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August 2, 2019 www.intellinews.com I Page 24
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Fitch Ratings says Kazakh banking sector may need more capital injections
Russia's MinFin to cut OFZ auctions for VEB issue
Fitch Ratings said in a note on July 31 that Kazakh banks' bad loans under IFRS 9 are “mostly well above their impaired loans under regulatory accounting” and at some medium-sized banks are so large relative to loss absorption capacity that these lenders may need fresh capital injections or other external support.
Fitch’s conclusions come after Kazakh authoritiesannounced there will be no more banking sector bailouts, following banking sector cleanups which started in 2017 and continued into this year. Fitch believes off-government balance sheet transactions, such as through the National Fund, could be used again to provide further government bank support if it were needed. However, the agency sees such state support as highly uncertain, which is reflected Fitch’s in “support rating floors of 'B-' for Fitch-rated medium-sized banks”.
Russia's Finance Ministry will limit the supply of federal OFZ ruble bonds by about RUB40bn until the end of 2019, due to the issue of a special ruble-denominated OFZ bond that is part of the re-capitalization scheme of state-controlled development bank Vnesheconombank (VEB).
As reported by bne IntelliNews, VEB will have part of its debt to the cen- tral bank covered by acquiring RUB212bn worth of newly issued OFZ at five times less the nominal value of RUB40bn, and swapping the OFZs for debt related to bailing out failed Svyaz Bank and Globex Bank.
The head of the debt department of the Finance Ministry told Reu- ters on August 1 that the limit for domestic issuance of OFZs in 2019 will be cut by RUB40bn, and not RUB212bn, as a result of the VEB support scheme.
Georgia’s currency, the lari, on August 1 slightly strengthened against the dollar, rising to 2.93 from 2.97, as the National Bank of Georgia (NBG) sold $32.8mn of $40mn offered to banks at an exchange auction.
The central bank announced on July 31 that it would sell up to $40mn as the exchange rate had reached a level “that might pose a risk to price stability” amid “the tourism-related shocks [caused by Russian sanctions in response to anti-Russia protests] and negative expectations”.
It also underscored that if the exchange rate then still negatively affected inflation, the NBG would “tighten monetary policy” as well.
Central bank intervention reverses weakening of Georgian lari