Commercial banks of republic partly are guilty in growth of inflation and "overheating" of economy, considers deputy head of AFS

/INTERFAX-KAZAKHSTAN, Astana, February 8, 07/ - Policy of active external borrowings of second tier banks of Kazakhstan is leading to growth of inflation and "overheating" of economy of the country, considers deputy chairman of state agency of financial supervision (AFS) Gani Uzbekov. "If to look at the structure of loan portfolios of banks, mainly today they accept money due to realty markets, due to building. That is actually those funds which they had borrowed abroad are intensifying the pressure on prices and on "overheating" of both on markets of realty and building. (...) Thus, at this growth (of inflation - IF-K), which is presenting now, and in "overheating" of economy partly is guilty the banking sector, I think", - he told in the interview to agency Interfax-Kazakhstan. In this situation, by opinion of G.Uzbekov, the main task of AFS is provision of stability of banking and financial sector as a whole. "Now growth (of banking sector - IF-K) is very rapid. And our main question is how to make this rapid growth stable and adequate. There are problems with it", - he stressed, adding that one of the main reasons of increase of risks in banking sector are active external borrowings of commercial banks. "So we are strengthening the regulating, in particular, we introduce new limitations on external loans, - the interlocutor of the agency continued. - of course banks do not like it. Some of them went mad on gigantomania, growth of banking capital, assets, but these all must be adequate". As it was informed, AFS is planning since March 1 to toughen the requirements to commercial banks, limiting their external borrowings by the size of shareholders equity. State agency supposes that to March 1 all banks have to correspond the new requirements. As earlier had announced the head of AFS Arman Dunayev, state agency had directed to association of financiers and to all banks the letter about plans of inclusion of two limits, directed on limiting of external borrowings: it is limit of banks' liabilities before nonresidents without consideration of offerings in securities and limit of liabilities before nonresidents, including all current securities. Some commercial banks of republic had perceived the new limitations by AFS negatively. Together with it, by the words of G.Uzbekov, state agency will anyway reach the introduction of extra limiting measurements, regulating the external borrowings. "One Norwegian professor once said: if mineral users are satisfied with acting tax code, then the authorized body is working badly. If they started to complain on it, then the state body had hit the weak place and is acting in the right direction. I do not say that these words must be understand word by word, but nevertheless", - he told. "The basis of reasoning of commercial banks is that tomorrow (after March 1, 2007 - IF-K) they won't be able to support with credits the real sector of economy. But they today also do not participate in projects of real sector - name at least one project when they had built the school! But I can list you majority of their projects in consumer crediting, where there is very high growth and in realty, where loan portfolio of some banks exceeds 60%", - he noted. By the words of interlocutor of the agency, AFS intends also to "increase the statistics registration by the banking sector, because from data provided by banks it is not seen whether money are going to real sector or not". Along with it, G.Uzbekov is not surprised by that negative reaction of banking sector, which had caused the plans of state agency of inclusion of new requirements. "Some bankers perceive new limitations as barriers for development of financial system. But today condition in banking sector needs its adequate regulating", - he is sure. "Look at wages, which the head of banks receive. Officially it do not sounds anywhere, but deputy chairmen receive only as bonuses from $500 th. to $1.5 m. Due to what? Again it is enough to look at structure of banks' portfolios - realty and construction", - G.Uzbekov had noted, adding that in developed countries "growth of wages of top-managers is adequate to increase of banks' profitability". "So it is resulting that bankers do not want to risk but want to earn money and live good, but it can't be. Good life is possible only by someone's account", - he stressed. By opinion of deputy head of AFS, with preservation of such condition the financial system of the country will be subjected to serious risks, despite its recognition by international financial institutions as the most progressive in CIS. "We should not calm down, we must move further. Any external shock may lead to crush of banking system. May be the market of realty is growing at very least, but if something will happen in other place and it will reflect on market of realty, on assets, on loan cost and so on, - he continued. - So today it is necessary to give the smaller motivation for investing by banks to realty and direct these funds for example on building of infrastructure". "I do not confirm that market of realty and construction - is bad. But the risks there are high and we must prepare to them adequately", - concluded the interlocutor of the agency. As it is known, in the last year AFS and National bank had already introduced three stages' limitations on attraction of external borrowings by commercial banks of republic. As of January 1, 2007 banking sector of republic was represented by 33 second tier banks, from which 14 are banks with foreign participation, including 9 daughter banks - nonresidents of the republic. For year 2006 the joint assets of banking sector of the republic had grown by 96.6% compared to growth by 68% year earlier. [2007-02-09]