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Kazakhstan to pump $5 billion into top banks

Kazakhstan to pump $5 billion into top banks

Kazakhstan plans to buy around $5 billion of newly issued shares in the country's top four banks to stave off a renewed banking crisis, the nation's prime minister said Tuesday.
The decision to buy into the banks _ Alliance Bank, BTA Bank, Halyk Bank and Kazkommerzbank _ is in line with recommendations from the Kazakh financial markets regulator, Premier Karim Massimov said in a statement.
Kazakhstan, the largest economy in central Asia, has endured a severe liquidity crisis over the past year with inflows of foreign capital drying up as the global credit crunch unfolded.
Under the plan, the state could end up with 25 percent of voting shares in the lenders, Massimov said. He ruled out the possibility that the government would seek to gain a controlling stake in any of the banks.
"It should be noted that the government does not plan to remain a shareholder in the banks for the long-term, and we hope to emerge from the banks in the medium-term, depending on the situation in the global financial markets," Massimov said.
The $5 billion investment program will be implemented by Samruk-Kazyna, a state holding company, which was recently created by the merger between the national development fund and the state assets management company.
The government also proposes to boost liquidity at the country's central bank, known as the National Bank, which will in turn support a range of second-tier lenders.
"The National Bank will be supporting banks' current and short-term liquidity by lowering minimum reserve requirements and expanding the range of potential collateral items for repurchase operations," Massimov said.
President Nursultan Nazarbayev has said his government will not hesitate to dip into its $51 billion of foreign currency reserves to prevent budgetary shortfalls.
The government last week announced plans to inject $15 billion _ equivalent to some 15 percent of the country's gross domestic product _ into the domestic economy by the end of the year to buffer the country from the fallout from the global financial crisis.
Another recent measure to restore confidence to the banking sector included a decision to increase the charter capital of the national deposit insurance scheme to more than $830 million from $250 million, increasing minimum coverage for individual account holders to around $41,000.
Kazakhstan has also said it will create a $1 billion distressed asset fund to assist banks in dealing with non-performing loans.