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Growth in credit risks to influence Kazakhstan's financial stability - the National Bank and FSA
Almaty, December 17 2008
The growth in repayment risks is a substantial factor of vulnerability of Kazakhstan's financial stability, the National Bank and the State Financial Supervision Agency (FSA) marked in the annual report on Kazakhstan's financial stability.
"The creation of reserves to cover the growing repayment risks puts pressure on the profitability and future capitalization of the banking system," runs the report.
According to the report, the favorable business environment tone of the world commodity markets and underestimated slowing-down effect on import under conditions of lower domestic demand contributed to the substantial improvement of the flow-of-funds table and allowed to maintain the state's reserves without any considerable interventions.
However, the sufficiency of reserves was not rated to the full extent due to unfavorable external factors.
"A substantial growth is marked in credit risks. Notwithstanding the growth in formed provisions, the actual adequacy was still not tested, because the banks were engaged in restructuring of loans. The slow-down of the economic growth and worsening of enterprises' financial state would have an additional influence on bank's profits," runs the report.