The Bankers’ Association for Finance and Trade (Baft) has met with leading government financial officials of Kazakhstan to convey concerns over recent developments in the Kazakh banking sector regarding the honouring of outstanding trade finance obligations.
Donna Alexander, president of Baft, met with Grigori Marchenko, governor of the National Bank of Kazakhstan, in Hong Kong two weeks ago and followed up with a meeting last week in New York with Bolat Zhamishev, Kazakhstan’s minister of finance. On both occasions, Alexander expressed Baft members’ concerns about the impact that the restructuring plans could have on global trade finance.
Three of Kazakhstan’s largest banks, representing more than 35% of the nation’s entire banking system by assets, have defaulted on significant loan obligations this year and are working through debt restructuring plans. At issue for Baft members is that trade finance could be subject to significant discounting under these plans, a move that is without precedent in the global trade finance markets for banks with overall systemic national importance.
“We are deeply concerned over the Kazakh banking sector restructuring proposal and hope that continued discussions with officials will help shed light on the ramifications of such a decision,” Alexander said. “Disregard for well-established international practices on the disposition of trade-related transactions could result in international banks responding to the proposed restructuring plan by cancelling trade facilities – which could take many years to be reinstated.”
Baft member banks have been very active in assisting in the international development of Kazakh companies and banks. Discounting repayment of trade-related transactions could have a significant negative impact on future business in the Kazakh banking sector. Baft recently sent letters to President Nursultan Nazarbayev and prime minister Karim Masimov emphasising this potential outcome, noting that other countries and banks have continued to prioritise the repayment of short-term trade finance obligations despite facing stress levels similar to those confronting Kazakh banks.
However, both officials indicated they did not believe the restructuring plans would have any lasting effects on the Kazakh economy.
“The extension of trade finance is essential for engaging in international trade which drives economic growth,” said Alexander. “To underestimate the impact of the restructuring proposal on Kazakh growth and development could be a grave mistake.”
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