MINISTRY OF SCIENCE AND EDUCATION OF RK
INTERNATIONAL ACADEMY OF BUSINESS
Theme: “Current situation of banking system of the Republic of Kazakhstan”.
Serikbayeva Zh. D.
c.ec.s, docent IAB.
TABLE OF CONTENT
ChapterI. Concept of bank and banking system 5
Chapter II. The current situation of banking system
of the Republic of Kazakhstan 12
Chapter III. Problems and perspectives of development
of banking system of the Republic of Kazakhstan 19
The modern economy represents very difficult system each part of which is closely connected with others and plays an important role. But, one of the major roles is played by the bank system providing at the present stage development of economic mutual relations, normal functioning of all economy as a whole. For today banks are called:
• to accumulate free money resources,
• to carry out functions of cashiers of economic subjects,
• to make issue.
Now it is impossible to present harmoniously developed state without the branched out network of banks. And it is valid, banks play in modern economy a role of numerous "hearts", which help probably development and formation of economic-political power of the state.
Economic-political as the political doctrine in which the economy would be considered separately from a policy isn't created yet.
For today, banks are the economic tool in government hands.
Despite imperfection of the bank legislation, the Kazakhstan banks occupy strong position in home market of capitals, and open branches abroad.
The modern bank system of Kazakhstan has developed as a result of the various transformations resulted within the limits of bank reform which has been spent in our republic since 1987.
The transition period during which old and new bank structures coexisted, has appeared rather short. As a result in Republic there was the two-tired bank system which first-tire represents National bank, and the second or bottom level is represented by the state, commercial, joint and foreign banks. The national bank is the main bank of Kazakhstan and is in its property. On the one hand, it is the legal body which is carrying out certain civil-law transactions with commercial banks and the state. On the other hand, it is allocated by wide imperious powers on management of a monetary and credit system of republic which are fixed in the Law "On National bank of RK".
In the given work development of bank system in modern economy is investigated.
The purpose of the given work to consider modern lines of development of banking in Kazakhstan.
Proceeding from the purpose we will try to carry out following problems:
• to consider history of development and formation of bank system RK;
• to study modern condition of bank system;
• to investigate problems and perspectives of development of bank system in RK.
Object of research of the given work is bank activity and bank system as a whole and the subject is the bank system in the Republic of Kazakhstan.
The task in view has been executed by the analysis of the economic literature and magazines, newspapers devoted to economic subjects, the data of National bank and FSA, laws and legal acts.
The urgency of the set theme is caused by that one of the major attributes of market economy is the bank system which acts some kind of the generator, accumulating supplying the state and all members of a society as financial assets. Creation of a steady, flexible and effective bank infrastructure - one of the major (and extremely difficult) economic reform problems in Kazakhstan.
I. CONCEPT OF BANK AND BANKING SYSTEM
Banking system is one of the major and integral structures of market economy. Development of banks and commodity manufacture and reference historically went in parallel and closely intertwined. Banks as financial intermediaries involve capitals of economic authorities, population savings, and other free money resources liberated in the course of economic activities, and give them out in time of using to borrowers, carry out monetary calculations and render other numerous services for economy, thereby directly influencing production efficiency and the reference of a public product and promoting growth of productivity of social activities. Today, in the conditions of the developed commodity and financial markets, the structure of banking system sharply becomes complicated. Have appeared new kinds of the financial institutions, new credit tools and methods of service of clientele.
Creation of banking system in Kazakhstan has begun after sovereignty reception, in December, 1990. For high-grade development of economy the decision on creation of the two-tiered bank system recognized all over the world as the most effective in the conditions of the market was accepted. It allows spending an independent monetary and credit policy, to solve problems of inflation and financial maintenance of the state and a society needs.
In essence, the Law "On Banks and Banking activity in Kazakh USSR", accepted in January, 1991 became the beginning of banking reform in the country. The given Law has provided formation of bases of two-tired bank system.
Then, in 1995 the law “On Banks and Bank activity in the Republic of Kazakhstan” has been passed on which the bank admits as the legal body which is the commercial organization and carries out bank activity according to the Law "On Banks and Bank activity in the Republic of Kazakhstan". The official status of bank is defined by the state registration and presence of the license of the authorized body for regulation and supervision of the financial market and the financial organizations.
As earlier it has been noted, banking system of RK is two-tired, the representative of the first-tier is National bank of RK, and the second – all other banks, except Development Bank of Kazakhstan. Also in banking system are included banks with foreign participation, Islamic banks and intergovernmental banks.
The National bank of the country has been organized from the moment of formation of independent Kazakhstan, but, despite it, it still wasn't the central bank of the country in its classical definition. The national bank continued to carry out a number of minor functions, besides, not all was clear with its status in system of state structures. So, during the period from 1991 till 1993 the National bank was submitted to all branches of the power. The government gave orders to it, deputies supervised its activity and delegated to it additional orders, often demanding of their immediate execution.
For the decision of the given problem in March, 1995 by the President of Republic of Kazakhstan N.A.Nazarbayev has been confirmed the Law "On the National Bank of the Republic of Kazakhstan" according to which the National bank became the legal body, has independent balance and together with the branches, representations and organizations makes unified structure, in the activity it is accountable only to the President. Since then no authority of representative and executive power has the right to interfere with activity of National bank. But, nevertheless, as well as in all other countries, the National bank of the Republic of Kazakhstan should coordinate questions of nation-wide economic policy with the Government. Same 1995 the first program of reforming of bank system of republic has been accepted. The essence of this program consisted in maintenance with banks of crediting of economy at the expense of savings of the population independently involved with them, available assets of managing subjects and external loans.
So the National bank has been "released" from political pressure and from functions which could carry out banks of the second level. Now the National bank has passed to performance of direct functions of the central bank of the country –carrying out of an independent monetary and credit policy and creation of the bank system meeting modern requirements. 
The national bank is endowed with wide imperious powers on management of a monetary and credit system of republic which are fixed in the Law "On the National Bank of the Republic of Kazakhstan". The Primary purpose of National bank is maintenance of internal and external stability of national currency of the Republic of Kazakhstan, and also working out and carrying out monetary policy, monetary circulation regulation, the organization of bank calculations and currency relations, assistance to maintenance of stability of monetary, credit and banking system, protection of interests of creditors and investors of bank. NBRK also acts as the emitter of the state securities, participates in service of the internal and external debt of RK guarantor of which is Government of RK. The National bank carries out supervision of activity of commercial banks and the organizations which are carrying out operations under the purchase, sale and an exchange of foreign currency and establishes prudential standards which regulate activity of banks. That is National bank bears full responsibility for functioning of monetary and credit sphere and represents interests of RK in relations with the central banks and financially-credit institutions of other countries. 
Reforming of banking system of Kazakhstan has passed practically in three stages.
At the first stage (1988-1991) in a condition of existence of the USSR has been spent reorganization of the state branch specialized banks by transfer of a part of functions of the center republican divisions of corresponding banks, there is begun creation of the first commercial banks and initial steps under the legend to the State Bank of separate functions of the central bank are taken.
The second stage with (1992-1993) is characterized by gradual transition of National bank to performance of some functions of the central bank within the limits of existence of a rouble zone, extensive formation and development of commercial banks, the beginning of formation of national bank is standard-legal base.
At the third stage (since November 1993) in connection with introduction of national currency full responsibility for functioning of monetary and credit sphere, introduction of classical principles of its mutual relations have been assigned to National bank with the budget and banks, strengthening of system of regulation of bank’s activity.
Follows that in the beginning of the third stage the condition of banking system of the country in essence didn't answer requirements to the full objectively-shown to them. It concerned as to National bank which by then hadn’t traditions and experience in a part of performance of functions of the central bank, and to banks of the second-tired which wasn't capable in necessary volumes to carry out crediting of economy at the expense of own and is independently mobilized financial resources and to carry out all complex of bank services.
In these conditions the National bank has developed and confirmed by the president of republic the concrete program of reforming of banking system in Kazakhstan for 1995. The program has been coordinated with actions of the government for deepening of reforms and an exit from an economic crisis, and also considered recommendations of the international financial organizations. During performance of this program certain positive results have been received:
· necessary coordination of activity of National bank, of the Ministry of Finance in carrying out of a financial policy of the state has been reached;
· introduction of all spectrum of tools of monetary and credit and currency regulation, characteristic for classical central banks has been finished;
· following mechanisms of system of supervision and regulation of activity of banks of the second-tired have been developed;
· the normative base has been created, there has begun processing of system of currency regulation and control;
· measures on increase of level and efficiency of the analysis of macroeconomic processes, their forecasting and decision-making use have been taken;
· considerable work on achievement of adequacy of used system of accounting of National bank and bank of the second-tier by international standards to requirements of market economy has been spent;
· has been reduced quantity of banks, directly violating established economic specifications and the rights of the enterprises and physical persons - clients of banks;
· quality of mechanisms of accumulation of financial resources by second-tier banks, and also level of an estimation of projects has raised at crediting of managing subjects and degree of risk of a reflexivity of credits;
· positive tendencies have been outlined in increase of level of capitalization of the banks, allowing them independently to carry out financing of large-scale projects on an intermediate term and long-term basis;
· work on increase of vocational training of the personnel has been made active.
Carrying out consecutive and interconnected steps on reforming and development of banking system of the country, and also realization of moderate-rigid monetary policy has allowed to bridle inflation, to stabilize a course of tenge and to lower level of interest rates. 
Representatives of the second-tier of banking system are commercial banks.
The organizational device of commercial banks corresponds to the standard scheme of management of Joint-stock company. The supreme body of commercial bank is general meeting of shareholders which should pass not less than once in a year. There are representatives of all shareholders of bank on the basis of the power of attorney. General meeting is competent to solve the questions taken out on its consideration if in session take part not less than three quarters of shareholders of bank.
Board of directors controls the bank activity. The board of directors carries out the general management of bank activity. The bank executive office is joint body or the person who is individually carrying out functions of an executive office which name is defined by the charter. An executive office carries out the current activity. The credit committee considers projects of credit and other plans of bank, confirms plans of incomes and expenses and bank profit, the board of directors considers questions on opening and closing of branches of bank and other questions connected with activity of bank, both mutual relations with clients and development prospects.
The board supervises over directly activity of commercial bank. It bears responsibility before general meeting of shareholders and council of the Bank. The board consists of the chairman of the board, its assistants and other members. Into structure of boards of commercial banks usually enters representatives of the largest participants of bank.
Bank board meetings are spent regularly. Decisions are accepted by majority of votes. At equality of voices the voice of the chairman of the board is solving. If trustees or its chairman don't agree with the board decision, they can inform the opinion to council or general meeting. Definitive the decision of council of the Bank in this case is. Board decisions are put into practice by the order of the chairman of the board of bank.
Bank audit is made by the auditor organization. Carrying out of audit for the results of a fiscal year is necessarily for banks. Copies of the report and the recommendation of the auditor organization should be presented by banks, or the auditor organizations to the authorized body within thirty days from the date of data acquisition of documents. The consolidated annual financial reporting of bank should be assured by the auditor organization. The auditor organization states results of audit and the conclusions in the report represented to board of directors and board of bank, at the necessity defined by bank, to other legal bodies that are a part of a bank conglomerate. The auditor report of the financial reporting of bank or other legal bodies which are a part of a bank conglomerate doesn't make a commercial secret.
Big banks usually consist of departments, managements and departments which are created to a functional sign. Their heads provide normal work of these divisions. Directors of departments, chiefs of managements and their assistants coordinate activity of departments and services, define their concrete purposes and programs, advise, supervise and estimate their work. The quantity of departments depends on size and character of activity of bank, volumes and complexity of bank operations and a variety of services given to clients.
The account in commercial banks is carried out according to the rules established by National bank. Banks represent to National bank or its management in the location of commercial bank balance on the first date, the quarter turnover sheet and the annual accounting report.
With a view of publicity maintenance in work of commercial banks and availability of the information on their financial position their annual balances confirmed by general meeting of shareholders, and also on account of profit and losses should be published in the press (after acknowledgement of reliability of the data presented to them by the auditor organization).
With a view of operative credit-settlement service of the enterprises and the organizations – the clients of bank territorially removed from the location of commercial bank, it can organize branches and representations. Thus the question on opening of branch or representation of commercial bank should be coordinated with Central administrative board of National bank in a place of opening of branch or representation.
The isolated structural divisions which are located out of a place of its finding and carrying out all or a part of its functions are considered as bank branches. The branch isn't the legal entity and makes delegated to it head bank of operation in the limits provided by the license of National bank. It concludes contracts and conducts other economic activities on behalf of commercial bank, which it was created by.
The representation is the isolated division of commercial bank located out of a place of its finding, not possessing the rights of the legal person and not having independent balance. It is created for maintenance of representation functions of bank, fulfillment of transactions and other legal actions. The representation isn't engaged in settlement-credit servicing and has no correspondent subaccount. For realization of household expenses to it the current account opens. 
The essence of activity of banks is shown in performance of certain functions by them, which distinguish them from other bodies. Grouping the basic operations of commercial banks, it is possible to formulate basic functions carried out by them:
1. Accumulation and mobilization of the monetary capital;
2. Intermediary in the credit;
3. Carrying out of calculations and payments in an economy;
4. Creation of means of payment;
5. The organization of release and placing of securities;
6. Consulting servicing.
Mobilization of temporarily free money resources and their transformation into the capital – one of the oldest functions of banks. Free money resources accumulated by bank legal and physical persons, on the one hand, will be brought in to their owners by the income in the form of percent, and with another – create base for carrying out of loan operations. The concentrated savings can be used on any economic and social needs. By means of banks there is a concentration of money resources and their transformation into the capital.
Other important function of commercial banks is intermediary in the credit. With direct credit relations between owners of free money resources and borrowers interferes not coincidence volume of the capital offered in the loan, with requirement for it, and also term of liberation of the capital with term on which it is necessary to the borrower. Direct credit communications between owners of the capital and borrowers complicates. The proprietor of the capital can not have the information on a financial position of the borrower. Commercial banks, acting in a role of financial intermediaries, eliminate these difficulties. Bank credits go in various sectors of economy, provide manufacture expansion. The stable economy can't exist without the organized and debugged system of monetary calculations. From here the great value has a role of banks in carrying out of calculations and payments.
The basic part of calculations between the enterprises is carried out by a non-cash way. Banks, representing itself as the intermediary in payments, carry out calculations on the instructions of clients, accept money for accounts and keep account all monetary receipts and deliveries. Centralization of payments in banks promotes reduction of distribution costs, and for acceleration of calculations and increase of reliability of payments electronic systems of calculations take root.
Special function of commercial banks is their ability to create or destroy money that is to increase or reduce monetary weight. Creation of means of payment is directly connected with depositary and credit activity of banks. The deposit can be created by two ways: entering by the client of cash into bank or delivery to the borrower of the credit. Thus specified operations by various image influence volume of monetary weight in circulation.
However banks are capable not only to create, but also to destroy money. It is possible at repayment by borrowers of credits by write-off of money from their depositary accounts. In this case the general monetary weight in an economy is reduced.
In the presence of demand for the credit the modern issue mechanism allows to expand borders of monetary issue that proves to be true growth of monetary weight in industrially developed countries. But it is required to economy optimum, instead of the excessive quantity of active money, therefore commercial banks operate within restrictions (obligatory reserves), established by the central banks.
Commercial banks carry out issue-promotional function, carrying out release and placing of securities, in particular, shares and bonds. Thus banks have possibility to direct savings on the industrial purposes. The securities market as though supplements system of the credit and cooperates with it. On the instructions of the enterprises needing long-term investments both resorting to a share issue and bonds, banks incur definition of the size, conditions, issue term, a choice of type of securities, and also duties on their placing and the organization of the secondary reference. Banks guarantee purchase of the let out securities, getting and selling them at own expense or organizing for this purpose bank syndicates, give to buyers of actions and loan bonds. Obligations for the considerable sums which have been let out by the large companies can be placed by bank through sale to direct clients, instead of a method of free sale at a stock exchange.
The sufficient economic awareness and possibility of control of economic situations allow banks to carry out consulting service. Banks carry out the analysis of financial activity of the enterprises, conditions of their accounting, estimate strategy of development and reveal possible directions of increase in incomes. Being engaged in operations with securities, banks estimate perspective of release of new actions of the client and a reality of their placing; advise clients in a choice of the firms, ready to incur placing of new securities, and other consulting services render: from opening of accounts to the recommendation about fulfillment of operations in the monetary and commodity markets. 
Recently commercial banks have faced a sharp aggravation of a competition from numerous specialized credit institutions which stimulates search by banks of new fields of activity, increase in number of services offered clients and improvement of quality of service.
Development of a tendency of expansion of functions of commercial banks in modern conditions proceeds. For strengthening of the positions in the market they carry out operations not characteristic for banks more actively, taking root into nonconventional spheres for them financial business. The role of banks in economy functioning thereby rises.
CHAPTER II. THE CURRENT SITUATION OF
BANKING SYSTEM OF THE REPUBLIC OF KAZAKHSTAN
For January 1, 2010 38 second-tier banks operate in Kazakhstan, including the city of Almaty where are registered 35 banks, 34 branches and 372 additional premises of banks, in 2009 the number of banks was 37, and in 2008 - 35, increase in the number of banks is due to an improving economic situation in the Republic of Kazakhstan. More detail the structure of the banking system of Kazakhstan can be observed in table 1.
Table 1 - Structure of the banking sector
||Jan 1. 2008
||Jan 1. 2009
||Jan 1. 2010
|Number tier two banks, incl.:
|banks with 100% of authorized capital owned by the Government
|Number of tier two banks’ branches
|Number of tier two banks’ cashier settlement desks
|Number of tier two banks’ representative offices abroad
|Number of non-resident banks’ representative offices in the Republic of Kazakhstan
|Number of participant banks in mandatory collective insurance system for individuals’ deposits
|Number of banks licensed to engage in custodian activity
Table 1 shows that on January 1, 2010 there was an increase in the number of tier two banks’ representative offices abroad, number of non-resident banks’ representative offices in the Republic of Kazakhstan, number of participant banks in mandatory collective insurance system for individuals’ deposits, number of banks licensed to engage in custodian activity.
Next, let’s consider the structure of assets of two-tier banks, of liabilities of two-tier banks, of capital of two-tier banks, of liquidity and profitability of the banking sector.
For 2007 the banks’ total assets increased by 2,811.4 bln. tenge (31.7%) and for January 1, 2010 totaled 11,557.3 bln. tenge (table 2).
Table 2 - Structure of total assets of the banking sector
||Jan 1. 2009
|Cash, refined precious metals and correspondent accounts
|Deposits in other banks
|Bank loans and reverse Repo
The banks’ asset mix shows the prevalence of loans to customers, followed by cash, refined precious metals and correspondent account balances, securities portfolio, deposits in other banks.
During 2008, bank total assets increased by 205.0 bln. tenge (1.8%), and on the January 1, 2009 constituted 11 889.6 bln. tenge.
From 2008 bank loans and reverse REPO transactions have increased by 376.2 bln. Tenge or by 4.2%; cash, refined precious metals and correspondent account balances decreased by 192.9 bln. tenge or by 19.0%; securities increased by 100.4 bln. tenge or by 12.7%, deposits in other banks decreased by 65.7 bln. tenge or by 10.2%, capital investments increased by 97.0 bln. tenge or by 43.6%.
On-balance sheet debt increased from 100.5 bln. tenge by 156.5 bln. tenge (2.6 times) up to 256.6 bln. tenge
Account balances reflecting the past due interest payments increased from the beginning of the year by 31.6 bln. or by 2.8 times and reached 49.0 bln. tenge as of 1 January 2009.
During 2009 the decrease in assets has equaled to 332,3 bln. tenge (2,8 %), bank loans and repo operations have increased by 394,4 bln. tenge (4,3%), reserves (provisions) have increased by 2 968,4 tenge.
In 2009 in comparison with 2008 and 2007 are the lowest rates of total assets.
Figure 1 - Structure of assets, 
The largest share of the asset structure falls on Bank loans and reverse Repo as they bring great profit (figure 1).
During 2007, total liabilities of two-tier banks have increased by 2,255.1 bln. tenge. (that is by 28.2%), and totaled 10,256.7 bln.tenge, as of the end of the reporting period (table 3).
Table 3 - Structure of total liabilities of the banking sector
||Jan 1. 2009
|Loans from other banks and institutions engaged in certain types of banking operations
|Loans from the Government of the Republic of Kazakhstan
|Loans from international financial institutions
|Special-purpose deposits of subs (SPV)
|Repo securities transactions
The greatest contribution to the increase in banks’ liabilities came from special-purpose deposits (SPV) of bank subsidiaries, which have increased by 971.9 bln.tenge, that is by 62.4%, followed by due to individuals, which increased by 413.6 bln. tenge, that is by 40.0%; while loans from other banks and institutions engaged in certain types of banking operations have increased by 379.1 bln. tenge to 1,798.2 bln. tenge.
From beginning of 2008 total liabilities of second tier banks increased by 177.5 bln.tenge (or by 1.7%), and formed 10 437.0 bln.tenge, as of 1 January 2009.
SPV deposits in total liabilities of the banking sector decreased by 244.5 bln. tenge, or by 9.7%, liabilities to individuals increased by 52.4 bln. tenge, or by 3.6%; while loans from other banks and institutions engaged in certain types of banking operations decreased by 348.0 bln. tenge to 1 450.2 bln. tenge.
Total liabilities of commercial banks in 2009 increased by 2 099.8 bln. tenge or by 20,1%. In the structure of liabilities, corporate deposits have increased by 978.2 bln. tenge or 31,7%, retail deposits by to 437.1 bln. tenge or 29,1%. Special purpose deposits of subsidiaries have decreased by 489.0 bln. tenge or 21,4%, loans from other banks and institutions engaged certain types of banking operations by 202.7 bln. tenge or 14,0%.
Foreign currency deposits in 2009 increased by 966.2 bln. tenge or 1.5 times.
Figure 2 - Structure of liabilities, 
The largest share of the liabilities structure falls on corporate deposits and SPV as they are based on large sums of money.
Line-item change in capital for 2007-2009 is presented in Table 4.
Table 4 - Calculated own capital of two-tier banks
|Jan 1. 2009
|Tier three Capital
|Investments of banks
tal calculated own capital
* negative value of the calculated own capital is connected with decrease of own capital of BTA Bank, JSC and Alliance Bank, JSC
**data across the system is given without BTA Bank, JSC and Alliance Bank, JSC.
Year 2007 to date, total estimated equity of tier two banks has increased by 611.6 bln.tenge (52.3%) to reach 1780,2 bln. tenge as of January 1, 2008. Herewith, tier one capital increased by 57.3% to reach 1284.0 bln. tenge, while tier two capital increased by 45.0%, i.e. up to 558.9 bln. tenge.
Total estimated own capitalofsecond tier banks increased by 167.7 bln.tenge (9.4%) from the beginning of 2008 and reached 1 947.8 bln. tenge as of 1 January 2009. Herewith, tier 1 capital increased by 18.8% and reached 1 525.1 bln. tenge while tier 2 capital decreased by 11.4% till 495.1 bln. tenge.
Tier one capital decreased by 2580.4bln. tenge, authorized capital by 397.6 bln. tenge, supplementary capital decreased by 0.4 bln. tenge, tier two capital decreased by 182.9 bln. tenge, subordinated debt increased by 24.8 bln. tenge, tier three Capital increased by 0.2 bln. tenge, investments of banks increased by KZT 99.3 bln.tenge.
Because of restructuring of BTA Bank, JSC the total calculated own capital of 2-tier banks of RK for 2009 has negative amount. BTA bank’s shares were bought by state so the capital of this bank decreased. But if we don’t take it into consideration the total calculated capital for January1, 2009 is the least but positive.
Table 5 - Change in liquidity of the banking sector
||Jan 1. 2008
||Jan 1. 2009
||Jan 1. 2009
||Jan 1. 2010
||Jan 1. 2010
Current liquidity ratio k46
(min value 0.3)
|Quick liquidity ratio k4-1 (min value 1)
|Quick liquidity ratio k4-2 (min value 0.9)
|Quick liquidity ratio k4-3 (min value 0.8)
*data across the system is given without BTA Bank, JSC and Alliance Bank, JSC.
In table 5, as of 1 January 2008, the liquidity of the banking system remained at excessive level. Composite current liquidity ratio, as of 1 January 2008, was 1.43 (vs. minimum standard for a particular bank of 0.3), short-term liquidity ratio was 0.97 (vs. minimum standard of 0.5).
As of 1 July 2008 the amendments in liquidity norms have come into force, aimed at regulation of term liquidity and term currency liquidity (up to 7, 30 and 90 days).
As of 1 January 2009 there wasn’t any violation of term liquidity and term currency liquidity coefficients (considering liquidity norms changes). Herewith, As of 1 January 2009 in banking system there are: coefficient of term liquidity up to 7 days (k4-1) constituted 3.1 (vs. minimum norm 1); coefficient of term liquidity up to 30 days (k4-2) constituted 1.8 (vs. minimum norm 0.9); coefficient of term liquidity up to 90 days (k4-3) constituted 1.6 (vs. minimum norm 0.8).
Composite current liquidity ratio, as of 1 January 2010, was 0.9 (vs. minimum standard for a particular bank of 0.3), coefficient of term liquidity up to 7 days (k4-1) constituted 5.1 (vs. minimum norm 1); coefficient of term liquidity up to 30 days (k4-2) constituted 2.6 (vs. minimum norm 0.9); coefficient of term liquidity up to 90 days (k4-3) constituted 2.1 (vs. minimum norm 0.8).
Mainly all indicators of liquidity for January 1, 2010 are the highest, it means that the liquidity of banks increases and for banking sector it is good.
Table 6 -Summary performance indicators reflecting the earnings of the banking sector
||Jan 1. 2008
||Jan 1. 2009
|Net income before tax to total assets (ROA)
|Net income before tax to equity (ROE)
|Interest income to total assets
|Interest income on loans to total loan portfolio
|Interest expense to total liabilities
|Provisioning expenses to total assets
In interest income, the largest proportion falls on interest income on loans to customers, while in interest expense prevailing are interest payments on due to customers. Net income before tax to total assets ratio (ROA) totaled 2.25%, net income before tax to equity ratio (ROE) was 18.41% (table 6).
Net income before tax payment to total assets ratio (ROA) totaled 0.23%, net income before tax payment to own capital ratio (ROE) was 1.88%.
Net income before tax payment to total assets ratio (ROA) totaled (-24.06)%, net income before tax payment to own capital ratio (ROE) was (-1192.63)%.
The results of the banking sector in 2009 are waning, despite the tremendous support of several big banks, huge losses and negative equity have not been overcome.
In the global economic crisis banking system of Kazakhstan was one of the most affected in country's economy. Standard & Poor's attributes this to its structural weaknesses, which are due to the strong dependence on external financing, as well as high-risk concentration (including the connection with significant risk of some major banks in foreign loans), weak risk management, a significant share of unhedged loans and deposits denominated in dollars, coupled with the ineffectiveness of measures taken by regulatory authorities, as well as the rapid growth of banks over the last decade. The seriousness of these problems, evidenced by recent defaults of four Kazakhstany credit institutions, including two of the top four systemically important banks - JSC BTA Bank and Alliance Bank. At stake are in default of BTA Bank, Alliance Bank, JSC Temirbank and Astana Finance "accounts for about one-third of total outstanding loans of the banking system, and their reporting rates of gross problematic assets (GPAs) and loan losses on settlements of Financial Institutions’ Association of Kazakhstan will be significantly higher than the average for the system.
In terms of Financial Institutions’ Association of Kazakhstan in the next few years the banking sector in Kazakhstan will be subjected to risks associated with the quality of assets and refinancing. Even if conditions improve, and economic growth resumes, banks can not quickly cope with the problems caused by their aggressive expansion in the lending market in the recent past. 
CHAPTER III. PROBLEMS AND PERSPECTIVES OF DEVELOPMENT OF
BANKING SYSTEM OF THE REPUBLIC OF KAZAKHSTAN
The crisis of the world financial system which has begun in 2007, has negatively affected the development of financial sector of Kazakhstan. Most painfully it was reflected in bank system of the country.
Following negative tendencies have started to be shown:
- decrease in possibilities of domestic banks to involve external financial resources lead a reduction of volumes of crediting of internal economy;
- decrease in rates of growth of actives and reduction of volumes of capitalization of banks;
- were problems with repayment of external obligations.
Each of the listed factors is in itself important and, anyhow, influences functioning of two-tier banks. But their set leads to system failures and threatens effective work of financial sector as a whole. Therefore the measures accepted by the Government, National bank and Financial Supervision Agency of RK on their elimination became paramount steps on overcoming of the crisis phenomena in national economy. 
According to the majority of bank experts, officially beginning of financial crisis in Kazakhstan it is necessary to consider the September, 2007. Throughout 2008 decrease in indicators of bank sector, in comparison with the previous periods was more than obvious. After considerable growth of crediting in 2006-2007, in 2008 rates of crediting have decreased more than in 2 times. But problems with a credit portfolio in first half of 2008 weren't such obvious yet. For June, 1st, 2008 the share of hopeless credits were 1,65 %, against 0,7 % for June, 1st, 2007.
By that moment in the USA mortgage crisis has already burst, and the wave of shortage of liquidity has covered all developed and emerging markets. In Kazakhstan during this moment was observed the acute shortage of funding. So, from August, 2007 till February, 2008 index Kazprime reflecting the rate of interbank credits, has risen from 6,5 till 12,4 % that testifies to increase in demand at money resources and falling the offer.
It is necessary to notice that as the most part of loans has been given out in 2006-2007 also the most part of loans is necessary for this period. Mortgage crisis in America and deficiency of liquidity in the world have led that banks couldn't obtain external loans in sufficient volume any more against decreasing volumes of crediting.
By this time reports of the international rating agencies draw not iridescent prospect for the Kazakhstan banks. So, Moody’s notices that increase of rates in the international debt markets for the long period can complicate refinancing for the Kazakhstan banks involving means from abroad. Agency Standard and Poor’s passed an opinion for a long time fears of steady growth of external loans of Kazakhstan banks. By estimations of S&P sounded in the beginning of 2008, the next 12 months on the refinancing purpose to the Kazakhstan banks will be required 3 bln. dollars quarterly, and 70 % of refinanced obligations will make the syndicated loans.
Having problems with a credit portfolio and practically having lost of the operative income, under external obligations the largest banks of the country "have arrived" to margin call. In I quarter of 2007 the external debt of republic at the expense of growth of external loans of a private sector has increased up to 95,7 % of GDP. Experts have unanimously remembered that the Kazakhstan bank system – unique system which borrowed means in such quantity. As much as possible external debt of commercial banks of the country has reached 46 billion dollars.
In the second half of the year 2008 index Kazprime has fallen on former level, but hasn't relieved the Kazakhstan economy and bank system of larger shock – the second wave of crisis which was already characterized not only local problems of banks, and pressure of their external debts upon all economy of Kazakhstan.
Expecting such course of events, the government in November, 2008 has suggested to generate monetary "pillow" and to help backbone banks with volume of 5 bln. dollars by time occurrence in structure of their share capital. Technically the scheme looked so: banks let out additional volume of shares which the government through the authorized operator fund Samruk-Kazyna redeems for 5 bln. dollars, in the list of "happy" recipient of public funds are six banks among which were Kazkommertsbank, BTA, Halyk, Alliance, CenterCredit and АTF have entered. In aggregate, on all above-stated banks financing was necessary over 80 % of not raw sector of national economy.
Subsequently, because of support from the parent companies, АТF and CenterCredit haven't resorted to the help of the state. The remained distances the oral consent. According to the governmental plan, in each of four banks the state share in a share capital will be 25 %. Occurrence process should occupy no more than 2-3 months.
The external debt of domestic bank sector has decreased for the end of 2008 to 39 billion dollars. From February, 2nd government session where were considered its joint actions with National bank and FSA on acquisition of shares of joint-stock company BТА bank and joint-stock company Alliance bank has taken place. With a view of maintenance of stability and safety of bank system the government has established control at the above-stated financial institutions on personal for each of banks scenarios. The chairman of board of directors of joint-stock company BТА bank Muhtar Abljazov and the first deputy of the chairman of the board of joint-stock company BТА bank Zhaksylyk Zharimbetov were discharges of performance of official duties by FSA decision, in connection with a recognition of their actions not corresponding to interests of investors and creditors of bank and current legislation requirements. The chief shareholder of bank Alliance – Financial corporation "Seimar Alliance"– has sold 76 % of common shares belonging to it to Fund Samruk-Kazyna for 100 tenge.
On February, 4th National bank of RK made devaluation of national currency on 25 % with the established corridor 150 tenge per dollar, plus-minus 5 tenge. One day later also was reduction of refinancing rates from 10 till 9,5 %. Government "occurrence" in a financial position of two banks considerably becomes more active.
In March within the limits of a program government aid to banks the minimum reserve requirements decreased from 2 till 1,5 % on internal obligations and from 3 till 2,5 % on other obligations that allows to give liquidity to bank system at a rate of 50 bln. tenge. And on March, 27th, 2009 placing of 20,91 % of shares of joint-stock company Halyk Bank of Kazakhstan for the sum 27 bln. tenge in Fund Samruk-Kazyna has come to the end.
By April, 1st the sum of an external debt of banks was decreased up to 35 bln dollars. Simultaneously FSA has already considers possibility of re-structuring of obligations of some large banks.
The Alliance bank was the first which declared about re-structuring. On April, 13th the bank management officially declared impossibility of repayment of the debts under internal and external loans. The debts total sum is defined in 4,5 billion dollars. Agency Standard and Poor’s has established credit ratings of the counterpart of bank on a mark "SD" – a selective default. The estimation was based on the payment admission on one of financial obligations. Fitch Ratings has lowered a long-term rating of a default of the emitter bank from level "CCC" to "RD" (the limited default).
A bit later, on April, 20th, 2009, BТА bank declared about stay of payments on the basic debt to the creditors and about plans on re-structuring of external debts of bank. Agency S&P has decreased long-term and short-term credit ratings of BТА bank from "CC/C" till "D" (default). Fitch Ratings also has decreased ratings of BТА bank from "СС" till "RD".
So started the first in the history of Kazakhstan process of re-structuring of banks external debts. It is necessary to notice that the Kazakhstan experience in this question was specific enough as in the world community before a problem with banks solved different ways. The most popular decision in the western practice was to divide banks on "bad" and "good". This scheme was also used in last decision of problems with banks in Iceland and the Baltic countries in 2008. The similar way of re-structuring provided division of all shares on "bad" and "good". Further was created a uniform bank for "toxic actives" or uniform bank for "good actives". The Kazakhstan experience had differences and became in some measure axiomatic.
The latest (on November, 23rd, 2009) which declared about the re-structuring was Temirbank. Temir couldn't make payment on November, 6th, 2009 for the sum 5,8 bln. tenge, and also on November, 9th, 2009 for the sum 1,9 bln. tenge to the main shareholder BТА bank. Also Temir Capital B.V. couldn't pay compensation for the 23,6 million dollars sum, subject to payment on November, 23rd, 2009 under the senior bonds.
And in the meantime the Alliance bank has already signed the agreement with committee of creditors. In the Alliance agreement were contained five options for creditors and was registered the future corporate structure of bank with the mechanism of realization of re-structuring of debts. The given signing any more didn't leave doubts in successful procedure of re-structuring of debts of Alliance bank.
It is necessary to note that Alliance and BТА in structure of external obligations great volume of debts has had on such credit product as the trading financing, having more difficult structure, rather than the usual syndicated loan. Aggravated a situation the fact that trading financing with participation of export-credit agencies occupied a considerable part in a credit portfolio especially of BТА.
Thus, banks have already to answer for obligations not private foreign company, but the state foreign company that gave to re-structuring process political color.
Being in process of re-structuring in 2009, BТА bank the first from problem banks which declared about potential occurrence of the strategic partner in the capital. Till nowadays it is the Sberbank of Russia. By this time the Kazakhstan none-bank financial organization Astana-Finance has already declared a default.
On the end of the first half of the year 2009 the debt of BТА bank has been 2,5 trillion tenge, Halyk bank – 988 bln. tenge, АTF bank – 859 bln. tenge and Alliance bank – 786 bln. tenge. For five months 2009 losses of all Kazakhstan banks have exceeded 2 trillion tenge.
On September, 7th, 2009 BТА bank offered creditors four variants of re-structuring of the debts the total amount of which was 12 billion dollars. According to the first variant, it is offered to creditors to redeem a debt on 1 billion dollars for cash with discount of 82,25 %. The second variant provided prolongation of debts for seven years with discount of 60 % and decrease in the rate of compensation with a five years' delay. In the third variant debt prolongation for fifteen years without discount, but with decrease in the rate of compensation with a ten years' delay was offered. The fourth variant included an exchange of debts for shares with 80 % discount. The bank intended to re-structure 10,3 billion dollars debts and to reduce their total amount to 8,2 billion dollars. However creditors suggest to write off only 4,9 billion dollars debt against the sum offered earlier by bank. According to developed by program bank, creditors have been divided into the senior package which included three options, and on younger, including two options.
The Alliance bank has given to creditors on a choice five options. The first option – the repayment for cash money with discount at a rate of 77,5 %. The second meant seven-year prolongation with discount of 50 % on the decreased interest rate, with amortization of the basic debt upon termination of 4 year preferential periods. The third option – payment of debts face value, but in 7 years of a preferential period during the following 10 years. The fourth option included debt payment at a face-value within 13 years after 10 years of a preferential period. The fifth option – converting of debts of creditors in a bank share from 75 to 80 %.
Re-structuring of Temirbank was more simple because the portfolio of obligations was small.
In last months of 2009 proceeding reduction of a share of standard credits and growth hopeless, and also growth of expenses on formation of provisions became a principal cause of deterioration of the basic indicators of bank system. Such tendency, according to experts, obviously doesn't testify the recover of bank sector of the country. However news about successful re-structuring of the largest banks install optimistic hopes. Many bank analysts believe that Alliance bank, and BТА bank can successfully spend re-structuring, and remains to only a few time before end of this process.
On the end of 2009 the external debt continues to make 39 billion dollars, and level of problem credits in a cumulative portfolio exceeds 30%. Banks, in view of closing of external sources of funding, were reoriented on home market. From the beginning of 2009year growth of depositary base in spite of the fact that in all 2009 bank sector of RK still uses mistrust from rating agencies is observed.
On March, 30th, 2010 the first about re-structuring end declared Alliance bank. As a result of process the bank has written off almost 3,5 billion dollars debts, the volume of obligations was reduced from 4,5 billion dollars till 1,08 billion dollars. As a result the structure of shareholders has changed also. So, 67 % of bank shares are at fund Samruk-Kazyna, 33 % – at creditors who are distributed between two thousand the minority shareholders any of which has no share more than 3 % of shares.
Already on July, 1st Temirbank declares that has executed all necessary payments for end of re-structuring of debts. As a result the bank has reduced the debts almost twice, from 1,4 billion dollars till 700 million dollars, and state fund Samruk-Kazyna – 79,9 % became its main shareholder. 20% more of shares remained with creditors, and an order of 0,1 % – at former shareholders.
The last, on September, 1st, 2010, re-structuring process has finished BТА bank. By its results the bank debt was reduced from 12,2 to 4,4 billion dollars.
After re-structuring creditors became shareholders of bank, and on their share 18,5 % of a share capital are coming. Fund Samruk-Kazyna is the basic shareholder owning others of 81,48 % of a share capital of bank. On a share of monitaries 0,02 % of shares are coming.
As experts now ascertain, the Kazakhstan bank system has sustained the crisis, and a sharp phase is behind. Many banks have already developed and adhere to new more conservative strategy of development. However the bank sector is still deprived a possibility of high-grade carry out of the basic function – to finance of economy. Shortage of reliable borrowers is felt in each bank. In spite of the fact that the majority of banks predict increase in a credit portfolio at 5-10 % till the end of the year, upon their loan portfolio continues to decrease. 
Early to say that world financial crisis is finished also it became irreversible. Risks still remain, and Kazakhstan as the part of world economic system, also can be subject to repeated waves of this phenomenon.
At the same time the experience developed in the country, shows, it is impossible what to relax and it is necessary to undertake the preventive measures, capable to protect a country financial system henceforth.
"The Concept of development of financial sector of Republic Kazakhstan during the post crisis period" confirmed by the Decree of the President on February, 1st, 2010 is one of such measures.
All perspective directions of development of financial sector are in detail enough registered in the given document on the near future.
As a whole, the Concept solves following problems:
- increase of stability of financial sector;
- creation of conditions on a non-admission of lacks, factors of instability and the phenomena which have been found out during current financial and economic crisis;
- stimulation of investment activity during the post crisis period as tool of realization of macroeconomic decisions;
- trust strengthening to financial sector of the country both from investors, and from consumers of financial services.
Within the limits of the decision of a task in view the prospect of development of financial sector of the country will be connected with use, both internal resources of economy, and external loan. Thus the priority will be given to the first making.
Besides, the role of the state regarding supervision and regulation over a financial system will amplify. It is connected so that at early stages to reveal, prevent and overcome system risks and their displays. From the state procedures on maintenance of a transparency of the activity which is carried out by the financial organizations, protection of investors and consumers of financial services will be carried out also.
Priorities in post crisis development of financial sector of Kazakhstan become use of institute of state-private partnership as the basic mechanism of financing of development of national economy.
In whole, in Kazakhstan great attention is taken away to perfection of the financial system. It is defensible, as the financial system is a basis of development of national economy without which is inconceivable the further advancement of social development of the country. 
During the work following conclusions have been made.
1. The concept of bank and bank system was defined.
Bank - concept is ancient and its display has been connected with occurrence of thought on exchange of money, about granting of money on credit, about centralization of another's money in the hands. The word literal translation "banko" means a word "bench" where operations with money were made.
The bank system is a wide concept covering all parties of creation and development of banks, their functions and operations on the basis of the bank legislation. The bank system differs as domestic (national), regional and world. On the basis of bank system there are conventional functional signs and principles without which functioning of the bank is impossible. The bank system in each country develops in interrelations with its economy, a direction of a society and acts as an important element in management of social and economic development of the country. The bank system, including the central bank, business banks of the second and third level, in all countries has the structure, specific features in separate operations, but is based on the conventional laws and requirements in banking.
2. Research of structure.
In the Republic of Kazakhstan the bank system is two-tired.
3. Definition of current basic problems.
• decrease in possibilities of domestic banks to involve external financial resources, hence, there was a reduction of volumes of crediting of internal economy;
• decrease in rates of growth of actives and reduction of volumes of capitalization of banks;
• were problems with repayment of external obligations.
At present, the bank system is an important link of domestic economy. Owing considerable accumulation of money resources, banks can make considerable impact on a rate of national currency, and on inflow of money in treasury, by operations with the state securities.
In the conditions of market economy the market of loan capitals represents itself as the original pump which is pumping out temporarily free financial resources from one spheres of economic activities and on them in other, providing, in particular, higher profit. For this reason one of the major problems of state regulation of bank system — rational definition of economic priorities and stimulation of attraction of credit resources in those branches or the regions, the accelerated development of which is objectively necessary from a position of national interests, instead of exclusively current benefit of separate subjects of managing. Process of concentration of the capital is a necessary condition of stability development of economy and the priority purpose of any subject of managing.
With occurrence in the country of banking establishments of non-state type - the commercial banks, organized in the form of joint-stock companies, functioning on commercial principles, the beginning of other model of the organization of the credit business, which distinctive feature - the organization of credit business in frameworks and on the basis of involved with banks in the form of deposits of resources is necessary. Thereby basically possibility of unlimited granting of credits as it practiced the state specialized banks, including on a gratuitous basis, for a covering of financial breaks and mismanagement is excluded. The organization of credit business on commercial the beginnings has led to working out of other approaches to a technique and criteria of crediting, revision of traditional installations.
Studying and generalization of world experience in bank management studying of classical tools and development of tools of the bank management comprehensible in republic, are actual today, undoubtedly, professional level of bankers grows in republic, more and more experts seize new tools of the financial market, managers of banks more actively study ways of transition from traditional to system approaches of management of bank activity, new systems of indicators for monitoring of a financial condition of bank take root, classical tools of management of actives and passives accustom, experience of an establishment of limits for banks - partners with application of various restrictions is studied. Ways of a real estimation of profitableness imitation items of expenditure and the general ways of rationalization of incomes and expenses take root.
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