On October 5, 2022, London hosted the 4th International Global NPL Summit. The Agency for Regulation and Development of the Financial Market, Baiterek Holding, and Kazyna Capital Management have organized a panel discussion in collaboration with the Embassy of Kazakhstan in the UK.
Global NPL is a key event that focuses on distressed asset markets and the challenges various countries face in this regard. During the summit, countries that are actively improving their national banking systems (Italy, Spain, Brazil, China, Turkey, and the UK) traditionally hold panel discussions.
During Kazakhstan's panel, the international investment community was presented with the results Kazakhstan has achieved in creating a favorable institutional environment. The participants have also revealed plans to improve the distressed assets market, reduce the NPL level, and involve distressed assets in economic turnover. These goals are expected to be achieved with the help of Baiterek Holding, the country's main financial institution.
At the panel, Madina Abylkassymova (Chairman of the Agency for Regulation and Development of the Financial Market), Kanat Sharlapayev (Chairman of the Board of Baiterek Holding), Natalya Akentyeva (Chairman of the Board of Bank RBK), Rasul Rysmambetov (financial analyst), and Hardip Bhatti (EY Portfolio Recovery and Restructuring Partner) have delivered speeches.
Madina Abylkassymova spoke about the development of the distressed assets market in Kazakhstan, the ways of dealing with distressed assets and involving them in economic turnover, and the latest innovations in the banking sector and the supervisory system.
Today, the amount of distressed assets is estimated at 6% of the total assets of the banking sector (2.5 trillion tenge). It creates favorable conditions for potential investors to enter the market.
The level of distressed assets is the main index of a banking system's reliability. To assess the financial condition of banks, the Agency uses the SREP (Supervisory Review and Evaluation Process) methodology that is based on standards established by the European Central Bank. The Agency also conducts regular asset quality reviews (AQR) and supervisory stress testing.
To accelerate the involvement of distressed assets in the economic turnover, the Agency has created favorable tax conditions for buyers of problem loans. In addition, stressed assets now can remain on the banks' balance sheets for no more than 3 years. The deadline is 5 years for banks' subsidiaries that manage stressed assets.
On July 4, 2022, the government adopted a law allowing private investors and non-residents to buy stressed assets. It will help banks discard non-performing loans, and will also open the market for new investors, including international ones.
It is necessary to form a full-fledged infrastructure for the stress assets market. In this regard, the Agency is creating a unified digital platform for the purchase and sale of distressed assets. The digital platform will help standardize distressed asset information, increase market transparency, expand the investor base, and create a secondary market for buying and selling distressed assets.
Kanat Sharlapayev noted the importance of the initiatives taken and spoke about Baiterek Holding's plans to develop the stressed assets market and interact with private investors:
– Baiterek Holding, as a flagship financial institution in Kazakhstan, aims at increasing the country's investment attractiveness. We will actively work to improve the market for non-performing assets. Our subsidiary Kazyna Capital Management implements these tasks. International investors with relevant experience will help the company develop a liquid market for distressed assets and reduce the NPL level without attracting public funds. Baiterek Holding and KCM will act as reliable strategic partners with local expertise.
It is worth noting that the summit was also attended by the leaders of the Top-10 private equity funds (Blackstone, KKR, etc.), the largest investment banks (Goldman Sachs, J.P. Morgan), international management companies working in the field of distressed asset management (Bain Capital, Apollo, Altamira), and BIG Four consultants.