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Commercial banks require less liquidity support now, says NBK chief

Astana, May 20, 2008

Interfax-Kazakhstan - Commercial banks in Kazakhstan need less additional liquidity today, opines Chief Executive Officer of the National Bank of Kazakhstan (NBK) Anvar Saidenov.

“The banks require less additional liquidity for the time being. However, we are expanding a list of instruments that enable banks to make more flexible use of REPO operations,” he said at a Monday session of the state commission for economic upgrade in Astana.

In particular, the list of instruments used as a pledge includes bonds of state-owned companies and banks issued before May 1, 2008 and bonds of Kazakhstan Mortgage Company, according to him. “In general, the situation is

controllable and if banks urgently need additional liquidity, it will be provided,” NBK chief emphasized.

Saidenov also indicated that despite declining volumes of foreign borrowings and a limited scope of deposits, banks in Kazakhstan have not suspended their lending activities.

“In January-March bank loans were rather stable and were estimated at 7,256 bl tenge, i.e. new loans are issued to the extent of earlier loans that are repaid,” Saidenov said.

Along with this, NBK chief indicated changes in the structure of extended loans. “Thus, the share of construction loans in March 2008 made 17.6% compared 16.2% in July 2007. Lending to the industry rose to 9.5% from 9.2% during the same period. However, the share of loans to the commerce and agribusiness has dropped,” Saidenov stated.

Moreover, curbing the inflation, price control and financial stability still remain top priorities for the NBK.

“We do not cut the refinancing rate that makes 11%, we are still withdrawing cash from the economy, but to a limited extent, and we are also receiving deposits from second-tier banks,” he said.

As of May 16 this amount makes nearly 80 bl tenge, Saidenov indicated.

Moreover, chair of the Financial Supervision Agency (FSA) Elena Bakhmutova said at the same session that the liquidity level of commercial banks remains rather acceptable.

According to her, a multiple coefficient of current liquidity as of May 1 made 1.44% “with a minimum standard for a particular bank at 0.3%, coefficient of short-term liquidity exceeds 1% with a minimum standard of 0.5%.”

She says obligations with a 3-month maturity are completely covered and no problems should arise within next three months in principle.

Along with this Bakhmutova indicated a growing share of liquid assets. It edged to 14% as of May 1 from 13.9% in early 2008, she underlined. Thus, banks have enough resources both to discharge their foreign obligations and extend loans to the domestic economy.

FSA chief says banks are raising the share of highly-reliable liquid assets having revised their loan portfolios.

“In particular they resume depositing with NBK and this testifies that these resources can be directed for lending to the economy at any moment,” Bakhmutova pointed out.

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