1. Banking system of the Republic of Kazakhstan
Budapest, April 2007

2. Main Pre-requisites for the Development of Banking Sector
Timely and efficient banking sector reform;
Solid legislative base;
Effective supervision;   
High internal competition;
Introduction of international management and control principles in banks .

3. Kazakhstan Banking Sector Reform Stages
First Stage ( ) :
Adoption of Statute “On Cooperation”; First cooperative banks;
Restructuring of specialized state branch banks.
Second Stage ( ) :
Extensive commercial banking sector formation and development;
Formation of the national banking legislation;
Adoption of two new statutes in April "On the National Bank of Republic of Kazakhstan" and "On Banks and Banking Activity in the Republic of Kazakhstan".
Third Stage (from November 1993):
Introduction of national currency – tenge, on November 15, 1993;
Division of function between National Bank of the Republic of Kazakhstan and Banking supervision;
Graduate transition to international banking regulation standards.

4. Transition to International Banking
Regulation Standards
1995 г. Banking sector reform, transition to market-oriented crediting of economy and formation of financial market, bank privatization .
1996 г. Transition to international principles (incl. Basel banking supervision principles) on adequacy of capital, quality of assets, quality of management, accounting.
гг. Introduction of consolidated banking supervision.
г. Introduction of international principles of corporate management and risk management. Independent audit of banks’ risk management practices.
гг. Strengthening of consolidated banking supervision and prudential regulation in accordance with the New Basel Accord on Capital. Establishment of the Credit Bureau .

5. Assets distribution in financing sector
As of January 1, 2007
Accumulatid pension funds - 10,1%
Professional
participants securities market – 1.9%
Insurance companys – 1.5%
Non - banks organizations - 3,8%
Mortgage companies
1,4%;
Banks 77,8%

6. The role of banks in economy

7. Share of banks assets to GDP in 2006

8. Dynamics of Changes in Number of Banks in Kazakhstan
As of January 1,2007 number of bank branches – 324,
Outlets – 1489,
Kazakh bank representative offices abroad - 22,
Foreign banks representative offices in Kazakhstan

9. Dynamics of changes of bank assets

10. Banks with foreign participation
share of foreign bank aggregated assets - 4%.
The main target is big corporate clients and trade finance. The largest foreign banks in Kazakhstan are:
ABN-AMRO – 11th position on the asset size ($816,1 mln.);
Citybank – 13th position ($657 mln.);
HSBC – 14th position ($378 mln.);
Texakabank (acquired by Russian Sberbank in 2006) – 15th position ($214mln.)
Number of foreign bank representative offices - 23, (growth from 17 to 23 in 2006).
WTO regulations require foreign bank branches access to internal market of a country. Kazakhstan has therefore, abolished the norm, which limited the participation of foreign investors in bank’s capital (previously 50%).

11. Main indicators of the banking sector
Index (billion.USD)
2002
2003
2004
2005
2006
Growth over 2006
Assets
7.5
11.2
19.8
33.8
69.9
107%
Liability
6.6
10.0
17.8
30.5
63.0
Equity capital
1.1
1.6
2.6
4.4
9.2
110%
Customer base
3.2
6.5
11.8
18.9
37.2
97%
Loan portfolio
4.7
7.3
13.3
22.9
47.2
106%

12. Structure of bank assets as of January 1, 2007

13. Share of assets of top 5 banks of Kazakhstan as of January 1, 2007

14. Capitalization of the banking system
Denomination article (billion.USD):
Growth in %
First level capital
2.8
6.4
133.4
Second level capital
1.6
3.0
87.6
Third level capital -
0.01
Total equity capital
4.4
9.2
110.5
Denomination article
2002
2003
2004
2005
2006
Equity capital
1,1
1,6
2,6
4,4
9,2

15. Capital adequacy ratio of the banking sector k1
0,09 k2
0,15
Ratio of capital to loan portfolio
0,19
0,20
Ratio of capital to generated provisions
3,40
3.91
Ratio of capital to doubtful loans
0,48
0,43
Ratio of capital to bad loans
8,53
12.43

16. Capital of top 5 banks of Kazakhstan as of January 1, 2007

17. The role of commercial banks in financing of economy sectors

18. Quality of loan portfolio of banks
billion. USD
Index (billion USD)
amount (billionUSD)
% of total
Total Loans including:
13.5
100
23.2
47.4
Standard loans
7.6
56%
58%
25.0
52.7%
Doubtful loans
5.5
41%
9.2
40%
21.7
45.8%
Bad Debts loans
0.4 3%
0.5 2%
0.7
1.6%
Generated provisions 4%
2.9%

19. Share of Loan portfolio of top 5 banks of Kazakhstan as of January 1, 2007

20. Structure of banks liabilities as of January 1, 2007

21. Customer base of commercial banks

22. Share of customer base of top 5 banks of Kazakhstan as of January 1, 2007

23. Dynamics of customer base on terms deposit
billion USD

24. Main indicators of the banking system as of January 1, 2007
Description coefficient
minimum standard
Luquidity coefficient
1.48
0.3
Short-term luquidity coefficient
1.18
0.5

25. Concentration of the banking sector as of January 1, 2007

26. Claims of banks to nonresidents

27. Liabilities of commercial banks before non-residents

28. TuranAlemFinance Russia
Eurobonds BTA
ABN AMRO/ DK
ABN AMRO/ DK
ABN AMRO/ DK
USD Notes
TuranAlemFinance BV
USD 350 Million
8.50% due 2015
RUR Notes
TuranAlemFinance Russia
RUR 3 Billion
6.40% due 2009
USD Notes
TuranAlemFinance BV
USD 200 Million
3M LIBOR %
due 2008
February 2005
October 2005
November 2005
ABN AMRO/ DK
ABN AMRO/ DK
ABN AMRO/ DK
USD Notes
TuranAlemFinance BV
USD 400 Million
8.00% due 2014
USD Notes
TuranAlemFinance BV
USD 600 Million
7.875% due 2010
USD Notes
TuranAlemFinance BV
USD 100 Million
10.00% due 2007
March-April 2004
June 2003
May 2002

29. Hybrid Tier 1 Securities
Eurobonds BTA
ABN AMRO/ DK
EUR Notes
TuranAlemFinance BV
EUR 500 Million
6.250% due 2011
September 2006
ABN AMRO/ DK
ABN AMRO/ DK
USD Notes
TuranAlemFinance BV
USD 250 Million
7.750% due 2013
April 2006
ABN AMRO/ DK
KZTNotes
BankTuranAlem JSC
KZT 13 Billion
7.60% due 2008
RUR Notes
TuranAlemFinance BV
USD 100 Million
due 2011
May 2006
March 2006
ABN AMRO/ DK
ABN AMRO/ DK
ABN AMRO/ DK
Hybrid Tier 1 Securities
BTA Finance SA
USD 400 Million
8.25% non-call 10 years
January 2006
PLZ Notes
TuranAlemFinance BV
PLZ 200 Million
3MLibor %
due 2013
Inaugural KZT Loan Facility
Bank TuranAlem JSC
KZT
7.85% due 2009
March 2006
March 2006

30. Entry on IPO banks

31. Measures on restrictions of banking sector liabilities
1. Мinimal Reserve Requirement are set as following (from 2006):
- For internal liabilities – 6%;
- For other liabilities – 8%.
2. Decrease in limits of open foreign exchange position (from 1st October 2006):
- Open foreign exchange position limit decreased by 12.5% from 15% of equity capital value;
- Foreign exchange net-position limit by 25% from 30% of equity capital value.
3. Introduction of Currency liquidity requirements (from 1st October 2006):
- Limit of current currency liquidity is set at no less than 0,9;
- Limit of short-term currency liquidity is set at no less than 0,8;
- Limit of medium-term currency liquidity is set at no less than 0,6.

32. Measures on restrictions of banking sector liabilities
4. Introduction of maximum limits on attracted short-term liabilities of non-residents in amount of Bank’s Equity capital (from 1st September 2006)
5. Introduction of two additional requirements on foreign borrowing restrictions (from 1st April 2007)
- Liabilities limit of the Banks to non-residents taking into account placement of Securities; k8(2-4),
- Liabilities limit to non-residents without taking into account Securities. к9 (4-6).

33. Introduction of Basel II standards from 2006
Detailed risk weighed ranking of assets and contingent liabilities when calculating capital adequacy with use of external ratings of borrowers and issuersв;
Approach to an evaluation of market risk in accordance with international practice of banking supervision;
Approach to an evaluation of operational risk (where capitalization requirements weighed as per operational risks according to new Basel agreement on capital are required to be included in calculation);
Including into capital calculation the perpetual financial instruments (hybrid capital);
Implementation of separate norms and limits for banks where a main participant is the banking holding.

34. Consolidated supervision of banking holding companies
In financial sector of Kazakhstan there are 9 financial groups established by commercial banks
Within the framework of consolidated supervision, the following monitoring is conducted:
Financial standing of large participants and banking holdings of banks ;
Transactions that are being executed between banks and affiliated entities ;
Compliance of the banks, which hold banking groups, with prudential norms for banking groups;
Entities, which have significant influence or activity, control on the banks.

35. SWOT – analyses Strength Weakness
High capitalization of the banking sector corresponding with the growth of banking assets;
Stabilization of exchange rate of national currency and level of inflation, low market risks;
High level of trust, high sovereign ratings, favorable investment climate;
Satisfactory quality of loan portfolio;
Satisfactory indicators of profitability and liquidity .
High qualified personnel.
low transparency of ownership structure ;
low diversification of the banking activity, the major part of income flow is concentrated in lending ,
high level of loan portfolio concentration by sectors and separate borrowers, significant share of lending in foreign currency ;
increase of credit risks level because of the growth of loans to non-residents..
decrease of a margin as a consequence competition strengthening

36. SWOT – analyzes Оpportunity Threat
• High growth rate of economy development determines not decreasing lending needs of real sectors, primarily processing industry enterprises, construction and service sectors;
• Income growth of population forms demands in retail lending developments, other banking services (card business, banking accounts and etc.);
• Development of concurrent banking services, in particular, broker-dealer, consulting, trust management of assets and accounts and etc.;
Further liberalization of currency relations, simplification of investments mechanisms (among them loans) and payments outside Kazakhstan;
• Creating of credit bureaus, that will simplify control mechanism of unreliable borrowers, and strengthen transparency and reliability of loan facilities market;
• Improving work efficiency of development institutions – Development Bank of Kazakhstan, Investment Fund of Kazakhstan, National Innovational Fund, Small Entrepreneurship development fund, State Insurance Corporation for the insurance of export credit and investments, and other.
Further perfection of monetary policy instruments, and bring into proximity with European Union standards; introduction of supervision international standards of Basel Committee on banking regulation.
Competition improvement, among them:
- Coming of foreign banks with more advanced technology and cheap resources;
- Along with development of credit societies, micro credit organizations conducting separate types of banking operations;
• Further concentration of banking system by means of
Mergers and acquisitions, increase in a number of banking holdings;
• Strengthening of banking
Supervision requirements, in part of prudential regulations and other normative standards execution.

38. History and Achievements
Increase of Assets to US$14 bln
Hybrid capital issue
East Capital, Sweden, becomes a shareholder instead of RZB
2006
Triple international rating Baa2/BB-/BB+ORIX Japan, ORIX Pakistan and IFC become shareholders in BTA Leasing
2005
2004
First Step of Expansion into the CIS
Upgrades of Bank TuranAlem Eurobonds to Baa3 by Moody’s and the Bank to BB- by Standard & Poor’s
2001
DEG, EBRD, RZB, FMO, IFC acquire CPS
Privatisation of Bank TuranAlem, increase of share capital and expansion of shareholder base
1998
TuranBank and Alem Bank are restructured and
merged into Bank TuranAlem
1997
Vnesheconombank is restructured
into Alem Bank
1991
Promstroybank
(Turan Bank) is founded
1925

39. BTA International Presence
- Representative offices
Moscow Slavinvest Bank
Kazan BTA Kazan
Minsk Astanaeximbank
Russia
Omsk
Omsk Bank
Astrakhan Agroinkom Bank
Belarus
22 Branches
198 Cash Settlement Units
Ukraine
Kazakhstan
Kiev
BTA Bank
Georgia
Kyrgyzstan
Armenia
Azerbaijan
Tbilisi BTA Silkroad Bank
Tajikistan
China
Yerevan BTA-Invest Bank
Dubai

40. Baa3 (stable) BB- (stable) Baa2 (stable) BB- (positive)
Основные показатели
2003
2004
Credit Ratings
Baa3 (stable) BB- (stable)
Baa2 (stable) BB- (positive)
Baa2 / BB / BB+
Baa1 / BB / BB+
Total Assets
US$2.6bn
US$4.8bn
US$7.5bn
US$14.37bn
Assets Growth
65.4%
65.7%
64%
92%
Total Equity
US$219m
US$385m
US$696m
US$1319m

41. Thank you for attention!