IDEAS home Printed from
   My bibliography  Save this article

From Stormy Expansion to Riding out the Storm: Banking Development in Kazakhstan




Pushed by expanding income (on the back of rising oil prices) and by rapid external debt accumulation, the Kazakh banking sector featured one of the most dynamic credit booms in CESEE until 2007. Following the U.S. subprime crisis, banks’ access to external funding plummeted and credit expansion ground to zero. The global financial and economic crisis that broke out in late 2008 forced credit institutions to drive down their external debt. Moreover, the collapse of the oil price in late 2008 and the devaluation of the Kazakh tenge in February 2009 cut domestic demand, liquidity and solvency. The share of nonperforming loans (NPLs) skyrocketed from 7% at end-2008 to 38% a year later. Large losses stemming from real estate exposure (burst of the housing bubble), lending to dubious partners and fraud played a role. Loan loss provisions were sharply ramped up, profitability was all but wiped out in 2008 and hefty losses incurred in 2009 (ROA at end-2009: –24%). Sector capital even turned negative. The authorities’ crisis response measures included the nationalization of two of the country’s largest banks and the recapitalization of two others (together accounting for twothirds of banking sector assets). The two nationalized banks then defaulted on their high foreign liabilities and initiated debt restructuring negotiations that are currently in the process of completion, promising steep haircuts for creditors, which should reduce the sector’s debt burden and positively impact its capital. Very high credit risk and a weak institutional environment weigh on investor sentiment. But there are also important shock-absorbing factors: the (oil price-driven) recovery of the real economy, depositor confidence, record-level official foreign currency reserves, the record-level oil stabilization fund and modest public debt.

Suggested Citation

  • Stephan Barisitz & Mathias Lahnsteiner, 2010. "From Stormy Expansion to Riding out the Storm: Banking Development in Kazakhstan," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 19, pages 61-71.
  • Handle: RePEc:onb:oenbfs:y:2010:i:19:b:1

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. William B. Francis & Matthew Osborne, 2010. "On the Behavior and Determinants of Risk‐Based Capital Ratios: Revisiting the Evidence from UK Banking Institutions," International Review of Finance, International Review of Finance Ltd., vol. 10(4), pages 485-518, December.
    2. Markus Leibrecht & Martin Schneider, 2006. "AQM-06: The Macro economic Model of the OeNB," Working Papers 132, Oesterreichische Nationalbank (Austrian Central Bank).
    3. Ray Barrell & E Philip Davis & Tatiana Fic & Dawn Holland & Simon Kirby & Iana Liadze, 2009. "Optimal Regulation of Bank Capital and Liquidity: How to Calibrate New International Standards," Occasional Papers 38, Financial Services Authority.
    4. Stefan Kerbl & Michael Sigmund, 2009. "Quantifying the Cyclicality of Regulatory Capital – First Evidence from Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 18, pages 93-103.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:onb:oenbfs:y:2010:i:19:b:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stefan W. Schmitz). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.