Examine the state of the resource base of banks in the Republic of Kazakhstan

Another aspect of the deployment for Basel III is the choice: to develop the system yourself or buy it from a supplier? With the exception, perhaps, of a deeper analytical view of the business, making independent development does not have much competitive advantage. Regulatory requirements are fundamentally the same for all banks. In addition, the international rules are systematically subject to change. Tracking these changes is an important but daunting task. In software vendors have special units for the analysis of these changes and bring the product into compliance with them. Is not profitable for banks to do this work yourself. Maintenance costs of the routine work associated with the regulations, it is easier to carry the suppliers, especially if the bank does not understand the effect of changes in regulations./26/

Applying the requirements of Basel III to different regions and countries, different problems arise. EU countries have consistently taken the previous rules of the Bank for International Settlements (BIS). So there is hope for an organic transition from the requirements of Basel II to Basel III. The European Union plans to produce a single set of rules for the whole of Europe, not to encourage stricter requirements in individual states and ensure a level playing field by reducing the differences in regulatory arbitrage. U.S. essentially skipped Basel II. Therefore, the country will implement the specification with new energy, building it on the basis of the principles of Basel I, simplified according to the law the Dodd-Frank. The degree of transition to a particular cycle varies considerably from country to country: Japan, Hong Kong, Singapore and Australia have made progress in this area - they are now on a par with the EU. Painting in Russia, Eastern Europe, Middle East, Africa and the Asia-Pacific region is less clear. Some countries may decide to start with a clean slate and implement a complete set of rules. Other - Use of Basel III as a starting point, not covering the whole set of requirements. For example, Russia recently announced the transition from standardized approach to the calculation of credit risk to an approach based on internal ratings (IRB) 2015 Some of the Middle Eastern countries are in the process of transition to IRB-model. In a number of countries could also be another current system of regulation, which in some cases can mean the replacement of the internal standards requirements of Basel III. However, it may be necessary to parallel execution of domestic and international law. Some may decide to move to the requirements of Basel III on its own, tightening regulations if, in the opinion of the authorities, Basel III does not meet the requirements within a particular country. This can lead to the creation of specific requirements and processes that need to be taken into account when implementing the specification. Global differences further complicate the situation, because banks may have to comply with different rules in different jurisdictions. Some banks will have to report in accordance with the requirements of Basel II in the same country and in accordance with the requirements of Basel III to another, depending on their location. The situation is further complicated by the fact that many regulators require banks to continue to submit reports in accordance with Basel I framework approach using a standardized model for calculating credit risk. This will allow the regulator to have a single method for comparison of all the banks, whose activities it regulates, regardless of whether they use the banks themselves - IRB-approach or the standardized model. In Europe, banks using IRB, regulators agreed that the lower limit on the Basel I should be within 80-90% of the index, calculated using the most "costly" standardized approach. In the U.S., this lower limit is 100%. In fact, it may mean that banks will have to comply with the requirements for compliance with the whole set of standards under Basel I, II and III, depending on the location of the activities and the requirements of local regulators. Reports will be required to provide detailed information regarding this matter, so as not to mislead the regulator or the market. Organizations using models based on separate data become extra burden in terms of additional costs and overheads in the cast of the companies that use a more centralized approach to the collection and consolidation of data and filing reports on standards of Basel I, II and III. All this must be taken into account in applying the principles of Basel III and the implementation of new solutions in the framework of a particular bank.

To comply with the requirements of Basel III, all banks are now required to take the necessary measures to provide financial departments and departments of risk management quick and easy access to centralized, verified and accurate data. These data should reflect the credit, market, operational risks, and the risks of concentration, lower credit quality and liquidity risks of the Bank. You will also need to calculate the increased capital, new liquidity ratios and new gearing ratio means that already in 2013 to be able to start reporting to the local supervisory authorities across the set of forms required by various state regulators. The requirements of Basel III to data management are important. To the bank, the regulator and the market could get a clear picture of the situation of the bank, the data must be fresh, accurate, and consistent. This problem cannot be solved efficiently if the data is stored in scattered form in several departments of the bank. Furthermore, they must be carefully structured. Proper data management must ensure receipt invariably true calculations of capital adequacy ratios, the ratio of equity and debt, and a measure of liquidity. This requirement, coupled with significantly increased standards of Basel III - in terms of detail and frequency of reporting - means that the data management in the Basel III standards required to perform more work than ever. Quality, relevance and timeliness of the data is perhaps the most important criteria for determining the success of the implementation of Basel III.

After filing reports the regulator there is a high probability that he will continue to work with the bank to determine the key issues concerning the method of calculating the results and application of standards. This requires rapid determination procedures, testing, approval and submission of data. Information provided in addition, must not contradict the report, including the format. Data preparation should be done as cost-effectively as possible. Also, remember that it should not affect other business operations. Such audit process will be particularly difficult for the banks in which data are stored separately in the storage and a large number of systems because the necessary information on the search will take longer. Banks using a centralized storage model, will be able to respond to inquiries more quickly and efficiently, thereby streamlining the compliance standard rules and reporting processes.

Stress testing, or the ability to understand how significant developments in the market will affect the key performance indicators and ratios, acquired increased importance in the framework of Basel III. Stress testing should be more careful, it will be more frequent, affecting a wider range of data. Ensure that such a stress test will be difficult, if the data in the organization spread across multiple repositories. Testing will take longer, require more effort and give less accurate results with an alignment with the model data storage, in which all the important information is in one central repository. Using a centralized storage will enable the bank to perform a wide range of complex stress tests that will meet the needs of business, giving analytical picture of the organization, as well as meet the requirements of the regulator, that is, to ensure compliance with the standards.

Basel III rules reflect the integrated nature of banks and banking. Administrative decision in accordance with the data should help to fulfill the requirements of integration - otherwise, to carry out its provisions will require a much higher overhead than necessary. In view of the growth occurred banks, they develop new services (and supporting systems), and the combined activity of the transition to a truly integrated system without disturbing the functions of the bank will be challenging. The ideal management solution will consolidate and calculate the capital of the organization's liquidity and financial leverage, and to report on these indicators on a single, centralized platform for reporting. Such a system can be seamlessly integrated with other systems of the original data. It will support data validation function at a high level and will store large amounts of information. This approach would streamline the process and allow risk managers to focus on the priority actions for risk management, instead of engaging in the time-consuming tasks, such as data extraction, quality, and reporting. Rapid tools to facilitate the calculations weekly and even daily calculations and the data will lead to an integrated and comprehensive financial statements prepared in strict accordance with the requirements of local regulators. Also, these tools are more fully disclose the situation to the bank. The pursuit of this ideal for many banks will be a tedious process. If we examine this question in context with other tasks described above, it becomes clear why underestimate the difficulties of implementing Basel III standard so easily. However, when these issues are addressed in the context of the organization of the bank, if you have the right approach and a set of tools you can find a solution that will allow the bank to go to the standards on time and within budget.

On January 1, 2013 in Kazakhstan was planned to start a phased introduction of the new version of the document - Basel III - with the full transition to the new standards in 2015. However, it was postponed indefinitely.

The cause lies in the unpreparedness of a number of countries, and more specifically, their banking systems to new standards of banking regulation. Probably position of the U.S. and the UK was decisive. The experts spoke highly controversial implications of Basel III for both banks and the economy of various countries.

Basel III will influence primarily on the structure and quality of capital - increase the minimum requirements for banks' capital adequacy and Tier I capital, of which also excludes a number of tools. The main task of bank capital will be prevention of potential losses in the normal course of business of a bank, and even in the event of complete termination. Also important new standard requirements for liquidity management of banks have important meaning i.e. they are formulated for the first time and adopted as a uniform international standards. Basel II includes a new approach to diversification of the loan portfolio of banks' risk management in general, and even to the standards of disclosure.

Even without implementation of Basel III, we can see that requirements of minimal size of bank capital are higher than in other countries.

If you look at the requirements for minimum capital of the world, the largest number of countries are in the area from 1 to 5 million euro. Lower limit for regional banks is 5,000,000,000 tenge, for Republican is 10 billion tenge. However, this does not affect the stability of the banking system, but rather reduces competition and promotes the expansion of the various micro-credit organizations.

In comparison with Russia, where only recently the requirement for minimum capital of banks increased to $ 6 million, then of course, our banking system is more "clean" and healthy. If you look at the situation in general, excessive demands of our National Bank is largely due to previous plans to create a regional financial center of Almaty. They planed that market of financial institutions from near and far abroad will come into our market. However, the financial center for objective reasons could not be established, and we live in is not quite a normal situation that impedes the creation of new small banks, which could also contribute to the development of the peripheral areas of the country. For example, in some U.S. states, the bank can be opened with only 70 thousand dollars. This, of course, these banks fully fall within the scope of all regulatory standards. Raising the bar four times higher than the average values, the regulator has seen the future of the country "Eurasian Leopard" with the economy like the "Asian Tigers" - Singapore, Malaysia, Indonesia and Taiwan. By the way, there is minimum capital requirements - $ 100 million. But do not forget that the level of monetization of the "Asian tigers" is several times higher than in Kazakhstan . In Singapore it exceeds 100%, while in Kazakhstan - less than 40%. It is impossible to ensure economic growth and stability of the banking system only by a single parameter - the capital.

At the same time implementation of Basel III has strengths and weaknesses. Advantage of Basel III is the creation of additional capital. Also Basel directed towards the reduction of operational risk and liquidity risk. Weaknesses are that the banks will have to not only reduce the current minimum lending period exceeding one year, but also encourage customers to repay previously issued the medium and long term loans for balancing their assets and liabilities as soon as possible. Obviously, it will have negative impact on the domestic business. The second disadvantage is that it reduces competition and leads to the increase in number of the various micro-credit organizations. We'd like to say that only time will tell that the introduction of Basel was right decision or not.



3.2 The implementation of certificate of deposit

Nowadays in banking system there is a problem of the shortage long-term liabilities. This problem can be solved by the implementation of certificate of deposit.

97% of deposits in local banks may be withdrawn by depositors without loss of interest rate during the year indicated in the study of the consulting company Ulagat Business Group.

Today retail deposits and deposits of legal entities are key source of funding. They make up two thirds of banks' liabilities. With the second wave of the global financial crisis, it is supposed that the structure will remain so for the next 5-7 years. In the case of crisis in the economy investors can start withdraw deposits. This will have very negative consequences both for the banks and for the state, in this case state will devote significant resources to support liquidity and stability of the banking system. This threatened by the situation faced by foreign banks, for example, Northern Rock - the 5th largest mortgage bank in the UK from which over 3 days about $ 4 billion was withdrawn, equivalent to 8% of the total deposit base of financial Institute. As a result, the state was obliged to provide a full guarantee for all liabilities of the bank, and the cost of its support amounted to $ 27 billion.

The analysis of the anti-crisis measures in the banking crises shows that about 70% of occasions a state is forced to allocate additional resources to support liquidity, and in 30% of occasion - a comprehensive guarantee on deposits and liabilities of banks. This issue is taken into account in the new requirements for the regulation of the banking sector Basel 3. "We plan to introduce Basel , and if it will be entered in full, then the banks will have to not only reduce the current minimum lending period exceeding one year, but also encourage customers to repay previously issued the medium and long term loans for balancing their assets and liabilities as soon as possible. Obviously, it will have negative impact on the domestic business./23/

The solution of this problem requires government program on the increase in the stability of the deposit base of commercial banks of Kazakhstan. The banks themselves can not correct the situation in this case, as competition between banks is very high. On the other hand, the price for the mistakes of banks can be very large, because deposits are now the only source of funding. The strategy directed at the solution to presented problems lies in implementation of deposit of certificate and development

Certificate of deposit is transferable security, indicating the presence of deposits with fixed interest rates in a bank or other financial institution. There is a number of advantages of using certificate of deposit for banks and for investors. On the one hand, it eliminates the need to withdraw the money in the bank when the investor needs money, because in some cases, instead it will be possible to use certificates of deposit. If you have a certificate of deposit, then you can sell it in the market to the pension fund, insurance or investment company to another investor. Certificate of deposit can be used as collateral for loans or as payment for transactions.

An increase in the amount of marginal rate guarantee on deposits placed with the help of certificate of deposit can encourage the use of such tool. It is proposed to increase the amount of guarantee for deposits from 1 year to 2 years to 7.5 million tenge and increase the maximum rate of interest of KDIF by 1%, and in the case of deposit for a period greater than 2 years of age to provide assurance to increase the amount of 15 million tenge and increase interest rate by 1.5%. These measures are proposed to extend on corporate deposits.

Clearly, this will require additional capitalization of KDIF. Experts suggest that it could be a $ 3.4 billion and for these purposes they offer to use international reserves of the National Bank. "If there will be an outflow of deposits and liquidity problems, the situation could be repeated as in 2007, when in the banking system $ 10 billion was poured. It is better to increase the stability now. And besides, we can provide some kind of framework for the return of funds by banks in 5-7 years - said Marat Kairlenov.

Market participants believe that such innovations have a positive impact on the banking sector. If this project will be implemented, it will help in the development of the banking system and the economy as a whole. The economy today is in need of "long-term" money.

Let's study the foreign experience of using certificate of deposit.

American certificate of deposit is a type of time deposit.Two general deposit categories exist with a $100000 denomination separating the groups.

Time deposits less than $100000 are most often called retail certificates of deposits or small certificates of deposit (CDs). The features of small CDs are not as standardized as large CDs although most bank market standardized instruments so that customers are not confused. Banks and customers negotiate the maturity, interest rate, and dollar magnitude of each deposit. The only stipulation is that small time deposits carry early withdrawal penalties whereby banks reduce the effective interest paid if a depositor withdraws funds prior to the stated maturity date.

Time deposits of $100000 or more are labeled jumbo certificates of deposit and are negotiable (can be bought and sold in the secondary market) with a well-established secondary market. Anyone who buys a jumbo CD or NCDs can easily sell it in the secondary market as long as the issuing bank is not suffering known problems.

Negotiable certificates of deposit (NCDs) are certificates that are issued by large commercial banks and other depository institutions as a short-term source of funds. The minimum denomination is $100000, although a $1 million denomination is more common. Nonfinancial corporations often purchase NCDs. Although NCD denominations are typically too large for individual investors, they are sometimes purchased by money market funds that have pooled individual investors' funds. Thus, money market funds allow individuals to be indirect investors in NCDs, creating a more active NCD market. Maturities on NCDs normally range from two weeks to one year. A secondary market for NCDs exists, providing investors with some liquidity. However, institutions prefer not to have their newly issued NCDs compete with their previously issued NCDs that are being resold in the secondary market. An oversupply of NCDs for sale can force them to sell their newly issued NCDs at a lower price.

Some issuers place their NCDs directly; others use a correspondent institution that specializes in placing NCDs. Another alternative to sell NCDs to securities dealers, who in turn resell them. A portion of unusually large issues is commonly sold to NCD dealers. Normally, however, NCDs can be easily sold to investors directly at a higher price.

NCDs must offer a premium above the T-bill yield to compensate for less liquidity and safety. The premiums are generally higher during recessionary periods. The premiums also reflect the market's perception about the safety of the financial system.

The problem of managing liquidity and interest rate risk management can be solved through the use of certificates such as Callable certificates and certificates the rate of which interest charged is tied to a change in the average market rate, or any market index (Step Up / Down, Variable rate).

A bank may issue a callable CD as a way to protect itself against changing economic conditions. With this product, the bank may offer an initial interest rate that is slightly higher than its fixed rate. However, it retains the right to "call" the CD, meaning it can take it back and issue one with a lower interest rate. The CD contract normally specifies a time frame in which the bank can call the product. Once this window passes, it must keep the CD at the initial interest rate for the duration.

Certificates of deposit such as Step Up / Down and Variable rate comfortable for banks relative size of the interest to be paid will be the same, regardless of the rates in the economy. As a base of indexation average market interest rate, the inflation rate in the economy, government bond yields or market index are chosen. However, in case of Callable, and certificate with indexed interest rate, there is a risk that in the event of premature termination of the issuer or a decrease in accrued interest following the market such certificates will not be sold in the secondary market without significant losses for themselves.

There is also a Brokered certificate of deposit, they are issued by deposit brokers, that this does not prevent this kind of certificates help to solve the general problem of liquidity. The holder of such a certificate is a group of independent investors. At the same time, in view of the high risk in comparison with other certificate of deposit, interest on brokered certificate of deposit is somewhat higher and lower commissions, which makes the tool more attractive to investors.

It is important to note that almost any kind of certificate can be sold in the secondary market. For return on investment it is more profitable to realize a certificate in the market, rather than withdraw money from the bank. Banks remain long-term liabilities at a fixed price, and customers at the same time can quickly regain its contribution with minimal losses, without going to the bank. This possibility makes the client panic less dangerous for banks. As a result, interests of banks and depositors are satisfied.

In contrast to a fixed CD where the interest rate remains the same for the entire term, a bump-up CD provides the opportunity for a "bump-up" to a higher interest rate one time during the term. The potential drawbacks are that bump-up CDs usually start with a lower interest rate than fixed CDs, and there is no guarantee as to when or if interest rates will rise. It is possible that the investor will be stuck with the initially low rate throughout the term.

With most CDs, investors must agree to keep the money in the CD until its maturity date or incur substantial penalties for early withdrawals. With a liquid CD, investors have the option to withdraw money on a penalty-free basis, provided they maintain a specified minimum balance. The investor may be limited as to the number and amount of the withdrawals, and may also receive a lower interest rate than that offered by other types of CD products.

Another interesting type of certificate is Add On. This option suggests the possibility of add funds. It is very comfortable when the certificate is opened for long-term saving of funds. This again is beneficial to both banks and depositors. Customers do not need to now wait for the expiry of the old certificate to increase the amount of the deposit, and you can immediately implement the long-term investment and then simply add funds to the principal. The interest on long-term deposits is higher and money do not lie idle. For banks, such as certificates represent an increased likelihood that funds will not be withdrawn before maturity./5, p.362/

In addition to facilities for the general population, the U.S. certificates of deposit can be beneficial even to those who wish to invest for the long term. So there are certificates of type Zero Coupon, which are issued for a period of 15-20 years and are sold at a discount. This allows customers, on the one hand, to realize their investment opportunities, and on the other hand, to give maximum flexibility to banks in terms of method of placement of these funds.

Thus, in the United States presents a set of types of certificates of deposit for all tastes, and his version will be selected for both the population willing to invest for a fixed term at a higher interest rate than time deposits, and corporations who have an opportunity to very profitable place their available cash flow. It remains to understand what prevents Kazakhstan from adopting this successful experience.

Obviously, for smooth functioning of the entire system it needs its precise regulation. In the United States, the major regulatory agencies are the Federal Reserve System and the FDIC. They set the same the requirements for all for the implementation of allocations to reserves, maintaining records of all owners, claims under certificates and all the middlemen, the general requirements for maintaining maximum transparency of the whole system and so on. In addition for creating a more comfortable environment to investors, there is CDARs (Certificate of Deposit Account Registry Service). In fact, it is an association of member banks, engaged in allocation of client resources. The association itself does not own. It only distributes. If the client wants to invest (in excess of the maximum limit of coverage) into a tool such as a certificate of deposit, coming to any bank- member of CDARs, enters into a contract with the association. The treaty is given to customer. This treaty is documentary proof of legal relations arising. Further, the bank without the participation of the client divides the entire amount into the required number of parts so that each part with interest covered by the warranty FDIC. The resulting parts are distributed to other member banks CDARs, which issue certificates of deposit, according to part. Accordingly, in case of the issue of each certificate, the issuing bank makes the necessary payments to the FDIC, as if the bank had just issued a certificate for that amount. There is no need for client to go to different banks, opening certificates to decompose a large sum at once on the same terms. In this case, all funds may be disposed of through the mediation of only one bank through which contract originally was concluded with the association. And in order to prevent situation when part of the funds are placed in those banks in which the client already has some investments in the same category of property, the customer must provide complete and accurate information about their deposits in other banks of association, if he has. Accordingly, the commission is taken by the Association for the service itself, because the client does not need to go anywhere and cares about what exactly banks issued certificates under its funds. Customer saves time, nerves and effort, workflow is simplified.

At the same FDIC has no claims against the CDARs, because in the agreement that is signed by all member banks of the Association, clearly defined all those requirements for the registration and maintenance of transparency of information systems that FDIC impose on all agents. Also, due to the passage of information on most of the certificates of deposit issued by the association, the process of collecting information on all deposits is greatly simplified for the FDIC. All this, in turn, helps to maintain a well-functioning secondary market of certificates of deposit.

This system was formed in the United States for decades. Its distinguishing feature is its flexibility, which allows banks to solve the problem of liquidity management by establishing a clear system of interest rate. At the same time, customers can choose their desired form of deposit and terminate the contract on time, pre-imagining the future and the consequences.

To sum up, we show again how a certificate of deposit of the American type can solve the problems inherent in the Kazakh banking market. Thus, the problem of lack of long-term funds by Kazakhstani banks can be solved by the fact that the American version of the certificate of deposit is issued for a longer period of time (usually 3 months to 5 years), while the secondary market of this tool really works. /23/

So, for early return on investment certificate holder can simply sell it instead of withdrawing money from the bank. This, in turn, is a solution to the problem of liquidity. Instead of mass panic withdrawals in volatile periods for the economy people can sell their certificates. The main thing is that the likelihood is high that before the repayment the money will remain in the bank, unless, of course, the possibility of an early withdrawal is not spelled out in the contract. In any case, the customer always has the right to choose, and still have the opportunity to return money quickly and relatively painless in terms of loss of a part of revenue. The presence of such a possibility could have a positive impact on the attitude of the banking system as a whole. An increase in supply of certificates of deposit in the secondary market, of course, will have its decreasing effect on the price, but it's still better than to solve the problem in the courts. However, the interest paid on certificates of deposit is higher than on conventional deposits. As a result, the both banks and depositors are happy.

As a result, banks receive long-term liabilities at a predetermined price, the population has income higher than for time deposits, return on investment and more money does not harm the banks and significantly less likely to lead to the settlement of the issue through the courts.



Conclusion

Carried out research of the study of the formation and strengthening the resource base of banks in a market economy has shown that the formation of the resource base, which includes not only the attraction of new customers, but also the constant change in the structure of sources of resource mobilization, is an integral part of flexible management of assets and liabilities of commercial bank. Effective liability management suggests the implementation of a competent deposit policy, which is based on maintaining the required level of diversification, providing opportunities to attract financial resources from various sources and maintenance of balance with the assets on timing, amount and interest rate.

In addition, the scope of activities of banks, defined by the object of its active operations, depends on the total amount of resources available to them, and especially the amount of borrowed funds.

Management of bank resources is a complex process of their formation and placement, which faces certain restrictions in the form of prudential standards developed by international and national supervisory authorities.

Equity capital for a commercial bank, as for any other commercial structure is the core activities that define its scope and volume of resource mobilization. In other words, the activity of commercial banks is largely determined by the size and structure of the equity.

The analysis allowed us to draw the following conclusions:

The share of capital in total equity of the bank shows the extent of forming its own capital through equity. The share capital as compared to 2010 decreased, but not by much: in the period 2010-2012, its share has decreased by 0.38%.

Analyzing the dynamics of the bank's own funds it can be concluded that the observed downward trend of total equity by reducing the share premium (16,925 mln.tg) and retained earnings (113,208 mln.tg).

Other provisions in 2012 compared with 2010 have a positive trend and increased by 237%. However, the increase of this indicator is negative and may be associated with increased risks of banking (credit risk, interest rate risk).

Shareholders' equity decreased over the period from 413.746 to 353.466 million tenge that is decreased for 60, 294 million tenge.

Analyzing the dynamics of changes in Return of Equity of JSC "Kazkommertsbank" we see a decrease in the rate of Return of Equity from 5.53% in 2011 to 5.18% in 2012 which means the decrease in efficiency in the use of equity. Return on equity decreases with the decrease in net profit.

Analyzing the results of the calculations of the Concentration ratio of equity, we can conclude that the assets are covered by their own sources of formation. In 2010, the figure was 0.15 depending, in 2011 - 0.17, in 2012 - 0.14, that is, above the regulatory limits, which indicates a good, independent financial condition of the bank.

In calculating the capital adequacy ratio as at 31 December 2012, 2011 and 2010. The Bank included in the calculation of capital obtained a subordinated loan in the amount not exceeding 50% of Tier I capital. In the event of bankruptcy or liquidation of the Bank, repayment of this debt is the Bank's liabilities to all other creditors. For the years ended December 31, 2012, 2011 and 2010. The Bank fully complied with all established requirements for the capital.

There is a tendency to the increase in the volume of deposits.

The share of retail deposits exceeds the share of deposits of legal entities in Kazkommertsbank, but the volume of retail deposits goes up rapidly. The volume of retail deposits starts to catch up with the volume of deposits of legal entities.

In comparison with other banks, the growth of retail deposits and deposits of legal entities is not high. This is explained by the fact that Kazkommertsbank reduced interest rates on its deposits.

The share of time deposits exceeds the share of demand deposits. There is a tendency to an increase in volume of time deposits and opposite tendency to decrease in volume of demand deposits.

Customers prefer to keep money in tenge.

Kazkommertsbank took out most of loans under repurchase agreements (65%).

In 2012 the volume of non-deposit resources was 109,974 mln, 2011 - 91,877 mln, 2010-147,138 mln. In comparison with 2011, we can see the tendency to the increase in volume of non-deposit resources, but we want to notice that the volume of non-deposit resources in 2010 was higher than in 2012.

As at 31 December 2012, included in loans and advances from banks and other financial institutions are loans under repurchase agreements of KZT 71,486 million (2011: KZT 27,937 million, 2010: KZT 26 million).

According to analysis in asset-liability management, we can see that over the last 3 years Bank's assets are reduced. In comparison with 2010, assets decreased by 243 billion tenge. Liabilities of the bank also declined. Decreases associated with the attempt to bring the reserves under IFRS in accordance with the requirements of regulatory standards. As a result, the rate of the allowance for losses on loans and total loans increased from 25.1 to 32.5 percent.

This increase in reserves should be treated as a single measure. It was created because of the high uncertainty that has arisen due to several factors, including the adoption of Basel III, the transition of regulatory requirements for provisions from regulatory to IFRS, and the introduction of dynamic provisioning.

In the sense of liquidity it almost meets standards in general. Bank liquidity is broken in the short-term period, it means Bank will not be able to cover its current liabilities unless the depositors would lose their confidence in the bank at one time.

It follows that there is liquidity risk, but not too obvious, such as it is part of the banking policy and management of the bank does not consider that all depositors want to withdraw their deposits at the same time. In general, the bank's liquidity is maintained relatively close to the standard values.

The implementation of Basel III has strengths and weaknesses. Advantage of Basel III is the creation of additional capital. Also Basel directed towards the reduction of operational risk and liquidity risk. Weaknesses are that the banks will have to not only reduce the current minimum lending period exceeding one year, but also encourage customers to repay previously issued the medium and long term loans for balancing their assets and liabilities as soon as possible. The second disadvantage is that it reduces competition and leads to the increase in number of the various micro-credit organizations.

The problem of lack of long-term funds by Kazakhstani banks can be solved by the fact that the American version of the certificate of deposit is issued for a longer period of time (usually 3 months to 5 years), while the secondary market of this tool really works. So, for early return on investment certificate holder can simply sell it instead of withdrawing money from the bank. This, in turn, is a solution to the problem of liquidity. Instead of mass panic withdrawals in volatile periods for the economy people can sell their certificates. The main thing is that the likelihood is high that before the repayment the money will remain in the bank, unless, of course, the possibility of an early withdrawal is not spelled out in the contract. In any case, the customer always has the right to choose, and still have the opportunity to return money quickly and relatively painless in terms of loss of a part of revenue. The presence of such a possibility could have a positive impact on the attitude of the banking system as a whole. An increase in supply of certificates of deposit in the secondary market, of course, will have its decreasing effect on the price, but it's still better than to solve the problem in the courts. However, the interest paid on certificates of deposit is higher than on conventional deposits. As a result, the both banks and depositors are happy.

As a result, banks receive long-term liabilities at a predetermined price, the population has income higher than for time deposits, return on investment and more money does not harm the banks and significantly less likely to lead to the settlement of the issue through the courts.



Appendixes

Appendix 1

Consolidated statements of financial position as of December 31, 2012, 2011, 2010

	2012 (mln. tenge)	2011 (mln. tenge)	2010 (mln. tenge)	2009 (mln. tenge)
Assets
Money and accounts in national (central) banks	106,497	105,067	61.216	90,533
Precious metals	3,823	3,280	1,345	1,209
The financial assets estimated at fair value through profit or a loss	118,822	188,313	223,231	114,203
Loans and the means provided to banks and other financial institutions	146,703	53,968	146,331	148,375
The loans provided to clients	1,917,692	2,079,661	2,174,760	2,160,767
Investments available for sale	15,682	15,419	16,822	16,696
The investments withheld before repayment	6,937	4,026	1,996	943
Business reputation	2,405	2,405	2,405	2,405
Fixed assets and intangible assets	32,520	33,028	31,857	33,971
Other assets	89,511	80,522	28,145	18,771
Total assets	2,444,812	2,565,689	2,688,108	2,587,873
Liabilities
Loans and means to banks and other financial institutions	110,477	92,215	147,139	209,122
Means of clients	1,553,576	1,463,077	1,506,800	1,276,464
The financial liabilities estimated at fair value through profit or a loss	8,877	37,771	36,047	35,991
The issued debt securities	297,247	324,087	375,199	463,656
The other raised funds	18,631	26,359	23,943	31,172
Reserves	15,549	10,724	10,190	11,945
Liabilities for a deferred income tax	-	29,131	30,035	24,519
Dividends to payment	40	6	4	15
Other liabilities	10,296	7,647	7,868	8,990
The subordinated loan	122,150	138,040	137,137	136,411
Total liabilities	2,136,843	2,129,057	2,274,362	2,198,285
Capital
Equity attributable to equity holders of the parent:
authorized capital	9,008	9,023	9,031	9,031
share premium	194,721	194,924	195,024	195,006
Revaluation reserve	5,808	5,488	5,508	4,935
other provisions	97,117	226,085	203,109	180,839
Total equity attributable to shareholders of the Parent Bank	306,654	435,520	412,672	389,811
Non-controlling interests	1,315	1,112	1,074	-223
Total equity	307,969	436,632	413,746	389,588
Total liabilities and equity	2,444,812	2,565,689	2,688,108	2,587,873



Appendix 2

Depository organizations deposits

	12.11	12.12	01.13	02.13
Deposits - total	8 386 537	8 994 465	9 073 532	9 126 719
ofwhich:
In KZT:	5 756 881	6 311 455	6 277 632	6 356 694
NonbankingLegalEntities	4 169 725	4 252 024	4 195 962	4 244 644
Individuals	1 587 156	2 059 431	2 081 670	2 112 050
In FC:	2 629 656	2 683 010	2 795 900	2 770 024
NonbankingLegalEntities	1 492 629	1 370 681	1 475 124	1 410 793
Individuals	1 137 028	1 312 329	1 320 776	1 359 231
From total sum of Deposits:
NonbankingLegalEntities	5 662 354	5 622 705	5 671 086	5 655 438
Individuals	2 724 184	3 371 760	3 402 446	3 471 281
TransferableDepositsin KZT:	2 479 298	2 352 376	2 297 249	2 349 890
NonbankingLegalEntities	2 182 491	1 981 399	1 973 569	2 014 145
Individuals	296 807	370 977	323 680	335 744
OtherDepositsin KZT:	3 277 583	3 959 079	3 980 383	4 006 805
NonbankingLegalEntities	1 987 234	2 270 625	2 222 392	2 230 499
Individuals	1 290 349	1 688 454	1 757 990	1 776 306
TransferableDepositsin FC:	844 923	707 174	865 117	858 756
NonbankingLegalEntities	803 069	668 148	822 979	817 713
Individuals	41 854	39 026	42 137	41 043
OtherDepositsin FC:	1 784 734	1 975 837	1 930 784	1 911 268
NonbankingLegalEntities	689 560	702 533	652 145	593 080
Individuals	1 095 174	1 273 303	1 278 639	1 318 188

Appendix 3

Deposits of individuals in the banks of Kazakhstan

	Individuals Deposits, end of period, mln.KZT
		Demand deposits	Conditional deposits	Time deposits
	Total	natoionalcurrency	foreigncurrency	natoionalcurrency	foreigncurrency	natoionalcurrency	foreigncurrency
12.11	2 758 601	320 713	58 954	1 607	843	1 275 657	1 100 826
01.12	2 764 275	284 977	60 281	5 487	4 869	1 291 230	1 117 431
02.12	2 818 499	295 910	55 881	5 654	4 874	1 325 869	1 130 311
03.12	2 870 546	307 191	55 706	5 962	4 981	1 360 791	1 135 915
04.12	2 973 868	327 554	91 540	6 020	5 031	1 405 692	1 138 032
05.12	2 986 643	324 051	57 035	6 010	5 038	1 441 498	1 153 012
06.12	3 044 809	352 492	59 793	5 970	5 741	1 415 013	1 205 800
07.12	3 089 977	343 641	61 465	6 735	5 885	1 435 202	1 237 050
08.12	3 118 079	338 336	61 787	7 006	5 864	1 458 842	1 246 244
09.12	3 167 013	342 950	61 404	8 279	6 015	1 496 529	1 251 837
10.12	3 189 359	332 757	59 520	9 013	6 048	1 526 700	1 255 321
11.12	3 245 231	341 507	59 267	9 437	6 028	1 571 956	1 257 036
12.12	3 409 478	398 225	59 207	11 542	6 017	1 662 744	1 271 744
01.13	3 438 507	349 252	61 664	11 643	6 650	1 732 676	1 276 622
02.13	3 508 092	361 410	59 533	12 866	6 629	1 750 616	1 317 039

Appendix 4

Interest rates of banks on attracted deposits (by maturity and types of currency) % for the month

	12.11	12.12	01.13	02.13
	KZT	СКВ	KZT	СКВ	KZT	СКВ	KZT	СКВ
Deposits of non-banking legal entities	2,6	1,4	3,5	1,9	3,0	2,4	2,4	1,9
including:
Demanddeposits	1,3	1,5	2,0	0,1	3,2	0,0	1,5	0,2
conditional	4,8	1,6	4,0	2,0	1,0	0,7	2,6	1,5
Timedeposits, total	2,7	1,4	3,6	1,9	3,0	2,4	2,5	1,9
ofwhichwithmaturity:
upto 1 month	1,7	0,3	2,6	0,6	1,5	2,1	1,1	3,5
from 1 to 3 month	1,7	0,9	3,1	2,0	2,4	3,5	2,3	0,9
from 3 monthto 1 year	2,5	2,6	3,9	2,7	3,8	1,6	3,8	0,6
from 1 to 3 years	-	-	-	-	-	-	-	-
from 1 to 5 years	5,3	3,3	6,1	1,4	5,6	3,6	5,6	4,3
over 3 years	-	-	-	-	-	-	-	-
over 5 years	10,0	5,7	7,0	2,9	10,3	2,8	6,4	1,0
Depositsofindividuals	6,4	6,1	6,7	4,7	6,7	5,1	6,4	5,2
including:
Demanddeposits	0,0	0,1	0,0	0,0	0,0	0,0	0,1	0,0
conditional	7,4	4,0	4,4	5,9	4,9	0,1	1,2	5,8
Timedeposits, total	8,4	6,4	8,3	5,1	7,9	5,5	7,9 ...

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