At a government plenary on Tuesday Kairat Kelimbetov, Head of the National Prosperity Fund Samruk-Kazyna, said that the number of Kazakh banks need to decline, while regulatory capital requirements needs to be increased. “Perhaps we should start with 15bn tenge. There should be 10-15 banks in Kazakhstan, not 37, especially since the shareholders have not acted responsibly in this area, as we saw prior to the crisis,” he said.

Mr. Kelimbetov commented that at present regulatory minimal capital is 5bn tenge; it is supposed to increase to 10bn by 1 July 2010.

However, Chairman of the Central Bank  Grigoriy Marchenko does not expect such a radical decline in the number of local banks, as he stated during a press conference in Almaty. “If we increase capital requirements, we will put pressure on foreign banks, because large Kazakh financial structures have larger capital reserves. For example, TAIB bank, National Bank of Pakistan and, at some point, Trade-Industrial bank of China had problems with raising capital,” he explained.
Mr. Marchenko thinks that such requirement would be contrary to Almaty’s goal as a regional financial centre, but he does not disagree that a higher capital buffer would be a positive effect during the crisis. He also noted that a decline in the number of banks would not drive up customer fees. “One cannot say that if the number of banks goes down from 35 to 10, the price of banking services will increase or decrease sharply. This would not be an oligopoly. If the number goes down to 4 or 5, then it would be more probable,” he said.

Deputy General Director of the rating agency KzRating Denis Rybalkin agrees. Smaller banks account for an insignificant share of the Kazakh banking system, so the decline in the number of banks will not affect the economy or the competition, he thinks. The main reason for a consolidation of the banking sector is regulatory optimization and monitoring banking activities in case of a possible bankruptcy, said Mr. Rybalkin.

“Large banks set up the political scene. The rest of them follow; they cannot set up high fees because all businessmen would go to a bank with smaller fees if the security was the same,” he said.

Systemic banks are unlikely to increase rates, unless they all agree to do it, which is unlikely, thinks Rybalkin. “Apart from larger institutions that may get discounts due to high transaction volumes, the rest are rather sensitive to bank rates. I do not think that a smaller number of banks will result in higher fees,” he stated.

Another market participant, who decided to comment anonymously, said that 10-12 banks could ensure a sufficient level of competition and prevent higher rates, in excess of reasonable profits. About 40 financial structures in a country of 15mn is too much, he said, but a decline in the number of banks will limit options.

“The process should evolve. It is difficult to determine the optimal number for Kazakhstan, since it is not clear how big the banks will become and how competitive they will be.  If there are only three large and seven smaller banks, competition will be limited,” he said.

If one compares similar banking structures based on size, the price of financial services will depend on economic conditions and other factors, since the level of rates and fees is a subjective decision.

“Some people note that the rates in Kazakhstan are high compared to Europe but they do not take into account the inflation level in Europe, which is 1%. Some say that the rates are too low for the current inflation level. However, the rates will depend on the economic conditions in this situation,” he concluded.

 

Elena Dmitrieva
Business and Vlast