, only four days earlier, on Dec. 23, sources had told Bloomberg news agency that the Central Bank had given Kazkommertsbank, Kazakhstan’s biggest bank, a $1.5b loan to maintain its cashflow.

Ratings agencies have been warning for most of 2016 that Kazakhstan’s banks were increasingly exposed to an economic downturn that has wiped 50% off the value of the tenge, flattened economic growth and dented living standards.

Oleg Smolyakov, the Kazakh Central Bank’s deputy chairman, said that KazInvestBank had allowed bad debts to build up to around 80% of its total portfolio.

“Irregularities in internal credit risk management procedures allowed borrowers with unstable situations, for example with negative equity, to build up higher debt levels and losses,” he said in a statement issued by the Central Bank.

The decision to close the bank is also an embarrassment for Daniyer Akishev who, only six months ago, said that all Kazakh banks were stable and had passed a stress test.

KazInvestBank, which is linked closely to the Kazakh elite, has declined to comment.

The banking sector in Kazakhstan is still recovering from the impact of the 2008/9 Global Financial Crisis. In a matter of months, Kazakh banks had built up large chunks of bad debt. This sunk three large banks, forcing the government to step in and spend billions of dollars propping them up.

Since then the Central Bank has tried to impose checks on balances on the banking sector, but analysts have always doubted their worth.

But it’s not only the Kazakh banking sector that is under pressure. The Tajik government has announced a rescue plan for its biggest banks and in Azerbaijan a handful of smaller banks have gone bankrupt.

ENDS

(News report from Issue No. 311, published on Jan. 6 2017)

Stock market: Georgian lari

DEC. 23 2016 (The Conway Bulletin) — It’s been a rollercoaster and with all good rollercoasters after a hair-raising ride you end up where you started.

This, of course, is Georgia’s lari currency. While it hasn’t quite ended 2016 where it started, and there are a few more days to go, it has been quite a ride. The lari opened 2016 at 2.41/$. On Dec. 22, the lari was trading at 2.75/$, a slight improvement from a year-low of 2.81 on Dec. 21 after the Central Bank intervened to give its currency a bit of strength.

It’s been on the slide since June when it peaked at 2.12/$. That’s a drop of 32.5% in six months. Like I said, it’s been quite a ride.

Essentially, the lari’s problems are Emerging Market currency problems.

They have been hit by a strengthened US dollar, security wobbles and by sustained low oil prices. Chuck in the poor performance of the Russian economy and stagnant local economic growth and its easy to see why the lari has been hammered. Worse-then-expected economic data and the Georgian Central Bank’s slashing of interest rates to try to boost growth have also weighed against the it.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)f

Georgia’s Central Bank props up lari

DEC. 20 2016 (The Conway Bulletin) — Georgia’s Central Bank sold $40m to try to stem a drop in the value of the lari, its first currency intervention since Oct. 12. In the past three months, the lari has lost around 19% of its value against the US dollar, worsening an already difficult economic outlook. In 2016, Georgia has sold $280m. The Central Bank blamed a strengthening US dollar for the lari slide.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Georgia’s CBank maintains rates

DEC. 14 2016 (The Conway Bulletin) — Georgia’s Central Bank slowed its interest rate cuts by keeping its key rate steady at 6.5% at its latest rate fixing meeting. It said that an increase in excise taxes and external factors would help lift prices temporarily although, there- after, price pressure will return. Inflation in Georgia stands at 0.2%, far below the Central Bank’s 5% target. It has cut its key interest rate from 8% at the start of the year.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Reserves drop in Kazakhstan

NOV. 10 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said its international reserves fell by 2.9% in October to $30.5b, the first decline in four months. Since the beginning of the year, reserves have grown by 13.8%, the Central Bank said. Last year the Central Bank spent a large proportion of its reserves trying to prop up its currency. This year, though, under a new Central Bank chief, the strategy has changed and the Bank has stepped away from intervention.

ENDS

(News report from Issue No. 304, published on Nov. 11 2016)

Kazakh C. Bank aims to hire foreign managers

OCT. 28 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank aims to hire foreign managers to oversee spending of the foreign currency- denominated element of its pension fund, worth around $5b. The hiring process could kick-start next year, according to one source at the Central Bank. Foreign currency-denominated assets make up around 21% of the $20b pension fund. The Central Bank aims to increase the share to 23% this year.

ENDS

(News report from Issue No. 303, published on Nov. 4 2016)

Georgian C. Bank keeps rates steady

OCT. 26 2016 (The Conway Bulletin) — Georgia’s Central Bank kept its key interest rate at 6.5% but said that it would lower it to 6% by the end of Q1 2017. It said that inflation and both consumer and business demand had slowed but that it was too early to cut rates now as the economy was still dealing with a previous cut. Annualised inflation in September measured 0.1% compared to a target of 5%.

ENDS

(News report from Issue No. 302, published on Oct. 28 2016)

Kyrgyz Central Bank keeps rate unchanged

SEPT. 26 2016 (The Conway Bulletin) – Citing falling prices and signs that the economy is beginning to grow again, Kyrgyzstan’s Central Bank kept interest rates unchanged at 6%. The Central Bank said that only by keeping rates at 6% will it be able to let prices increase gently, within a 5-7% corridor. This year, the Central Bank has reduced interest rates twice from a level of 10% in January.

ENDS

(News report from Issue No. 298, published on Sept. 30 2016)

Armenia’s C Bank cuts interest rates

SEPT. 27 2016 (The Conway Bulletin) – Armenia’s Central Bank cut interest rates by 50 basis points to 6.75%, in an effort to combat deflation. The Bank said that after a positive first half, the economy slowed significantly in Q3. This is the sixth time this year that the Central Bank has cut interest rates. At the beginning of 2016, interest rates stood at 8.75%.

ENDS

(News report from Issue No. 298, published on Sept. 30 2016)

Business comment: Kazakh banking

SEPT. 21 2016 (The Conway Bulletin) – Despite countless declarations on efforts to save its banking sector, Kazakh banks are not as healthy as they say.

Last year, President Nursultan Nazarbayev instructed the Central Bank to conduct stress test to avoid a spiraling of non-performing loans similar to the crisis that followed the 2007/8 global debacle.

He had just sacked Kairat Kelimbetov, Mr Devaluation, the Central Bank chief under whom the tenge currency lost around half its value in two years.

The result of the declarations has been a sharp drop in the share of

bad loans in banks’ total portfolio. Officially, this week Kazakhstan’s Central Bank chief Daniyar Akishev said that non-performing loans had shrunk from around 30% two years ago to just 8.4%.

This raised eyebrows among analysts.

How could a broken system, hit by currency depreciation and toxic assets, recover so quickly, without undergoing a serious makeover?

The answer is simple, according to some: The problems were swept under the rug.

“Kazakhstan’s banking sector is a legalised zombie park,” an anonymous economist told Forbes Kazakhstan.

“In reality, bad loans make up around 60% of the total loan portfolio. But through refinancing, on paper, banks have written most of them off of their accounts.”

Notably, the most frequent and well attended protests in Kazakhstan for the past few years are organised by groups of mortgage holders. They mainly hold US dollar debt.

If their overdue loans are neither being refinanced, nor being accounted for, where are banks hiding them?

ENDS

(News report from Issue No. 298, published on Sept. 30 2016)