As the former
governor of the National Bank of Kazakhstan,
you truly have seen the local banking sector
grow, and played a considerable part in its
development. With this in mind, could you
give our readers a brief introduction into
the Kazakh banking sector?
Recently, I have been invited to the celebration
of the 300-years anniversary of the Bank
of London. One should compare those 300
years with 10 years history of the banking
system here in Kazakhstan. While talking
about the development of the economy of
Kazakhstan we feel more comfortable speaking
about the development of the banking sector.
What did we inherit from the Soviet Union?
There were four state banks, which were
serving the whole economy of the country.
However, those banks used to be subsidiaries
of the central banks that were located in
Moscow.
During the times of Mr. Gorbachev, when
the liberalization of the economy started,
it was decided to give the permission for
the establishment of private banking institutes.
And in 1990 there were four private banks
in Kazakhstan. Banking activity used to
be regulated from Moscow. There were the
Central bank or the State Bank of the USSR,
the Agricultural bank, Industrial and Construction
bank and also Social Credits bank (providing
loans to non-industrial sector). By 1993
the banking reform was conducted in Kazakhstan.
As a result of this reform there were only
two banks that were fully controlled by
the government: the Central bank, which
is currently headed by Mr. Marchenko, and
Halyk Savings bank (People's Savings bank).
A little bit later there was an EXIM (Export
and Import) bank established, which is most
likely going to be liquidated soon. In the
year before last year the Bank of Development
has been created. All the other banks are
non-state, private banks.
In 1993 we used to have 243 banks. These
were very small banks. None of them have
been regulated properly. They were mostly
dealing with lending in insignificant amounts.
The above situation worsened with the crash
of the Soviet Union. When the industrial
links were broken, we all became independent
states. And even though we managed to come
to some agreements in terms of politics,
by means of signing treaties and other documents
through certain mechanisms in the framework
of CIS, there was no agreement in the field
of finance. It means that the situation
was as follows. Only three Baltic countries
separated. Other countries were still in
a so-called Rouble zone. And we got twelve
issuing centres. All of them were issuing
the Russian Rouble. All that brought us
to the point where all the countries were
solving their problems and the inflation
has become very high. After that, certain
countries started to introduce national
currencies. There were three countries staying
in the Rouble zone until the middle of 1990.
These were Russia, Uzbekistan and Kazakhstan.
But even those three countries could not
come to the agreement. In June 1993, Russia
introduced their own national currency.
And on November 15th, 1993, Kazakhstan introduced
its national currency, Tenge. From that
very date onwards, we may speak about the
conscious development of the banking system
in our country. Kazakhstan received an opportunity
to regulate money aggregates by itself.
It could determine certain parameters of
the development of economy, and formulate
the standard budget. In case the inflation
in the country was high then that was the
result of the activity of the state itself.
I mean that we eliminated the import of
Russian inflation. By 1993, we have completed
the prices' liberalization. The state regulation
has been abandoned. We refused from the
system of fixed prices. With the implementation
of Tenge we determined our ratio to international
currencies. And the state, in particular,
the National bank obtained the opportunity
to regulate the rate either by means of
intervention or by means of buying out those
currencies.
In this environment also Kazkommertsbank
started to develop. Could you indicate to
our readers the links between the development
of Kazakhstan and upgrades of Kazkommertsbank?
In 1993, Kazkommertsbank used to be one
of the average level banks. There are certain
private banks in Kazakhstan that have been
created in 1990 and they had more time for
development. That was Turan bank, which
has been established at the basis of a state
bank, Industrial and Construction bank.
Formerly, there was an External Trade bank,
which has been reorganised into Alem Bank.
KRAMDS bank has developed very fast, but,
unfortunately, this will come to an end
soon. Kazkommertsbank has chosen a relatively
conservative policy from the very beginning.
From year to year it has been increasing
its assets. Our bank used to be very choosy
and strict in terms of its lending portfolio.
And gradually life has put all the banks
so that on the tenth year of existence of
our banking system Kazkommertsbank has become
the largest bank of the country. I do not
want to bother you with statistics, but
here, in our brochure, you can see the share
of Kazkommertsbank at different markets.
It is something in between 27% and 32%.
Nowadays, Kazkommertsbank is able to conduct
a relatively strict selection of staff members
at the labour market. We have created the
whole system of attracting specialists.
The main idea of this system is the career
growth of specialists within the structure
of the bank. We are not putting constrains
for spending for education. Implementation
of new banking products creates the demand
for special training. And perhaps we have
brought into life the principle, which says
that, the best investment is the investment
into people's education. Our staff members
are attending many training seminars both
abroad and in Kazakhstan. We have our special
training program in our bank, which is composed
according to a regional division. It means
that we get together our staff members from
our Southern, Eastern, Central Kazakhstan
subsidiaries and organise local seminars.
Credit and security portfolios are also
important To the Kazkommertsbank are also
very important its. I hope that you could
highlight to our readers their importance
to Kazkommertsbank?
Kazakhstan has a population of only 14,8
million people. Around half of them are
residing in rural areas, which are spread
over a huge territory. Besides, while flying
above Kazakhstan, he ? (God) distributed
mineral resources not carefully enough.
As a result those resources happened to
be at places with the most unfavourable
conditions to live. Oil is mostly concentrated
at the deserts areas with the very hard
climate. There is also oil on the South
of Kazakhstan, where the living conditions
are also very unfavourable and transport
links are not developed. Non-ferrous metals
are located in the Eastern and in the Central
parts of Kazakhstan. Certainly, it would
be better if we could find oil reservoirs
somewhere close to Almaty, because the climate
here is really pleasant to live in. If you
have ever been to those places, where oil
and gas enterprises located in Kazakhstan,
you could see that these are real deserts
and it is extremely difficult to stay there.
And the economy as a whole is not that big
for around 15 million people.
As of today thanks to Mr. Marchenko's efforts,
and I have actually started the process
in my times, we have 46 banks here in Kazakhstan.
Even this number is still too many for our
country. And the market is highly competitive.
Especially considering the fact that main
investments are coming to Kazakhstan from
outside, this is in the oil and gas sector,
and those are not credited inside the country.
Actually, Kazakhstan has not enough money.
That is why banks are mostly competing for
the big corporative business, for medium-
and small size business, for population's
deposits. Some time ago, Mr. Marchenko has
sworn that he would attract to the banks
more than 1 billion USD additionally and
then he would shave his beard. Recently,
he showed up without his beard.
Of course, due to their pervious experience
our citizens did not trust to the banking
sector and preferred to keep their savings
in different places at home. That was the
reason why in 2000 special legislative measures
have been taken to provide and maintain
the banking secrecy and banking guarantee.
We used to have about 15 various organizations
that had a right to inspect individuals'
accounts in the banks, cash flows at those
accounts. That has been changed and the
procedure has been arranged properly. It
was specified in which cases banks are allowed
to disclose the above information. And the
above legislative innovations have been
strengthened with the creation of the Fund
of Guaranteeing (Insuring) of Populations'
Deposits. All those steps brought us to
the positive output. There is some information
about the deposit base in our brochure.
According to these figures the growth of
deposits is impressive in all the banks.
And if, in 2000, we were at approximately
number eight among all the banks, nowadays
we are the leader in the field of individuals'
deposits. To my mind, the undertaken measure
played a positive role in making banks trustworthy
for the population. Also the state started
to publish its economic strategy in the
beginning of the year and to determine the
main parameters of the economy. National
Bank and the government publish the obligations
in terms of GDP growth, in terms of inflation,
in terms of averages rate of Tenge inflation
for the beginning and the end of the year.
Afterwards, the National Bank and the government
should keep at the level of those figures
that have been published at the beginning
of the year. This is a very good sign both
for real and banking sectors.
Moody's Investors Service assigned
a rating of Ba2 to the upcoming issue of
senior unsecured notes by Kazkommertz International
B.V. The notes are denominated in US$ and
are unconditionally and irrevocably guaranteed
by your bank. Could indicate the significance
and meaning of this?
On the tenth year of our activity we have
made the 10th syndicated loan. Recently, we
have allocated Eurobonds for the amount of
150 million dollars. For the first time these
are five years bonds. In the end of the year
2000, we have repaid the bonds for the amount
of 100 million dollars. Kazkommertsbank has
not made a default on any of its borrowings.
As you know we are driving the same car. The
bank will never get the rating, which is higher
than the country's one. This is the common
rule. That is why we are very much interested
in the growth of our country's rating and
to our mind the rating of Kazakhstan is underestimated
at the moment. The thing is that currently
Kazkommertsbank has no problems with the acceptance
of its guarantees by large American and European
banks. We have no problem with attracting
syndicated loans or in additional issuance
of bonds. However, there is a problem of price.
We have established correspondent and good
business relationships with the largest banks
of the world. We are known. We are trustworthy.
As you may see from our brochure - page with
the information about Euromoney - it acknowledged
us as the best Central Asian bank for few
years. That is why the rating of the country
as an indirect instrument is keeping us from
moving ahead. It means that it is not efficient
to build a business bank based on only corporative
relations with certain companies. |
That is why we
started to work with the population very actively.
We are participating in a number of programs,
particularly in those of the Asian and European
Development banks, on the development of medium
and small size businesses. It means that we
are the agent of those banks. Certainly, there
is a conflict of interests here, since we
are trying to lend that sector by our own
money as well as by the money, provided by
EBRD and ADB. This comes from the situation
when Mr. Marchenko is to solve the problem
of protecting the Kazakhstani financial market.
Considerable cash flows are coming to the
country. Mr. Marchenko sterilises a part of
that cash flow and buys a part of it by himself.
And banks are afraid of unreasonable strengthening
of Tenge towards Dollar. I am always speaking
in Dollar terms because of a very simple reason.
Formerly we used to have quotes towards the
Dollar and towards the Russian Rouble. After
1996, when the devaluation of Rouble has taken
place in Russia, we are not using Rouble for
quoting. Nowadays we are working with Dollars
only and using cross rate the National Bank
quotes all the other currencies of the world.
It has been said, "Kazkommertsbank
is still relatively small, has a potentially
volatile funding base and certain concentrations
in the loan book". If you consider this,
are there opportunities for foreign partners/investors
to link up with the Bank (as was done by ABN
Amro), and was this the reason behind the
plan to merge with Halyk Savings Bank of Kazakhstan?
At the moment we do not have any projects
like that. However, last year we have received
a very essential technical assistance from
Deloitte & Touche particularly in the
field of retail banking. Currently we are
restructuring our strategy. Today, we have
launched a very important seminar, in the
framework of which we have invited managers,
who are dealing with the retail banking, to
Almaty. They will have a very intensive five
days training.
As for the project with Halyk Savings bank,
the situation was as follows. That project,
due to which we were planning to obtain
the shares of HSBK, has been really important
for us. At the second stage we planned to
conduct the merge of our two banks. As a
result, we would have received a large network
for the retail banking, which has been inherited
by HSNK from the National Savings bank.
However, we did care about the price of
this package. We have come up to the reasonable
price during the trade negotiations and
then we left the negotiations, since we
considered that I would be much cheaper
for us to build our own network. We have
got the data of the serious survey conducted
among all the layers of population in terms
of their need in banking services. It means
that we know the needs of retired people,
the needs of budget institutions employees,
the needs of the small and medium size businesses
and VIP people. Now, we are aware of the
demands and we restructure our retail-banking
network accordingly. We restructure even
the internal architecture of our subsidiaries.
We actively train our personnel. I believe
that we will get the output of all these
activities by the end of this year. Last
year we have got the biggest profit among
all the banks, which is about 34 million
dollars. For the first quarter of this year
we received more than 10.3 million dollars.
I believe that we have chosen the right
way and our profit will grow even more in
the current year.
In recent years, the possibility of further
monetary integration in the region has come
up. How do you see this happening, and what
will the effects be on the operations of Kazakh
banks, such as Kazkommertsbank?
Due to the process of globalisation CIS countries
including Kazakhstan will most likely introduce
the joint currency at some stage. Nobody knows,
maybe in 50 years the whole world will use
one currency and the World Bank as well as
IMF will have a lot to do. In particular,
Bretton Wood's agreements will probably be
revised. Probably humankind will reject the
golden equivalent. In anyway, integration
processes will be developing.
We had a very serious claim to IMF, since
experts that are working there are very
smart and well educated but they are not
able to predict financial crisis in various
counties. They like teaching others, but
they never give realistic recommendations
on how to overcome the crisis. In global
scale one country's crisis is dangerous
for other countries. The Crisis of 1998
in South - East Asia and in Russia could
at least have had fewer consequences, if
not prevented. Maybe you already know that
at our stage of development we are not making
any loans from IMF. We have fully repaid
our debts. And though we have a right for
certain borrowings from SDR we are not going
to use them. We have enough gold and currency
reserves. At the moment Mr. Marchenko is
facing the problem of currency operations'
liberalisation and given the right of exporting
the capital banks of Kazakhstan will start
to actively enter Central Asian countries.
We are able to credit some objects in Kyrgystan,
Uzbekistan, Tajikistan. We have our subsidiary
in Moscow, Russia. Formerly, only Russian
banks were coming here to open their branches.
Our bank has its branch over there. We have
established three our subsidiaries in Holland:
Kazkommerts International B.V., Kazkommerts
Capital 2 B.V. and Kazkommerts Finance 2
B.V. We have bought a bank in Kyrgystan.
We are planning to make it the biggest bank
in terms of capital by the end of this year.
Both of these countries are on the edge
of privatisation of very large objects (enterprises).
We are intended to participate in this process
in particular on those objects that will
be selling products to our country.
Your background is undeniably very impressive,
certainly within the banking sector, where
you had a lot of influence as the former
governor of the National Bank. Now you are
working at the Kazkommertsbank. Could you
indicate to our readers how your previous
experiences are helping you at your current
position?
I do not know if there is such an expression
in English language, but I was a sort of
"painted over the wall". During
the period of 1994-1995, we closed about
150 banks. Some of them where closed because
of bridging prudential norms. I was blamed
in being against the private property in
banking sector. I was very much "kicked"
by both Kazakh and Russian language mass
media. That was because when I came to work
at the National Bank I was saying that Kazakhstan
is the country of "non-frightened"
bankers, since there have been no regulation
at all. Everybody was drunkard with the
democracy. It was considered that they could
do whatever they want. And we had to quickly
introduce the civilised methods of regulating
the banking activity. We raised the issue
of requirements on chartered capital. In
those cases when banks were not meeting
the prudential requirements, we took away
their licences. Prudential requirements
on chartered capital obliged the banks to
merge. We forced them to introduce international
accounting standards. Naturally, the bankers
who used to enjoy their freedom did not
like that. Having retired I started to work
as a senator. I was the only senator who
has rejected the mandate voluntarily. And
at that time I received an offer from Kazkommertsbank.
For more than three years I work here as
a Chairman of the Board of Directors. And
I believe that the background, which I have
got in the banking sector, are helpful for
the bank and the main slogan of our bank
"We are together" is being brought
into life.
As an expert of the Kazakh banking sector,
you are obviously well informed and opinionated.
What then would you have a final message to
our readers about Kazakhstan and also about
Kazkommertsbank?
I would like to wish to the readers of your
magazine, which is a business magazine, that
their personal plans will become a reality.
As for the staff of the magazine, I would
like to note that I like very much you Internet
web site. This is a brilliant idea that has
a huge potential. And we are very grateful
to you that you decided to come to Kazakhstan
in order to compile a report about our country.
Unfortunately, there are many things, which
are not known about our country. People still
mix all these countries - Uzbekistan, Kyrgystan,
Kazakhstan, Tajikistan, etc. I have friends
working for HSBC. In their correspondence
with Singapore branch of HSBC they were asked
if the military campaign is taking place here.
This will not last forever. We are only ten
years old. In 20 or 30 years from now Kazakhstan
will take its proper place in the world.
Our President from the very beginning acted
as an integrator for the countries of this
region. And I think we are not far from
the moment when something like Euro will
appear in Central Asia. Probably, Russia
will also be included into such a unit as
well as other countries of the former Soviet
Union. This way will be passed by our countries
much faster than by European countries,
because at least in the banking sector we
are studying very carefully the historical
experiences of Europe, United States. You
may evaluate the potential of new people,
who are working in our bank, since the average
age of them is approximately 32 years. And
these youngsters are growing very quickly.
I would like to note that 42 % of our bank's
revenue is non-interest revenue. That means
that we actively developing the system of
retail banking. However, there are problems
too. We have our own point of view in terms
of the policy of the executive power. We
have some disputable issues with the National
Bank. Although Mr. Marchenko considers me
as his teacher, we have disputes sometimes.
He used to occupy a middle level position
and got his education in United States.
I have promoted him to the position of my
deputy. We used to work together quite well,
but sometimes we have different opinions.
I would say that Kazkommertsbank has some
issues to be discussed with the banking
inspection authorities. However, those disputes
are constructive and useful for both sides.
That is because Kazkommertsbank is supporting
Mr. Marchenko in creating the open and transparent
banking system.
During the ten year period our banking sector
has made a good progress, because at the
beginning I managed to establish an independent
central bank. Soviet mentality presumes
that the government should order to the
central bank. I do not think that the process
of privatization has gone smoothly in Kazakhstan.
However, those mistakes seem to be inevitable
during some revolutionary changes. At the
moment we disagree with the government on
some of the issues of the budget policy.
The banking sector should be transparent
and is using international accounting standards.
The banking sector is far ahead of the economy
as a whole!
Nowadays, you will not be surprised if the
banker speaks English. Formerly it was a
problem for us to send our people abroad
for training, since though they were professionals,
they could not speak English. And I would
like to finalise my answer to your question
with the following phrase that I have heard
once in Germany in Bundesbank: "Germans
may believe and they may not believe in
God, but they do believe in Bundesbank".
I would like to wish that all Kazakhstani
people believe in and trust Kazkommertsbank.
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KAZAKHSTAN
V.I.P. INTERVIEWS 