By Simon Pirani
Could you comment on the state of Kazakhstan's banking sector? Is the low level of banks' capital base of concern?
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Banks have been growing much faster than the rest of the economy. Average GDP growth over the past five years was about 10% a year, whereas banking sector growth was 40% to 50%. Average banking sector assets rose by 57% last year; Halyk Bank's assets also increased by 57%. The large and medium-size banks are profitable but even this profitability is not a guarantee that they can grow organically: they need more capital. The banks' average capital ratio in Kazakhstan is substantially higher than in other countries. The financial supervisory authority here requires that banks maintain a minimum level of capital equal to 12% of risk-weighted assets, compared with the 8% required by the Basle Accord. For the banking system as a whole, the ratio is now about 14%; a few years ago it was 20%.
Banks are adopting a variety of approaches to this question. Some are attracting international financial investors: Kazkommertsbank has brought in the European Bank for Reconstruction and Development, which owns a 15% share.