Transcript PowerPoint ******

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Kazakhstan’s economy experienced rapid growth in the early 2000s, but has
slowed down since the global financial crisis in 2008
GDP Growth Trend in Kazakhstan
(unit: %)
GDP Growth Rate
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14
estimated
by WB
12
10
8
6
4
2
0
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
(source: World Bank)
 From 2000 to 2007, Kazakhstan’s economy recorded an average annual growth
rate of 10.2% due to a boom in construction and real estate
 Kazakhstan’s economy took toll immediately after the global financial crisis but by
2010, its annual growth rate has rebounded to 7%
 The economy has slowed down since 2012 due to decreasing international oil prices
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The global financial crisis in 2008 increased banking industry’s credit risk,
which in turn led to a surge of NPLs
Total Loans and NPL Ratio in Kazakhstan
(unit: billion KZT)
16000
Total Loans
31.2%
NPL Ratio
35.0%
32.9%
29.8%
14000
30.0%
30.8%
23.8%
12000
23.5%
10000
25.0%
22.8%
21.2%
20.0%
8000
15.0%
6000
10.0%
4000
5.2%
2000
9.2%
as of the end
of August
5.0%
0
0.0%
2008
2009
2010
2011
2012
2013
2014.3
2014.12
2015.5
(source: National Bank of Kazakhstan)
 In late 2008, NPLs recorded only 5.2%, but it increased dramatically to 21.2%
(KZT 2 trillion) in 2009 and reached its peak at 33.7% (KZT 4.9 trillion) in May 2014
 The average monthly increase of NPLs from 2009 to 2014 was 3.9%
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After the Kazakhstani government recognized the problem regarding NPLs,
the NBK requested consultation service from KAMCO through KSP program
In January 2013, KAMCO received a request from the National
Bank of Kazakhstan(NBK) to impart Korea’s successful
experiences in overcoming the Asian financial crisis
In December 2013, NBK submitted a KSP written demand
survey to Korean MoSF, requesting KAMCO to share its
experience and expertise on NPL acquisition and resolution
In April 2014, the Fund of Problem Loans(FPL) sent an official
letter to Korean MoSF, requesting urgent operation of
Kazakhstan KSP consultation
In October 2014, KAMCO took part in a bidding procedure for
2014 Kazakhstan KSP, and was designated as the sole
provider for the consultation
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KNOWLEDGE SHARING PROGRAM (KSP)
is a knowledge-intensive development and economic
cooperation program designed to share Korea’s
development experience with partner countries
KSP Characteristics
DemandDriven
PolicyOriented
ParticipationOriented
Integrated
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Economic Development Strategy
• Economic Planning System
• Public Private Consultation
• Think Tank and Infrastructure
Institution and Export Promotion
• Manufacturing Sector Development
• Promotion of Entrepreneurship
• Export Promotion
Knowledge-based Economy
• Support for R&D Sector Strategy
• Innovation Clusters
• E-Government and ICT Industry
Economic Crisis Management
• Early Warning System/Structural Reform
• Macroeconomic Stabilization
• Nonperforming Loan Clearing System
Human Resources Department
• Education
• Vocational Training
• Social Safety Net and Retraining
All issues in the field of economic and social development,
as requested by partner countries, are considered
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Stage 1: Demand
Identification
• Project Proposal for KSP (Form)
• Official Proposal Letter
Stage 2: Policy
Research
Stage 4: Monitoring
and Evaluation
• Pilot Study Visit
• High-Level Demand Survey
• Interim Reporting & Policy
Practitioners’ Workshop
• Monitoring on Process of the
Program
• Survey & Interview
Stage 3: Policy
Consultation
• Senior Policy Dialogue
& Final Reporting Workshop
• Dissemination Seminar
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Overview
 Title:
 Period:
 Managing Entity:
 KSP Provider:
2014 Kazakhstan Knowledge Sharing Program
December 1st, 2014-June 30th, 2015 (7 Months)
Korea Development Institute (KDI)
Korea Asset Management Corporation (KAMCO)
Proceedings
 Dec. 2013: NBK submits demand survey for 2014 KSP
 Oct. 2014: KDI announces tender for the 2014 Kazakhstan KSP
 Nov. 2014: KAMCO selected as the sole provider for the 2014 Kazakhstan KSP
 Jan. 2015: High-level Demand Survey and Pilot Study-Signed MOU between KAMCO
and NBK, identified and confirmed KSP topics, and interviewed personnel
related to KSP topics (Almaty)
 Mar. 2015: Interim Reporting & Policy Practitioners’ Workshop: Provide interim policy
consultation and seminars on KSP topics (Busan)
 Jun. 2015: Senior Policy Dialogue and Final Reporting Workshop: Present final policy
recommendations to NBK, FPL, and relevant institutions (Almaty)
 Jun. 2015: Submission of KSP Final Report
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“Policy Consultation for Enhancing Divestment of NPLs and the Establishment
of Effective NPL Acquisition Regimes”
NPL
Analysis
Legal
Aspects
NPL
Acquisition
& Valuation
• Analysis of the current status and outstanding issues in relation to NPLs
in Kazakhstan
• Enhancement of relevant legislations to enforce the divestment of NPLs
that are kept under financial institutions
• Establishment of an effective NPL acquisition structure
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Demand Survey & Pilot Study (Jan. 21-23, 2015)
Objectives
 High-level Demand Survey & MOU signing with the National Bank of Kazakhstan
 Hold working level meetings for each KSP topic
 Meet relevant and high-impact institutions in Almaty and request for support
Outcome
 NBK and KAMCO signed an MOU to solidify its relationship and to promote future mutual
cooperation
 Discussed and confirmed Kazakhstan KSP topics and schedule
 Confirmed local consultants and signed the terms of reference (TOR)
 Interviewed NBK practitioners who are involved in NPL acquisition and valuation, and the
legal framework
 Visited the ADB Kazakhstan Resident Mission (Country Director), Korean Consulate
(Almaty Office), KOTRA (Almaty Office), Bank CenterCredit, KPMG, and Shinhan Bank
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Interim Reporting Seminar & Policy Practitioners’ Workshop (Mar. 31 – Apr. 3, 2015)
Objectives
 Disseminate preliminary research findings through the Interim Reporting Seminar
 Provide training to participating NBK & FPL working-level staff
 Allow participants to learn more about Korea’s financial infrastructure through
visiting prominent public institutions
Outcome
 KAMCO presented the KSP Interim Report: “Role of JSC ‘Fund of Problem Loans’ in
Decreasing NPLs in the Banking System,” “Economic Status of Kazakhstan & NPL
Market Analysis,” “Legal Measures for Divestment of NPLs in Kazakhstan,” and “NPL
Valuation Models and Practical Methods”
 KAMCO delivered high-impact training lectures to the delegation: “Introduction to
KAMCO’s OnBid System,” “Organizational Changes in KAMCO,” “The NPL Resolution
Fund Overview,” and “KAMCO’s NPL Acquisition Strategies”
 Kazakhstan delegation visited Korea’s Financial Supervisory Service (FSS) and Korea
Deposit Insurance Corporation (KDIC)
 Met KSP Senior Advisor, Mr. Yongduk Kim
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Senior Policy Dialogue & Final Reporting Seminar (Jun. 16-17, 2015)
Objectives
 Deliver the 2014 KSP research results to NBK and FPL
 Conduct a Senior Policy Dialogue with Directors and of NBK and Deputy Chairman of FPL
 Visit FPL’s office and have a policy discussion with senior decision makers to better
understand their future needs
Outcome
 KAMCO KSP Team participated in a Senior Policy Dialogue with NBK and FPL senior
policy makers
 KAMCO consultants disseminated research, analysis, and policy recommendations to
working level staff of both NBK and FPL
 Visited FPL’s headquarter to further discuss research results as well as strategies on how
to implement the policy recommendations
 Visited Korean Consulate (Almaty Office) to deliver KSP consultation results
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MOU Signing Ceremony between
KAMCO Executive Director, Mr. Jong-Jin Lee and
NBK Deputy Governor, Mr. Nurlan Kussainov
(NBK - Almaty, Kazakhstan)
Interim Reporting Seminar & Policy Practitioners’
Workshop (KAMCO Headquarters – Busan, Korea)
High-level Demand Survey
(NBK - Almaty, Kazakhstan)
Senior Policy Dialogue
(NBK – Almaty, Kazakhstan)
Meeting with KAMCO Executive Director,Mr. Jong-Jin Lee
(KAMCO Headquarters – Busan, Korea)
Final Reporting Seminar
(NBK – Almaty, Kazakhstan)
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Topic 1: Analysis of NPLs in Kazakhstan
Research Results
 Kazakhstan’s bank concentration is lower than OECD countries’ average
•
Top 5 largest banks in Kazakhstan account for 53% of total assets of banks
•
Top 5 largest banks in Korea account for 79%
 The enlargement of Korean financial institutions after the 1997 Asian Financial
Crisis strengthened competitiveness through realizing economy of scale in the
financial sector
•
Diversified loan portfolios
•
Increased profits in large banks, which insulated them from economic shocks
•
Fewer and larger banks were easier to monitor and supervise
Policy Recommendation
 Pursue a strong restructuring policy that emphasizes increasing bank concentration
•
Liquidation and M&A of banks
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Resolving insolvent financial institutions and other institutions’ NPLs are required
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NPL Reduction and Contributors (Comparison between Kazakhstan and Korea)
Kazakhstan
May 2014
NPL Ratio
Sep. 2015
33.7%
(KZT 4.9 tn)
9.2%
(KZT 1.3 tn)
• NPL Write-off
• Transfer to bank’s subsidiary
AMC (“OUSA”)
Major Contributors
• Debt collection
• Completion of P&A transaction
between BTA & KKB
Korea
1999E
2014E
12.9%
1.53%
(KRW 61 tn)
(KRW 23.8 tn)
• Reduction of the number of
troubled banks “Survival of the
Fittest”
• Two-Track Policy
- KAMCO’s NPL Fund, acquiring NPLs
from financial institutions (1997)
- Establishment of KDIC, raising
troubled banks’ capital (1998)
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Banking Sector Restructuring (Comparison between Kazakhstan and Korea)
Kazakhstan
Korea
Number of Banks
Reduced by 45.5%
40
33
30
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35 Banks
Number
of
Banks
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5 License Revoked
10 Merged
1 Newly Founded
0
1997E
(after completion of
P&A transaction
between BTA&KKB)
Jun. 2003
Number of Non-Banks*
2500
Reduced by 37.3%
2068
2000
1362
1500
1000
500
0
1997E
152 License Revoked
151 Merged
469 Suspended
66 Newly Founded
Jun. 2003
* Non-banks: Merchant bank, Security Firms, Insurance companies, Investment trust, Savings banks, etc.
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Topic 2: Enhance legislations to enforce divestment of NPLs from banks
Research Results
 Kazakhstan has all four elements necessary for effective management of NPLs
(legal basis, regulatory & supervisory authority, organization specialized in NPL
management, and funds(capital))
 Pending problems of NPL control lies in practical aspects rather than legal ones
 The legal systems of Kazakhstan and Korea have differences in mechanisms and
methodology of formation, adoption, enforcement of and implementation of laws
and regulations. Therefore, it would be difficult to fully adapt Korea’s NPL
management system
Policy Recommendation
 Broaden FPL’s scope of activities and the range of NPLs subject to be purchased
or acquired
 Allow more autonomy to FPL in decision making procedures and overall management
 Implementing stricter requirements for preliminary review of loan applications
 Setting long-term goals for NPL regulation systems, particularly improving
corporate restructuring
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Topic 3: Effective NPL valuation methods
Research Results
 The legal environment for valuating secured NPLs in Kazakhstan is relatively well
composed (Civil Code, Law on Banks, Mortgage law, Law on Registration), which
enables creditors to recover loans by exercising security rights
 Valuation differences exists
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•
•
Different views toward cash flow estimation
Different views toward recovery estimation
Use of different discount rates
Policy Recommendation
 Narrow the gap in estimating cash flow, recovery period and discount rate
 Standardize and publicize auction process
 Improving Kazakhstani real estate registry system
 Actively use real estate market information
 Accumulate and use auction information
 All necessary information for proper NPL valuation should be easily accessible online
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Policy Recommendations from KAMCO and Actual Application Cases
Policy Recommendations
Increasing the
competitiveness of the
banking sector through
structural development
Actual Application Cases in Kazakhstan
• Recently, Kazkommertsbank(KKB) completed purchase
of BTA bank’s shares for P&A process with an effort to
reduce NPL ratio
Broadening the scope of
to FPL’s legal framework for more
FPL’s activities and range • Amendments
business opportunities has been approved
of NPLs
Providing autonomy to
representative from Ministry of Finance was
FPL in decision making • The
included into the Board of Directors
and overall management
Conducting due diligence • Introduction of prudential requirement starting January
2016 will facilitate the improvement of risk policy in
of applicants for bad
banks, including underwriting procedures
loans
Establishing long-term • NBK will set up the environment to promote
rehabilitation of insolvent companies for corporate
goals for NPL regulation
restructuring
system
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Main Theme: Establishing the strategy for JSC “Fund of Problem Loans” to
develop as a Public AMC and suggesting various methods for NPL resolution
Topic 1: Recommendation on establishing the strategies for FPL to become a
public AMC
 Review legislation and regulatory legal acts of redemption schemes and
management of NPLs
 Comparative analysis of relevant legislations in Korea and Kazakhstan, and
recommend possible legislations for Kazakhstan to adopt
 Introduce role of Public AMCs and draw mid to long term development strategies
for FPL to become a public AMC
 Emphasize the necessity of becoming a specialized institution for NPL resolution
and capacity building
Topic 2: Introduction of various NPL resolution methods depend on NPL
characteristics and suggestion of changed methods for local application
 Review and analyze current available NPL resolution methods in Kazakhstan
 Analyze Kazakhstan legal, regulatory and financial environment for NPL resolution in
order to apply practical NPL resolution methods
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Thank You!
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