FSA about the condition of the financial market and financial organizations as of July 1 of 2005 (preliminary data)

/Kazakhstan Agency for financial market and financial organizations regulation and supervision, July 14, 05/ - Following is the press-release of FSA dedicated to the situation on Kazakhstan's financial market in the first half of 2005 (note IRBIS). BANKING SECTOR As of July 1 of 2005, 34 second tier banks functioned in Kazakhstan. By the resolution of the Agency's Board #172 dated June 2, 05 license of Nauryz Bank Kazakhstan JSC for making transactions provided by the banking legislation in national and foreign currency has been withdrawn. As of July 1 of 2005, 14 banks with foreign participation (including 9 subsidiary banks of banks-non-residents of the Republic of Kazakhstan) and Development Bank of Kazakhstan JSC, which is not a second tier bank, are acting. 26 second tier banks have branch networks, total number of banks' branches is 400 (including Nauryz Bank Kazakhstan JSC), including branches of Halyk savings bank of Kazakhstan JSC - 147, BANK CASPIAN JSC - 39, Kazkommertsbank JSC - 23. 24 banks have cash-settlement offices (CSO) out of their locations. Total number of CSO is 1,200 (in the reporting month permissions for opening 27 CSO were given), including CSO of Halyk savings bank of Kazakhstan JSC - 391, Bank TuranAlem JSC - 194, VALUT-TRANZIT-BANK JSC - 161. 17 representatives of foreign banks are functioning in the republic. By the reporting date 27 auditing organizations and 56 auditors had licenses for auditing banks. By the reporting date total equity capital of the banking sector equaled to KZT432.1 bn. having grown during the month by KZT27.6 bn. or by 6.8%. Banks' total assets grew by KZT242.6 bn. (7.7%) to KZT3,374.9 bn. and compared to similar indicator as of July 1 of 2004 - by KZT1,352 bn. (66.9%). Adequacy indicators were k1 - 0.087; k2 - 0.156 (as of June 1 of 2005 k1 - 0.086, k2 - 0.156). Loan portfolio of banks including interbank loans rose by KZT161.8 bn. (7.6%) within the month to KZT2,277.3 bn. Stake of standard credits in bank's loan portfolio structure at the reporting date was 61.1%, doubtful - 36.4%, bad - 2.5%. As of June 1 of 2005 stake of standard credits was estimated by FSA at 60.1%, doubtful - 36.9%, bad - 3.0%. Total sum of deposits attracted by banks from juridical and physical persons (excluding banks and international financial organizations) by the beginning of July of 2005 was KZT1,947.0 bn. having increased within June by 3.5% (including deposits of juridical persons - KZT1,453.9 bn., grew by 4.0%; total deposits of physical persons - KZT491.3 bn., grew by 2.1%). Total sum of second tier banks' revenues as of July 1 of 2005 was KZT213.5 bn. having increased in comparison with similar period of last year by 48.7%. Total expenses were KZT178.4 bn. having increased in comparison with similar period of last year by 49.8%. Undistributed net income (uncovered loss) of banks was equal to KZT35.1 bn. that is higher by 43.3% in comparison with similar period of last year. For breaking the baking legislation in June of 2005 banks were made 1 warning, demanded 1 letter - obligation, fines were imposed to 2 banks. As of July 1 of 2005, 13 banks in Kazakhstan were in forced liquidation process. The Agency's Board accepted following normative legal acts in June concerning second tier banks: "About inclusion of changes and additions in the resolution of the Board of the National Bank of Kazakhstan dated June 3 of 2002 #213 "About confirmation of Instructions about normative meanings and methods of prudential norms calculation for second tier banks"; "About confirmation of the form of the report about rests on balance and off- balance accounts of second tier banks". INSURANCE MARKET As of July 1 of 2005, 36 insurance (reinsurance) organizations had licenses for dealing with insuring activity. Two organizations have licenses for life insurance, 29 - licenses on compulsory insurance of transport owners' civil responsibilities. There were 8 insurance brokers, 29 actuaries, 35 auditing organizations and 70 auditors, who had licenses for auditing insuring activity, in the country. Within 5 months of 2005 total assets of insuring organizations grew by 17.9% to KZT52.0 bn. Total equity capital grew by 13.7% to KZT27.4 bn. Insurance reserves totaled KZT26.2 bn. Volume of insurance premiums totaled KZT25.6 bn. and increased in comparison with similar period of last year by KZT9.6 bn. (60.0%). Including volume of insurance premiums on compulsory insurance totaled KZT2.7 bn. (more by KZT0.6 bn. (28.6%)), voluntary personal insurance - KZT3.2 bn. (more by KZT1.5 bn. (88.2%)) and on voluntary property insurance - KZT19.7 bn. (more by KZT7.5 bn. (61.5%)). Volume of insurance payments within 5 months of 2005 totaled KZT4.08 bn. and increased in comparison with similar period of last year by KZT1.51 bn. (58.8%). Volume of insurance payments on compulsory insurance totaled KZT1.30 bn. (more by KZT0.21 bn. (19.3%)), on voluntary personal insurance - KZT0.60 bn. (more by KZT0.13 bn. (27.7%)) and on voluntary property insurance - KZT2.18 bn. (more by KZT1.17 bn. (115.8%)). Besides, during the period FSA sent to insurance organizations 5 letters- prescriptions in order to remove violations of the legislation regulating insurance market. By the current date 31 insurance (reinsurance) companies participated in the system of insurance payments guaranteeing. By the reporting date 9 insuring companies were in the process of forced liquidation. In June of 2005 the Agency's Board accepted following normative legal acts: "About inclusion of changes and additions in the resolution of the Board of Kazakhstan Agency for financial market and financial organizations regulation and supervision dated November 27 of 2004 #335 "About confirmation of Instructions about prudential norms of insurance (re- insurance) organization, their calculation methods and presentation of reports about execution of prudential norms, and also requirements to the degree of insurance (re-insurance) organization's assets diversification"; "About approval of Recommendations on classification of risks by compulsory classes (types) of insurance and introduction of database of insurance statistics by insurance (re-insurance) organizations". ACCUMULATIVE PENSION SYSTEM As of July 1 of 2005 a total of 14 accumulative pension funds functioned in Kazakhstan, they had 74 branches and 74 representatives in the republic's regions. Investment management of pension assets of accumulative pension funds were carried out by 10 organizations, 3 of them were accumulative pension funds, which had licenses for independent management of pension assets: SAPF JSC, APF of Halyk Bank of Kazakhstan JSC and APF BTA Kurmet- Kazakhstan JSC. Number of individual pension accounts (accounts) of depositors (recipients) on compulsory pension fees as of July 1 of 2005 was 7,170,498. In June number of depositors paying compulsory pension fees grew by 76,371 (1.1%). Number of accounts of depositors (recipients) on voluntary pension fees increased in June of 2005 by 235 and as of July 1 of 2005 was 31,233 with total amount of pension accumulations amounting to KZT424.7 m. Number of accounts of depositors on voluntary professional pension fees, having increased in June by 30, equaled by July 1 to 3,149 with total amount of pension accumulations amounting to KZT10.4 m. Pension accumulations of depositors (recipients), having grown in June by KZT14.4 bn. (2.7%), as of July 1 of 2005 were KZT556.5 bn. Total inflow of pension fees, having grown in June by KZT11.1 bn., as of July 1 of 2005 were KZT438.1 bn. Amount of net investment income, having increased in June by KZT4.0 bn., as of July 1 of 2005 were KZT133.5 bn. Stake of net investment income in total amount of pension accumulations is 24.0%. Pension payments of accumulative pension funds as of July 1 of 2005 were KZT31.2 bn. (grew within the month by 2.7%). Pension payments for June of 2005 totaled KZT0.8 bn. No transfers of pension accumulations to insurance organizations in accordance with pension annuity agreement were made in June. As of July 1, 2005 weighted average coefficient of nominal income of accumulative pension funds for the period June of 2002 till June of 2005 totaled 22.25%, accumulated inflation rate for the period equaled to 21.92%. Weighted average yield on pension assets by accruing result since the beginning of the year has equaled to 7.84% APR. SECURITIES MARKET As of July 1 of 2005 there were registered 2,414 joint-stock companies with acting share issues in Kazakhstan (grew by 24). 61 broker-dealers, 18 registrars, 11 banks-custodians, 10 pension assets investment management organizations (PAIMO) and 19 organizations controlling securities portfolios acted at securities market. In June of 2005 there were registered 73 share issues (including those, in specifications of which changes were included and certificates about the state registration were changed), 2 bond program, 4 corporate bond issues with total volume of KZT16 bn. (registered under bond programs), 55 share issues were annulled. As of July 1 2,654 acting share issues and 131 existing corporate bond issues with total face value of KZT503.9 bn. were in circulation. In June of 2005 six mutual funds were registered. As of July 1 twenty one mutual funds were carrying investment management at securities market (15 closed funds, 4 open and 2 interval funds). As of July 1 of 2005 162 securities issues of Kazakhstan's issuers were included in KASE's official "A" listing category, 45 - in "B" category. In June of 2005, in order to remove violations of the legislation regulating activity on the securities market, the Agency sent to securities market's professional participants 1 letter-prescription. In June of 2005 the Agency's Board accepted following normative legal acts concerning securities market's professional participants: "About inclusion of changes and additions in the resolution of the Board of Kazakhstan Agency for financial market and financial organizations regulation and supervision dated January 29 of 2005 #17 "About setting prudential norms for organizations combining types of professional activity on the securities market, confirmation of the Rules of prudential norms calculation for organizations combining types of professional activity on the securities market, and presentation of reports about their execution"; "About confirmation of the Rules of conducting broker-dealer activity on Kazakhstan's securities market". ORGANIZATIONS CONDUCTING SEPARATE TYPES OF BANKING OPERATIONS As of July 1 of 2005 a total of 79 pawn-shops, 112 credit institutions and 79 other organizations rendering separate types of banking services (including 4 mortgage companies) had licenses for conducting of banking and other operations in Kazakhstan. As of June 1 of 2005 total of aggregate assets of credit institutions was KZT21.1 bn. (up by 38.4% within the month), liabilities - KZT9.1 bn. (up by 4.9%), shareholders equity - KZT12.0 bn. (up by 83.0%). Stake of standard credits in the structure of credit portfolio of credit institutions was 84.0%, doubtful - 15.9%, bad - 0.1%. As of May 1 of 2005 stake of standard credits was 78.9%, doubtful - 21.0%, bad - 0.1%. Total assets of mortgage companies as of June 1 was KZT53.3 bn. (up by 5.4% within the month), liabilities - KZT41.2 bn. (grew by 5.6%), shareholders equity - KZT12.1 bn. (grew by 4.6%). Stake of standard credits in the structure of credit portfolio of mortgage companies was 98.91%, doubtful - 1.03%, bad - 0.06%. As of May 1 of 2005 stake of standard credits was 99.17%, doubtful - 0.76%, bad - 0.07%. In June of 2005 for non-fulfillment of norms of the acting legislation organizations conducting separate types of banking operations were sent 8 letters - prescriptions, and demanded 3 letters-obligations. As of July 1 of 2005 three credit institutions were in the process of voluntary liquidation, 1 - in forced liquidation. PROTECTION OF INVESTORS CONSUMERS OF FINANCIAL SERVICES In June of 2005 the Agency received 82 complaints from physical and juridical persons concerning activity of second tier banks, insurance organizations, accumulative pension funds, securities market's subjects, among which: - 11 appeals were concerned with activity of second tier banks (13% from total number), explanations on 8 of them were given, 3 are being examined; - 23 appeals were concerned with activity of insurance organizations (28%), explanations on 10 of them were given, 13 are being examined; - 46 appeals were concerned with activity of accumulative pension funds (56%), explanations on 6 of them were given, 40 are being examined; - 2 appeals were concerned with activity of securities market's subjects (3%), explanations were given. Further examination of 24 appeals given before has been completed (6 - concerned with activity of second tier banks, 8 - activity of insurance organizations, 8 - activity of accumulative pension funds, 2 - activity of securities market's subjects), on which corresponding explanations have been given. 2 appeals have been regulated by means of making insurance payments by insurers to victims. Here were also examined 6 queries of the financial market's subjects (concerning transfer and payment of pension accumulations and informing of depositors), on which explanations were given as well. In pursuance of the order of the Agency's Chairman dated 29.07.2004 ¦245 "About confirmation of the Program of informational activity of Kazakhstan Agency for financial market and financial organizations regulation and supervision for year 2005" (the Order) in June of this year the Agency gave interview about the Agency's actions concerning achievement of authenticity of advertising of second tier banks and questions on inclusion of changes and additions in the Law "About banks and banking activity in Kazakhstan" for KTK JSC. Taking into account many complaints concerning bad service of payment cards issued by second tier banks, the Agency went on working out a single approach to setting responsibility of second tier banks for improper service and taking corresponding measures, so the National Bank has made a project of Instructions about requirements raised to second tier banks on organization of work of cash-dispensers and provision of their proper functioning, and gave it to the Agency for coordination. As regards second tier banks' collecting amounts for services on examination and registration of documents for getting mortgage loans the Agency, by the request of Financial institutions association of Kazakhstan and Kazakhstan Mortgage Company JSC, prepared data on tariffs from insurance amounts, which are used by insurers while insuring life, from accidents and property, while receiving such the loans. Financial institutions association of Kazakhstan has been given a letter with the offer to examine the question about making an additional agreement to the Memorandum about cooperation in the context of uniform approach to setting tariffs on examination and registration of documents for getting mortgage loans between banks participating in Program realization. In pursuance of the Order in June of this year explanatory information "About the order of making agreement about pension provision by officers and military personnel with APF and withdrawal of pension accumulations by foreign citizens on the basis of identity card" have been published in official editions ("Finansovyi vestnik" journal #6/2005). [2005-07-14]