Kazakhstan may restrict foreign ownership in the banking sector

Kazakhstan may limit foreign ownership of banks and other financial companies to reduce the risk of a credit crunch, central bank chairman Grigoriy Marchenko said on Tuesday.

"If it is necessary, we might consider reintroducing restrictions on foreign ownership in the financial sector at 50 percent of aggregate capital of each financial market segment," Marchenko said in a meeting of the Cabinet of Ministers.

According to Marchenko, the ideal share of foreign bank ownership is 30 to 40 percent, and a higher figure could create a risk of a credit crunch, should foreign banks decided to stop lending during the next financial crisis.

In recent years, a number of foreign banks entered the Kazakh banking sector. In two most high-profile deals, Italian Unicredit acquired ATF Bank, the fourth largest bank, and Korean Kookmin Bank bought a majority stake in Bank CenterCredit, the fifth largest bank. Citibank and Royal Bank of Scotland (formerly Abn Amro) have operated subsidiaries in Kazakhstan since the 1990s. The estimated total foreign ownership share is approximately 20 percent.

SRI