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Eurasia
July 13, 2018 www.intellinews.com I Page 21
Kazakhstan approves new law on stricter controls over capital outflow from local banks
bne IntelliNews
Kazakh President Nursultan Nazarbayev last week signed off on a law setting stricter controls over the outflow of capital from local banks. The law came into force on the same day.
Capital flight has been a long-standing concern, but the Kazakh authorities have failed to properly address the issue. However, last year’s revelations about the offshore ventures of Kazakh banking sector-affiliated oligarchs and speculation that such capital flight might be behind a large share of the bad loans faced by Kazakhstan's Kazkom- mertsbank (KKB) appear to have pushed the government into action.
Nazarbayev, in his January address this year, demanded greater controls be placed on financial institutions. In February, Kazakhstan approved a draft law on foreign currency transaction regula- tions aimed at “expanding the scope of cross- border foreign currency transactions”, tightening regulations on foreign currency operations involv- ing capital outflow and “recognising offices of international organisations as residents”, among a number of other goals.
National Bank chairman Daniyar Akishev has de- scribed the new legislation as a way to grant the central bank greater control over currency flows. The law is meant to prevent a list of transactions
seen as forms of improper capital withdrawal. The regulatory powers over the system will be shared between the central bank and the Com- mittee For State Revenue.
Akishev has noted the rules would have no bear- ing on regular citizens since “liberal principles of currency regulation will remain in force.”
The country’s banking sector – which has still
not fully recovered from the 2008-09 financial crisis – has been hit by a rise in bad loans since the slump in world crude oil prices and the tenge free-float in 2015, which has depressed the en- tire Kazakh economy. Its largest banks have been bailed out, which included a merger deal between the banks KKB and Halyk.
S&P Global Ratings on June 26 raised its long-term issuer credit rating on KKB to 'BB' from 'B+' and with positive implications removed the rating from CreditWatch where the bank was placed in Decem- ber 2017. The announcement was made after Halyk officially received approval to go ahead with finalis- ing the merger. KKB, formerly the largest lender by assets, was bought out by Halyk last year.
Nevertheless, a number of small banks, including Qazaq Banki and Astana Bank, received no state support and have been continuously lambasted by Nazarbayev for their poor performance.