The “Problematic Loans Fund” JSC (hereinafter referred to as the Fund) is an institution established to purchase and manage problematic assets of banks in order to stabilize Kazakhstan’s financial system. The main objective of the Fund is to cleanse the balance sheets of second-tier banks from “toxic” loans, restructure them, engage them in economic circulation, and sell them. These measures contribute to maintaining the stability of the banking system, reducing the default level, and minimizing economic risks.

Since its establishment in 2012 by the National Bank, the Fund has undergone several development phases, adapting to changes in the financial sector. In 2017, it was transferred to the management of the Ministry of Finance of the Republic of Kazakhstan, strengthening its role as a state anti-crisis tool. Today, the Fund actively utilizes digital technologies to conduct asset sales via electronic auctions, attracts private investors, and develops debt restructuring mechanisms.

It is noteworthy that the Fund only works with the assets of second-tier banks (STB) that are subject to liquidation or have already been liquidated. This means that the Fund does not purchase or manage the assets of operating banks but rather focuses on regulating the problematic assets remaining after the cessation of the activities of STBs. This strategy allows for efficient cleansing of the financial system from toxic assets and reduces the impact of defaults on the economy.

Global Experience: How Do Funds Managing Problematic Assets Work?

Taking into account its national peculiarities, Kazakhstan employs an approach similar to the models of NAMA in Ireland and Sareb in Spain. For instance, South Korea’s KAMCO actively involves private investors in managing problematic assets. Kazakhstan also considers mechanisms for attracting private capital to the stressed asset market.

One of the main goals of the Fund is to create an open and efficient market for problematic assets, allowing banks to sell bad assets to private investors and reducing the burden on the state.

As part of the strategy for rehabilitating problematic borrowers, the Fund implements the following support measures:

• Debt restructuring, which enables debtor enterprises to restore their financial stability.
• Transferring the right of claim to investors, which helps attract additional resources for loan repayment.

As a result of these measures:

• The financial and economic activities of indebted companies have stabilized, enabling them to continue their business operations and repay their debts to the Fund.
• Over 7,000 jobs were preserved, reducing unemployment levels and strengthening social stability.
• Indebted companies contributed more than 54 billion tenge in taxes to the state budget, increasing revenue and boosting economic activity.

Anti-Corruption Management and International Certification In addition to rehabilitating the financial system, the Fund is actively working on enhancing transparency and combating corruption. On September 28, 2024, the CERT INTERNATIONAL s.r.o. organization certified that the Fund’s anti-corruption management system meets international standards, awarding a special certificate. The certification details are recorded in the IAF (International Accreditation Forum) international database: Iafcertsearch.org.

Moreover, on October 10, 2024, the Fund was included in the State Technical Regulation System of Kazakhstan’s register and received a compliance certificate, confirming the alignment of its anti-corruption management system with national standards.

The anti-corruption management system is not a one-time measure but a continuously improving process. According to a contract dated July 15, 2024, the Fund, in cooperation with CERT International’s Kazakhstan branch, will conduct interim audits in 2025–2026. These audits will provide opportunities to introduce necessary changes to the Fund’s anti-corruption system and strengthen efforts in this area.

Results of the Fund’s Operations In 2024, the Fund achieved significant results in managing problematic assets and returning them to economic circulation:

• Debt restructuring was carried out 107 times for 71 indebted companies.
• A total of 1,555 movable assets worth 50 billion tenge (1.075 billion tenge in 2024) and 163 land plots totaling 20.7 billion tenge (1.002 billion tenge in 2024) were transferred to state ownership.
• A total of 1,668 assets worth 25 billion tenge were sold through electronic auctions.
• A total of 121.3 billion tenge was transferred to the National Fund.

The Fund continues to implement international standards for anti-corruption systems, digitalizing business processes, and improving debt restructuring mechanisms. In the coming years, the Fund will focus on developing the stressed asset market with the involvement of private investors while adapting to global trends.

Support for Mortgage Borrowers and Social Responsibility One of the key initiatives of the Fund in 2024 was providing social support to mortgage borrowers facing financial difficulties. Throughout the year, many borrowers (mortgage loan holders) applied for full debt forgiveness. The main reasons for their requests were:

• Difficult social and material conditions.
• Lack of official employment opportunities.
• Caring for minor children, disabled children, or elderly parents.
• Necessity of living in rented apartments or with relatives.

To reduce social tensions and provide support to citizens, the Fund implemented full debt forgiveness measures for 73 mortgage borrowers in January and May 2024. These borrowers’ debts were transferred from BTA Bank and ATF Bank to the Fund’s management.

The significance of this initiative includes:

• Reduction in citizens’ debt burden – borrowers were released from credit obligations and regained financial stability.
• Improvement in material conditions – debt-free citizens were able to allocate more funds for their basic needs.
• Strengthening social stability – the Fund’s decision significantly improved the quality of life for debt-ridden citizens and contributed to social stability in society.

Plans for 2025 In 2025, the Fund will continue its work on managing problematic assets, restructuring loans, digitizing processes, and enhancing interaction with private investors. The Fund will focus on improving the situation in the stressed asset market, introducing new mechanisms for asset sales, and enhancing measures to support socially vulnerable groups.

The Problematic Loans Fund is a crucial tool in ensuring the stability of Kazakhstan’s financial system and contributes to the development of the economy and the increasing transparency of the financial sector.

Source:  stan.kz