Baiterek Holding jointly with the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market held a panel session “Kazakhstan” in the framework of the IV International Summit “Global NPL”

On October 5, 2022, on the sidelines of the 4th International Summit “Global NPL” in London (Great Britain) the panel session “Kazakhstan” organized by the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market together with Baiterek NMH JSC and Kazyna Capital Management JSC with the support of the Embassy of the Republic of Kazakhstan in the United Kingdom of Great Britain and Northern Ireland was held. Global NPL is a key event to review the development of the distressed assets market and regional challenges in this area. Traditionally, states that are active in the recovery of the national banking system, such as Italy, Spain, Brazil, China, Turkey and the UK, hold sessions on the sidelines of this forum under the auspices of their country. During the session, the international investment community was presented with the results of the work done in Kazakhstan to create a favorable institutional environment, plans of the banking sector to improve the market of distressed assets and reduce the level of NPL, as well as further actions to involve this class of assets in economic turnover with the participation of Baiterek Holding - the key financial institution of the country. The speakers at the panel session were Madina Abylkasymova, Chairman of the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market, Kanat Sharlapayev, Chairman of the Management Board of Baiterek NMH JSC, Natalia Akentyeva, Chairman of the Management Board of Bank RBK JSC, Rasul Rysmambetov, Financial Analyst, and Hardeep Bhatti, EY Partner for Portfolio Recovery and Restructuring. At the summit, Madina Abylkasymova, Chairman of the Agency, spoke on the topic “On development of the market of distressed assets in Kazakhstan”, she told about creating effective mechanisms for clearing the banking sector of Kazakhstan from distressed assets and their involvement in economic turnover, and about recent innovations in the banking sector and the supervisory system. Today, the amount of distressed assets is estimated at 6% of banking sector assets (KZT 2.5 tln.), which is attractive to new potential investors to enter the market. Madina Abylkasymova noted that the level of distressed assets serves as the main indicator of the reliability of the banking system. In order to form an objective picture of the financial status of the banking sector on an ongoing basis, the supervisory process of the Agency is built on the application of a risk-oriented approach from 2019, providing for the assessment of the financial condition of banks using the SREP (Supervisory Review and Evaluation Process) methodology based on the European Central Bank model, as well as regular AQR (Asset quality review) and supervisory stress-testing. In order to accelerate the involvement of distressed assets into economic turnover, the Agency adopted regulatory measures aimed at creating a favorable tax regime for buyers of nonperforming loans. In addition, there are limits on the presence of distressed assets on the balance sheets of banks of not more than 3 years and their subsidiaries that manage distressed assets of not more than 5 years. In order to attract private investors to this market, a law was passed on July 4, 2022 to expand the list of buyers of distressed assets by including private investors, including non-residents. This creates a market mechanism for cleaning up banks' balance sheets from nonperforming loans, as well as providing access to the distressed assets market for new investors, including international investors. Additionally, the formation of a full-fledged infrastructure for the market of distressed assets is required, which includes the construction of a platform for free purchase and sale of distressed assets, and ensuring the transparency of information for all market participants. To this end, the Agency is working on the issue of creating a unified digital platform for the purchase and sale of distressed assets. The digital platform will contribute to the standardization of information on distressed assets and increase market transparency, expand the investor base, and form a secondary market for the purchase and sale of distressed assets. In turn, Kanat Sharlapayev noted the importance of the adopted initiatives and spoke about the plans of Baiterek Holding to develop the market of distressed assets and interaction with private investors: Baiterek Holding, as a key financial development institution of Kazakhstan, aims to increase the investment attractiveness of the country and will work actively to improve the market of non-performing assets. The Holding’s subsidiary Kazyna Capital Management Fund of Funds is involved in the implementation of these tasks. KCM together with International Investors with relevant experience will work out several options aimed at developing a liquid market for distressed assets and reducing the level of NPLs without attracting public funds. In each of the options, Baiterek Holding together with KCM will be a strong strategic partner with local expertise. It is worth noting that Heads of Top-10 Private Equity Funds (Blackstone, KKR, etc.), major Investment Banks (Goldman Sachs, J.P. Morgan), international Distressed Assets Funds Management Companies (Bain Capital, Apollo, Altamira) and BIG Four Consultants were invited to participate in this event in 2022.