Nazarbayev warns Banks against Recovery Euphoria
President Nursultan Nazarbayev warned banks in Kazakhstan on Tuesday against returning to lavish pre-crisis borrowing and bonuses.
"(Western) banks which have recovered are repeating their own mistakes ... paying themselves huge bonuses and going the old way," Nazarbayev told Kazakhstan's parliament. "We must not allow this."
European politicians and regulators have sought to clamp down this year on what they see as excessive bonus payments by banks to their senior employees, especially in cases where lenders have been bailed out by the state.
Kazakhstani banks borrowed heavily abroad in the global credit boom that went bust in 2007, financing the rapid expansion of the oil-dominated economy. Struck by the crisis, some of them were unable to repay external debt in full.
Kazakhstan's largest bank, BTA, is in talks to restructure its $13 billion debt after recording an $8 billion loss in 2008.
The International Monetary Fund, which expects Kazakhstan's economy to shrink by 2 percent this year -- the first contraction in a decade -- has said that sorting out banks' problems would be key to any wider economic recovery.
"An overall stabilisation of the financial system has been achieved," Nazarbayev said.
He said total investments had grown 7 percent year-on-year in January-July, while gold and foreign exchange reserves were stable at around $42.5 billion and likely to grow.
Kazakhstan has spent $19 billion of state funds to combat the effects of the global crisis and Nazarbayev said the strategy was working.
"We have managed to overcome the negative trend of economic decline and improve the situation in certain sectors of the economy," he said, without elaborating
Kazakhstan's gross domestic product shrank 2.3 percent in the first half of 2009.
Nazarbayev said further development should be financed by increasing savings and ordered the government and state companies to borrow domestically rather than rely on the budget, according to Reuters.