National Bank wants to use retirement money to lend banks in Kazakhstan

The National Bank is going to use money in the pension fund for lending to commercial banks / Photo: Shutterstock

According to Timur Suleymenov, head of the National Bank, the regulator is going to invest assets of the Unified Accumulative Pension Fund (UAPF), which is under the control of the National Bank, in long-term bonds issued by commercial banks.

As the official noted, Kazakhstani banks need stable sources of funding in order to provide financial resources for long-running projects. UAPF funds might be one of these sources.

However, in order to obtain pension money a credit organization must meet certain requirements of financial stability. No details were provided though. It’s also unclear whether the regulator will require an additional buffer to banks’ capital adequacy. Also, if a bank receives such pension money it would be required to lend these funds to the corporate sector. By doing so, the National Bank wants to promote diversification and economic growth, Suleymenov said.

In Kazakhstan, the National Bank is one of several entities responsible for the management of pension assets of the UAPF. As of October 1, the regulator oversaw $36.6 billion in pension assets. The remaining five private managing companies control $25 billion in pension assets. Kazakhstani citizens can choose any of these companies to manage their retirement capital. Over the first nine months of 2023, the National Bank reported 8.9% in yields. The only company that has shown worse results than the regulator was Central Securities (8.2%). All other private managing companies have shown much better results compared to the bank.

The National Bank also bets on syndicated loans provided to several banks simultaneously. This mechanism is expected to be an effective tool to boost corporate lending. Even though this type of financing has been available in Kazakhstan since 2020, it isn’t popular among borrowers. The country’s parliament has also suggested allowing borrowers to convert their bilateral loans into a syndicated one.

According to Finance Minister Yerulan Zhamaubayev, the cabinet has already chosen $1 billion worth of nine projects that may be subjected to a new syndicated financing approach.

The National Bank is also going to introduce a differentiated rate scale on corporate income tax for banks. Those banks that are actively issuing loans for businesses can count on lower rates of funding.

In early October, the Agency for Regulation and Development of the Financial Market (ARDFM) also suggested raising the conservation buffer for the capital of those banks that aren’t systemically important from 2% to 2.5% in order to make them a bit more interested in issuing loans for businesses. Even though violating of the conservation buffer isn’t a crime, it may lead to a ban on dividend payouts. In this case, banks would use undistributed revenue to issue more business loans, the ARDFM said.