Economic sciences/1.Banks and banking system.
Alisheva D. E.
“NARXOZ” University,
Kazakhstan
External risks of Kazakhstan
banks
Introduction
In recent years a lot of work on improvement of the
legislation regulating banking activities and reformatting the Kazakh banking
market have been held in Kazakhstan, many Kazakh banks have changed their
owners and have had large-scale restructuring.
As
noted by the authors of the "Top 10 fastest growing banks in
Kazakhstan," in these circumstances "willingness to experiment and
the ability to look at the classic banking products in a new way, to expand the
range of services, to increase the speed, mobility and quality of service"
are getting particularly important [1]
That is, the readiness for the implementation of
management innovations is becoming the most important competitive advantage of
the bank. In particular, traditional approaches to risk management is getting
absolutely insufficient to ensure the competitiveness of the bank.
As shown by a survey conducted by us of managers who
have worked in the field of risk management in Kazakhstan banks, the content of
the matrix of credit, operational and market risks of Kazakh banks is rapidly
changing; mutual influence (synergy) of the various risk factors is becoming
more complex and meaningful, both within the individual bank, and on the scale
of the national banking system. The role of political and global risks
increases dramatically. This publication is devoted to these two types of
Kazakh banks' risks
1.
Standard
& Poor 's Ratings Services assigns to Kazakhstan banking sector a rating at
the level of BBB + / Stable / A-2 in 2013 to BBB / Negative / A-2 in 2016 [2].
Banking
Industry Country Risk Assessment (BICRA) considers the level of industry risks
of the banking system of Kazakhstan is "very high". (Depending on the
level of risk BICRA identifies ten groups - from countries with the lowest risk
in the first group to the tenth with the highest risk, Kazakhstan is
consistently ranked in the eighth group) [3].
Symptoms
of distress and causes of a high level of industry risks identified by BICRA
are: a significant amount of bad loans, high credit risk and weak underwriting
standards, low yields due to the high level of risk, a low quality of
management. The advantages of the banking sector of Kazakhstan highlighted by
BICRA is a fairly high level of competition [3].
2.
In recent years, a number of problems and
negative trends has clearly manifested, causing low quality of banking services
for the majority of customers of the Kazakhstan banks (with the exception of
large companies and private VIP-clients):
à)
inaccessibility of banking services for 2/3 of the population of Kazakhstan;
According
to the National Bank of the Republic of Kazakhstan, in the countryside, per one
point of banking services there are from 18,300 people (Akmola region) to
105300 people (Kyzylorda region) - with an average of 7200 people: most bank
branches (65%) are concentrated in 15 major cities, where the population is 38%
of the population [4]
b) unjustified
obstacles in obtaining credit;
In a study of the availability of bank
lending in Kazakhstan, conducted by the Center "Sange", the majority
of respondents noted the need for large expenditures of time and effort to get
a loan - and the ability to avoid them, to speed up the solution of the problem
with the help of an informal remuneration to a manager [5]
c) multiple violations of the rights of
clients and the ineffectiveness of their legal protection.
In
2013, in Kazakhstan, the Committee for the Protection of the rights of
consumers of financial services was established, whose main tasks were to
ensure an adequate level of protection of the rights and legitimate interests
of consumers of financial services and financial literacy of the population. In
an interview, the Chairman of the Committee recognized that "the complaint
does not bring significant results for banking customers - usually the bank
operates in accordance with the law, but, in fact, in bad faith". [6] The
banking sector, in fact, has become a brake on the program of social
modernization of Kazakhstan.
3.
The
Parliament is holding discussions over the draft bills aimed at:
à)
changes in the content of collection organizations;
At present time, activity of the
debt collection organizations in Kazakhstan is not regulated by any special
legal act. The draft law "On the collection activity" reflects
international experience. In world practice, collection organizations act as a
mediator to resolve the relationship of the lender and the borrower / debtor,
when the debtor is provided the options to solve the problem. With regard to
bank borrowers such solutions to the problem may be a proposal to refinance the
debt with various options.
b)
changes in classification of violations of borrowers, in particular, the
introduction of the concept of "very small violations";
We
are talking about the amendment to the Civil Code of the Republic of Kazakhstan
with regard to establishing the conditions under simultaneous presence of which
the breach of the obligation secured by the pledge is deemed negligible and the
size of the pledgee's claims is clearly disproportionate to the value of the
pledged property.
c)
legislative ban on the activity of banks and their leaders (individuals and
legal entities), which led to substantial damage from fraud, including in terms
of violation of the rights of the consumers of banking services.
It is proposed to legalize the "black
list" of managers of financial institutions, once in which they are unable
to work in the banking sector.
4.
In recent years, around the world there is a decrease of
confidence in the banking system and tightening regulation of banks. According
to P. Krugman, it is possible that we will have to implement "radical
method of the full reconstruction of the monetary system, including the
complete elimination of paper money and the introduction of negative interest
rates" [7]. Negative interest rates mean the
collection of payment for the use of money (demurrage); This is possible only
with the full transition to electronic settlements and elimination of all cash,
discarding "paper" banknotes.
If this idea in one form or another is
implemented, the activities of banks will change dramatically, acquiring a
qualitatively different content - organization of cash flows in the national
payment system will be in the first place. Which, according to experts, may
well do without the banking system in its current form [8]: "If banks do not learn to
work with private clients in a new way, they will be expelled in disgrace from
the market: they will be replaced by other structures, more flexible, more
mobile, more user-friendly" [9].
5.
As early as in 2007, remote banking service looked like an exotic
innovation: then SBI Holdings, together with Sumitomo Trust & Banking were
among the first to launch SBI Sumishin Net Bank, which managed to attract in
half a year almost 640 thousand clients..
Today, the development of remote banking already seems inevitable
for most countries - which is stated by the authors of the international
program to increase opportunities for small businesses and households.
"Global partnership to improve access to financial services" [10] and
the "Alliance for the expansion of access to financial services" [11].
Introduction of remote banking is now coming through
the development of peer-to-peer lending information platform and blockchain
technology. Initially, this technology was known as a platform for the creation
and circulation of Bitcoins, later the idea appeared to use this opportunity of
information technology to make interbank transactions faster and cheaper.
Massive introduction may lead to the fact that the
national banking system will be the single-level. In other words, in every
country there will be only one bank, where customers can make payments without
intermediary banks. The Bank of England has already created a consortium of 50
banks, which is completely restructuring its banking business model for
blockchain technology
In modern conditions in the matrix of of risks Kazakh
banks significance of political (tightening of the legal regulation of banking
activities) and global (changing forms of banking activity in the global
financial system) risks is increasing dramatically
Bibliography
1.
Top 10 fastest growing banks in Kazakhstan //National Business 13.05.16
http://nb.kz/15332/
2. Bank
Ratings In Kazakhstan. Standard & Poors Mar 2016
http://www.researchandmarkets.com/reports/3641181/bank-ratings-in-kazakhstan-mar-16#rela4
3. Banking
Industry Country Risk Assessment: Kazakhstan.
Standard & Poors Oct 2015 //
http://www.researchandmarkets.com/reports/3441935/banking-industry-country-risk-assessment#rela3
4. The
official Internet resource of the National Bank of Kazakhstan http://www.nationalbank.kz/index.cfm?docid=178&switch=russian
5.
The availability of bank lending in Kazakhstan. A report on the
results of the study of the views of customers of banks // Sange Research
Center, 2012 www.sange.kz/files/8413/6022/0568/___u.pdf
6.
Consumers and their rights: we need fair rules of the game.
Interview with the Chairman of the Committee on protection of consumers of
financial services G.Z Aymanbetova // Fingramota IAP 14.02.2014
[Electron. resource]. - Available from URL: http://www.fingramota.kz/about/
7.
Krugman P. Secular
Stagnation, Coalmines, Bubbles, and Larry Summers // New York Times, 16.11.2013
8. Report
The future of financial services Intuit 2020
http://http-download.intuit.com/http.intuit/CMO/intuit/futureofsmallbusiness/intuit_corp_banking.pdf
9.
Top financial mobile and internet services: Results of 2012 and
Trends for 2013 International Conference // The site of Financial Group
"Life"http://www.lifesreda.com/assets/LifeSREDA_BestFinancialApps_2012-c204a4077ab541b7a53763e470c44538.pdf
10. Global
Partnership for Financial Inclusion, GPFI
http://www.gpfi.org/about
11. Alliance
for Financial Inclusion, AFI www.afi-global.org