Banking Risk Factors Highlighted
Banking Risk Factors Highlighted
Kazakstan’s banking sector may be the most successful in Central Asia, but it still has some areas of vulnerability. Economists identify the main areas as rising external liabilities, the disproportionate growth in mortgage lending, the risks pertaining to certain economic sectors, and a lack of transparency across the economy as a whole.
Richard Hainsworth, the director of the Global Rating Group, told a recent press conference that the main risk to the banks in Kazakstan is the lack of transparency in the economy and in business.
Economist Petr Svoik explained to NBCentralAsia that because the banks remain reliant on powerful political and economic groupings and on mineral resource-based corporations, this impedes them in the search for maximum transparency.
Banking expert Igor Osipov believes it is for the banks to put their own house in order, as the issue of transparency does not only apply to the wider economy. He noted that the government’s financial supervisor is trying to secure a commitment to greater transparency from the banks, but so far the agreement has only been signed by 16 out of 34 banks, and implemented in full by just one of them.
A different kind of risk is posed by the sharp rise in consumer credit, which has gone up 300 per cent in the last three years, while the banks’ capitalisation continues to fall. The experts say there are substantial risks attaching to the disproportionably high level of mortgage lending for homes.
Analysts also referred to the rise in speculation, as the banks borrow in Europe at low rates and then lend to domestic customers at higher rates of interest.
Osipov said all these risk factors need to be considered as Kazakstan makes preparations to join the World Trade Organisation, WTO, in 2007.
“When Kazakstan joins the WTO, foreign banks will come into the domestic market, bringing new technologies, cheaper lending and higher levels of service,” he said. “They could present a serious problem for Kazak banks.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
Richard Hainsworth, the director of the Global Rating Group, told a recent press conference that the main risk to the banks in Kazakstan is the lack of transparency in the economy and in business.
Economist Petr Svoik explained to NBCentralAsia that because the banks remain reliant on powerful political and economic groupings and on mineral resource-based corporations, this impedes them in the search for maximum transparency.
Banking expert Igor Osipov believes it is for the banks to put their own house in order, as the issue of transparency does not only apply to the wider economy. He noted that the government’s financial supervisor is trying to secure a commitment to greater transparency from the banks, but so far the agreement has only been signed by 16 out of 34 banks, and implemented in full by just one of them.
A different kind of risk is posed by the sharp rise in consumer credit, which has gone up 300 per cent in the last three years, while the banks’ capitalisation continues to fall. The experts say there are substantial risks attaching to the disproportionably high level of mortgage lending for homes.
Analysts also referred to the rise in speculation, as the banks borrow in Europe at low rates and then lend to domestic customers at higher rates of interest.
Osipov said all these risk factors need to be considered as Kazakstan makes preparations to join the World Trade Organisation, WTO, in 2007.
“When Kazakstan joins the WTO, foreign banks will come into the domestic market, bringing new technologies, cheaper lending and higher levels of service,” he said. “They could present a serious problem for Kazak banks.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
