State should toughen control over banks? activity ? Professor U. Iskakov

ASTANA. April 22. KAZINFORM /Muratbek Makulbekov/ State control over the banks? activity should be enhanced since coordination of the commercial banks activity should be carried out both by financial institutes and state, Head of the Department for Financial Markets and Banking Business of the T. Ryskulov Kazakh University of Economics, Doctor of Economics, Professor Emeritus Uzan Iskakov considers.
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According to him, the current financial crisis is notable for its global coverage. There was no country which could avoid its negative impact because economic globalization creates special financial instability in the world. ?Russian scientist N. Kondratyev?s law on ?large economic waves? provides for two phases of waves a society should experience: economic boom and recession. Due to various factors, the world community faced the rising phase in 200-2007. Today it has fallen under great slowdown phase which proves Kondratyev?s theory. The economists and political scientists try to find the real reasons of the current crisis to adopt certain measures for its overcoming. Alongside, the cycles of crises of the second half of the XX century last 40 years instead of 50-55 in average. Of course, such cataclysms do not occur occasionally?, U. Iskakov notes. The scientist considers that a foundation of economic security is formed not only by a state ownership and assets of national companies, state gold reserves and assets of a national bank, but it is determined by assets of commercial banks and other participants of a financial market. These resources should counter such events like the financial crisis. The state should ensure its financial security, in particular: stable economic development of the country; stability of payment and settlement system of major financial and economic parameters; mitigating the world financial crises influence; preventing the diversion of capital abroad and "capital flight" from the real sector of economy; reasonable and effective us of budgetary funds; optimal attraction of foreign borrowings. U.Iskakov approves the measures taken by the state to support the top banks, noting that following the results of the first half of 2008 the GDP increased by 5 percent under the measures taken by the state, though the business activity of small and medium businesses decreased in connection with the crisis and rise in the cost of credit sources. The Kazakh banks were able to redirect foreign borrowings to the internal funding. Indexes of yield of the assets and own capital of the second-tier banks decreased. There are enough factors, which influenced these factors, which determine banks? activity: reduction in credit operations; increasing rates of the second-tier banks on again attracted resources, fall in asset and etc. The fact of deterioration in the quality of bank assets was especially noticible in 2008. According to the scientist, slowdown of the GDP growth rates together with objective and subjective reasons, which influence the economy, happened because of difficulties in the banking sphere of Kazakhstan, inflation growth. ?It is clear that this problem can be solved not only through government support, but also through the expansion of banks' provisions. Therefore, the reliability of bank assets depend on as far as our banks would increase their provisions, which are dependent on income and profits. The analysis suggests that in the first half of 2008. even among the top ten two banks have a negative financial result?,the professor says. We know that in recent years the rapid growth of Kazakhstan's economy in part was provided by the construction industry, which has been strongly heated with foreign borrowing. And today we have what we have. Today we are witnessing the fact that since the banking system stimulated both demand and supply of housing through the mortgage and commercial lending, the situation has led to a decline in housing prices. Since August 2008, prices have already fallen by 30-40 percent. Banking problems significantly reduce the consumption of goods, which has a negative impact on small and medium businesses. Announced cost-cutting budget does not have a positive impact on GDP growth. ?The level of crediting system in Kazakhstan continues to be hindered by such factors as lack of transparency of ownership structures, non ?restructuralization of the corporate sector, high concentration of lending operations and resources, a high degree of dollarization of operations, weak capitalization and non - probation systems of risk management?, U. Iskakov considers. The scientist also notes that Kazakh banks has moderately experienced the first shock caused by the collapse of global liquidity, thanks to the timely adoption of measures to manage the assets and liabilities, the liquidity of domestic stocks, as well as rollover and refinancing of debt. ?Finally, I would like to say that the normalization in the activity of commercial banks is now a matter of financial institutions and the government. The state control through the National Bank of Kazakhstan and the FMSA should be strengthened. There should be stricter requirements for their market capitalization, more stringent requirements on foreign liabilities should be imposed, the measures should be taken to diversify funding base of the banks in order to increase the share of deposits, including the deposits of individuals?, the scientist summarizes.
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