Kazakh bank plans $3 billion bond-buying scheme to ease debt crisis

Kazakhstan's central bank plans to inject 0.6-1.0 trillion tenge ($1.8-3.0 billion) into local banks through a bond-purchasing programme to help them write off bad loans, provided shareholders pitch in too, an official said on Thursday. The central bank will invest twice the amount provided by a lender's shareholders in purchasing banks' subordinated bonds, said Olzhas Kizatov, head of its banking sector supervision department. "We need to support banks' capital so they could actually write off problem loans," he said. "This is only possible through the creation of additional provisions."
According to official data, Kazakh banks' combined bad loans stand at 11 percent of their total assets. "In reality, we understand that this figure is higher," Kizatov said. The bond-buying programme will be launched in September, he said. It follows a 2.4 trillion tenge ($7.2 billion) bailout of the Central Asian nation's biggest lender by assets, Kazkommertsbank, last month.