Kazakhstan plans to inject 2 trillion tenge ($6.2 billion) into its state-owned 'bad bank', the Problem Loans Fund, in order to buy distressed assets from local banks, central bank deputy chairman Oleg Smolyakov said on Monday.
The capital injection will come from the state budget and will be partly financed by an increased transfer from the state oil fund, said Economy Minister Timur Suleimenov, who spoke to paarliament alongside Smolyakov The International Monetary Fund said this month that resolving the issue of bad loans, some of which are yet to be recognised, is the main challenge facing the oil-exporting Central Asian nation.
Officials did not name any banks that might offload their bad assets to the fund, but the market's focus is likely to be on Kazkommertsbank (KKB). Halyk Bank , Kazakhstan's largest bank, which is in talks to take over Kazkommertsbank, said last month it wanted the latter to get rid of bad assets before a deal is finalised. KKB has an outstanding loan of $7.5 billion, around half its assets, to BTA, a former bank that is now a distressed asset management company.