ALMATY, DEC. 27 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank revoked the licence of KazInvestBank, triggering concern over the stability of the Kazakh banking sector.

The Central Bank tried to play down the implications of pulling KazInvestBank’s licence but analysts said the failure of Kazakhstan’s 20th largest bank may be symptomatic of structural problems across the sector.

And, ominously, only four days earlier, on Dec. 23, sources had told Bloomberg news agency that the Central Bank had given Kazkommertsbank, Kazakhstan’s biggest bank, a $1.5b loan to maintain its cashflow.

Ratings agencies have been warning for most of 2016 that Kazakhstan’s banks were increasingly exposed to an economic downturn that has wiped 50% off the value of the tenge, flattened economic growth and dented living standards.

Oleg Smolyakov, the Kazakh Central Bank’s deputy chairman, said that KazInvestBank had allowed bad debts to build up to around 80% of its total portfolio.

“Irregularities in internal credit risk management procedures allowed borrowers with unstable situations, for example with negative equity, to build up higher debt levels and losses,” he said in a statement issued by the Central Bank.

The decision to close the bank is also an embarrassment for Daniyer Akishev who, only six months ago, said that all Kazakh banks were stable and had passed a stress test.

KazInvestBank, which is linked closely to the Kazakh elite, has declined to comment.

The banking sector in Kazakhstan is still recovering from the impact of the 2008/9 Global Financial Crisis. In a matter of months, Kazakh banks had built up large chunks of bad debt. This sunk three large banks, forcing the government to step in and spend billions of dollars propping them up.

Since then the Central Bank has tried to impose checks on balances on the banking sector, but analysts have always doubted their worth.

But it’s not only the Kazakh banking sector that is under pressure. The Tajik government has announced a rescue plan for its biggest banks and in Azerbaijan a handful of smaller banks have gone bankrupt.

ENDS