CEE architects of transition: Grigory Marchenko


Lucy Fitzgeorge-Parker
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Grigory Marchenko served two terms as governor of Kazakhstan’s central bank – from October 1999 to January 2004 and from January 2009 to October 2013. He was chairman of the board of Halyk Bank from 2005 to 2009. He retired in 2013 and divides his time between Barcelona, Baku and Almaty.




It is hard to find any successful reform in Kazakh finance that doesn’t have Grigory Marchenko’s mark on it.

His first chance to change the structure of Kazakhstan’s post-Soviet economy came in 1995 when, as deputy central bank governor, he was tasked with leading reform of the country’s new chaotic banking sector. 

Initially, a proposed new banking law – based on Basel I methodology – met with stiff resistance from Kazakh bankers. “The heads of the large and mid-sized banks came to us and said: ‘Why don’t you just close all the banks and reintroduce the old system with state-owned banks because there is no way we can operate under this level of regulation’,” says Marchenko. 

He and his colleagues met with the bankers twice a week for the next six months and patiently explained the proposed reforms. “Eventually they understood it wasn’t just a bunch of young guys sitting in the central bank and telling them what do it – it was how the world operates,” he says. 

With the banking reform completed, Marchenko moved to the Kazakh securities commission in 1996 to prepare Almaty’s sleepy stock exchange for a sweeping privatization programme called ‘Blue chips’.

Designed to develop local capital markets by listing a clutch of medium and large state-owned enterprises, the initiative attracted a lot of interest – thanks largely to Marchenko’s efforts in promoting it around the world.

In what would become a recurring theme over the next 23 years, however, at the last minute the government scaled back plans and backtracked on allowing foreign participation. Marchenko promptly resigned from his position at the securities commission. 

“There was no point in sitting around and pretending I was still important, so I left,” he says. “I announced a tender for myself and it was won by Deutsche Bank, who asked me to set up their subsidiary in Kazakhstan.”

Launched in January 1998, the new entity proved extremely successful, notching a number of notable firsts in capital markets and advisory, including arranging Kazakhstan’s first municipal bond issue, its first subordinated loan and the first local M&A transaction. 

“It was fun because it was small and the markets were still very undeveloped,” says Marchenko. “Unfortunately in the middle of my contract I was appointed governor of the central bank, so I didn’t get my option from Deutsche Bank, which was kind of sad.”

I was a better central bank governor the second time because I understood what markets need
 - Grigory Marchenko

The reason he was called back to the central bank was to deal with the fallout from the Russia crisis. His first job was to stabilize the tenge, which was fairly quickly accomplished. The second, and more challenging, was to rebuild shaken confidence in the banking sector. “People were hugely mistrustful of banks,” he says. “When I was appointed governor there was only $300 million of retail deposits in the system.”

Marchenko pushed through legislation on banking confidentiality and introduced the deposit insurance fund. As a result, by the time he left the central bank again in January 2004, the country’s retail deposit base had grown to $4 billion (today it is $25 billion).

Six months later, after brief spells first as deputy prime minister – “unfortunately I couldn’t work with the prime minister of the day, for reasons I won’t go into” – and then as adviser to then president Nursultan Nazarbayev, he moved to head up leading local lender Halyk Bank

He remained in post until January 2009 and is credited with saving Halyk from the fate of leading rivals BTA Bank and Kazkommertsbank by preventing it from loading up on foreign wholesale funding and funnelling the proceeds to local construction and real estate firms. 

Great game

“For several years it was a great game,” says Marchenko. “The price of real estate was going up by 40% to 50% a year, so you could borrow at 8% on the international markets, then lend it to real estate and construction companies. 

“Unfortunately, as any student of economic history knows, this type of game can’t go on for ever.”

In 2008, the Kazakh banking sector went down in flames and Marchenko was once again called back to the central bank to sort it out. 

“That was hugely unfair,” he jokes. “My salary went down 10 times and I had to sort out the problems of the banks, which were their own doing!” 

Restructuring the three Kazakh banks that defaulted on their external debts enraged international creditors of BTA, Alliance Bank and Temir, who bitterly resented the Kazakh government’s refusal to bail out the three banks. 

In the end, however, an orderly restructuring was achieved – thanks partly again to Marchenko’s efforts to reconcile the various parties. He says his experience in the private sector helped. “The second time round I was a better central bank governor because I understood better what markets really need,” he says.