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2 october 2009 Recently proposed concept of the stabilizing bank is under further elaborationFMSA (Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations) posted to its web site draft regulations (the “Regulations”) with respect to stabilizing bank (the “SB”):- The Regulation on establishment, licensing and formation of a minimum size of the charter capital and shareholders’ equity of the stabilizing bank; - The Regulation on management of the stabilizing bank, entering into transactions, in respect of which special procedures are established and the termination of the stabilizing bank’s activity; - The Regulation on conservation of the second-tier banks and conduction of the operation on simultaneous transfer of assets and liabilities of a bank in part or in full before individuals and/or legal entities to another bank (banks) by the temporary administration (temporary bank administrator) of the bank. As alerted in our previous Client Note, FMSA introduced a new concept – the stabilizing bank, to the Banking Law (Law of the Republic of Kazakhstan On Banks and Banking Activity in the Republic of Kazakhstan dated August 31, 1995), under which a bank that is undergoing conservation may transfer its assets and liabilities to the SB. Currently, no conservation regime is initiated towards any Kazakh bank. Those Kazakh banks facing liquidities shortages are at the stage of negotiating their debts with creditors. For example, BTA Bank, the aggregate debt of which is around USD 12 billion, has announced that it has entered into a Memorandum of Understanding with the Creditors’ Steering Committee to restructure BTA’s financial debts. Under the Memorandum the parties will cooperate on agreeing the terms of restructuring. But in case the parties fail to agree on terms of restructuring, FMSA might initiate conservation regime towards BTA Bank and, subsequently might approve transfer of BTA assets and liabilities to the SB. Under the amended Banking Law, a bank that is undergoing conservation may, subject to approval of (i) FMSA and (ii) its depositors and/or creditors, transfer its assets and liabilities in part or in full to the SB. Transfer of assets and liabilities to the SB is meant to be approved by depositors and/or creditors in case they do not object in writing within 5 calendar days since the relevant announcement made in printing publications. Neither the Banking Law, nor the draft Regulations, specify procedures of filing of an objection or requirements on content of objection. We also note that the time period of filing is very short (five calendar days only!) and there is a risk that creditors/depositors might simply not be able to comply with a deadline. Once the transfer to SB is approved, FMSA establishes a bank with a status of stabilizing bank. The draft Regulations propose simplified procedure of establishment. The SB also obtains banking license and is allowed to perform all banking operations provided by the Banking Law except for certain activities. Under the draft Regulations, the transferrable “liabilities” include bank liabilities under deposits of individuals and/or legal entities except for inter-banking deposits and deposits of SPV subsidiaries. The transferrable “assets” include highly liquid assets specified so in the FMSA Prudential Norms Regulations and other assets, classified as standard or doubtful, of first and second category and not overdue for more than 30 days. One condition for transfer is that a ratio of assets to the liabilities shall not exceed 150%. The transferred assets are estimated by book value. The SB, besides, is allowed to substitute the “worsening” asset to another asset of a bank or transfer back to a bank the liabilities which are not covered by assets or in case size of liabilities put the SB into interest rate risk or liquidity risk. Under the Banking Law, once the transfer to the SB took place, performance of liabilities before individuals and/or legal entities, except for accrual of interest, shall be suspended for up to 12 months. The purpose of the SB is (i) improvement of quality of assets received from the “problem” bank; (ii) transfer of assets and liabilities of SB to the other bank (banks) – acquirer; and (iii) sale of shares of the SB to an investor who will guarantee its functioning under the Kazakh law requirements. The draft Regulations further establish procedures for transfer of assets and liabilities to a third party bank as well as qualification requirements to such bank. Once an investor acquires shares in the SB, the SB loses its status of stabilizing bank and shall operate in accordance with Banking Law and regulations established for the secondtier banks. The third draft Regulation mentioned above is also aimed at substituting the existing “Regulation On Conservation of Banks in Kazakhstan” (the “Existing Conservation Rules”). The draft Regulation repeats certain provisions of Existing Conservation Rules, e.g., restrictions that can be applied by FMSA (at its own discretion) during the conservation:
This Client Note is prepared based on the text of draft Regulations available on the web-site of the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (www.afn.kz). Please note that the final/enacted version of the Regulations may differ from one we reviewed herein. GRATA Finance and Securities Team Rashid Gaissin Managing Partner RGaissin@gratanet.com Kamilya Nurpeissova Senior Lawyer KNurpeissova@gratanet.com Tel.: +7 727 2445777 Fax: +7 727 2445776 |
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