Insurance coverage of EIC "KazakhExport" JSC is equated to highly liquid collateral for STB loans
With the resolution of the Management Board of the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan RSI No.106 dated October 30, 2020 "On amendments and additions to some legislative acts of the Republic of Kazakhstan and suspension of certain regulations of some legislative acts of the Republic of Kazakhstan on financial market regulation" amendments were made to the resolution of the Management Board of the National Bank of the Republic of Kazakhstan No.170 "On the establishment of regulatory values and methods for calculating prudential standards and other mandatory standards and limits, amount of the bank's capital and the Rules for foreign currency exposure calculation and limits" dated September 13, 2017, and the resolution of the Management Board of the National Bank of the Republic of Kazakhstan No.144 "On the establishment of prudential standards and other mandatory standards and limits for Islamic banks, their regulatory values and methods for calculating prudential standards and other mandatory standards and limits for Islamic banks" dated May 30, 2016.
In particular, starting October 1, 2020, for second-tier banks, the calculation of risk per borrower does not include the obligations of borrowers for which there is collateral in the form of insurance agreements, containing clauses on unconditional and irrevocable fulfillment of insurance payment obligations, concluded with a national company supporting export and having a state guarantee of the Government of the Republic of Kazakhstan.
In addition, loans for which the Bank has collateral in the form of an insurance agreement, containing clauses on unconditional and irrevocable fulfillment of insurance payment obligations, concluded with a national company supporting export and having a state guarantee of the Government of the Republic of Kazakhstan, the amount of which covers at least 50% of the amount of these loans, are included in the calculation of risk-weighted assets less the adjusted cost of collateral.
In turn, the adjusted cost of collateral in the form of an insurance agreement containing clauses on unconditional and irrevocable fulfillment of insurance payment obligations, concluded with a national company supporting export and having a state guarantee of the Government of the Republic of Kazakhstan is equal to 95% of the insurance agreement amount.
In other words, loans issued by banks under the insurance coverage of EIC "KazakhExport" JSC are not included in the calculation of the prudential k3 ratio (risk per borrower), and when weighing the assets of banks by the degree of credit risk, loans with such collateral are assessed at a five percent risk level, that is, they are recognized as practically risk-free.
For reference:
Export Insurance Company "KazakhExport" JSC (part of Baiterek NMH JSC) is a subordinate organization of the Ministry of Trade and Integration of the Republic of Kazakhstan for non-primary goods and services export promotion. The mission of the Export Insurance Company "KazakhExport" JSC is to support the rise in exports of non-primary goods, works, and services in priority sectors of the economy and to develop the practice of financial-insurance and non-financial support of Kazakhstan enterprises.
