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Kazakhstan Government bails out two major banks: BTA Bank and Alliance Bank

WASHINGTON. February 16. KAZINFORM Among 36 banks which form Kazakhstans banking sector, 6 major banks play a critical role in its financial system. These so-called system forming banks are Kazkommertsbank, Halyk Bank, BTA Bank, Alliance Bank, ATF Bank and Bank Center Credit. The latter two have major foreign shareholders capable of supporting the banks until the recovery of the financial market. All in all, the above 6 banks have been financing more than 80% of the Kazakh non-oil sector, providing loans to small and medium businesses and holding the savings of the majority of population. That is why the banks are considered to be the main guarantors of stability in financial system and banking sector of Kazakhstan. Chronicle of events: As a result of the world liquidity crisis in 2008 the Government of Kazakhstan implemented a number of projects aimed at increasing the banking stability. A huge effort has been in place ever since to support 6 major system forming banks On October 24, 2008 the Government drafted a comprehensive plan to support and further increase their capitalization, maintain financial sustainability and liquidity. Samruk-Kazyna National Welfare Fund initiated additional capitalization for four major banks: BTA Bank, Kazkommertsbank, Halyk Bank and Alliance Bank. The government aid was conditioned to be used for: -Increasing reserves - Increasing own capital - Financing SMEs - Guaranteeing shareholders rights to purchase shares back within 4 years On November 28, 2008 Samruk-Kazyna signed the Memorandum of Understanding with the 4 banks. The Memorandum has set the framework for separate agreements with shareholders as well as terms and scope of Samruk-Kazynas involvement in the banks capital Kazkommertsbank and Halyk Bank fully complied with their obligations under the Memorandum. BTA Bank and Alliance Bank situation was somewhat complicated as their major shareholders for different reasons couldnt or failed to fulfill the voluntarily taken obligations on strengthening guarantees of banks sustainability In these circumstances the Government decided to take BTA Bank and Alliance Bank under its control On February 2, 2009 at the joint meeting of Government, National Bank and Agency for Financial Supervision, the process of BTA and Alliance acquisition was discussed and a joint statement released. By the decision of the Financial Supervision Agency, BTA Board Chairman Mr. Ablyazov and First Deputy Chairman Mr. Zharimbetov were dismissed on the charges of violating the interests of depositors and creditors of the Bank as well as legal violations The same day Samruk-Kazyna Board of Directors under the chairmanship of Prime Minister Karim Massimov decided to buy 78,14% of BTA Bank and 76% of Alliance Bank Government control over these two major banks will ensure their smooth operation; serve the best interests of depositors and creditors as well as national economic and security interests. Most importantly, the Governments role as a guarantor will ensure safety of deposits held in these banks Both banks play an important role in the domestic financial system. BTA Bank itself is a source of more than 7,000 jobs for the economy. Its share on domestic credit market is over 26%, while Alliance Bank has more than 8%. Obviously, the Government could not allow the default of these banks as it could have sent shock waves throughout Kazakhstans banking and financial system. The Government used separate approaches on each bank. Temporary governmental control over both banks has nothing to do with nationalization. According to the current legislation, it was a temporary measure and the Government will immediately sell the shares when the market recovers. Today, Samruk-Kazyna is in talks with potential strategic investors to sell part of its stake in BTA Bank. Preliminary talks are being held with the Russian Saving Bank. Governments control over Alliance Bank was initiated by the banks own shareholders and by today Samruk-Kazyna has transferred to the banks account more than $200 mln. The Government bailout of two banks is in full compliance with Kazakhstans legislation. It was an inevitable emergency action in given circumstances and does not in any way hinder the Governments long-standing policy of promoting liberal market economy. Mr. Mukhtar Ablyazov, BTA Banks former Chairman, has been actively seeking to disavow the bailout plan, politicize the Governments actions and put them in a negative context under the label of nationalization. The Government, however, has no intention to succumb to unreasonable and biased pressure and sacrifice the well-weighed stabilization plan designed for saving jobs and deposits as well as finance the economy in uneasy times, Kazinform refers to the press service of the Kazakh embassy in the USA,


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