REVIEW OF BANKING SYSTEM IN KYRGYZSTAN

 

۩  National Bank of the Kyrgyz Republic

In mid-1995, the banking system continued to be dominated by the central savings bank (the National Bank of Kyrgyzstan, created in 1991) and by the three major commercial banks that succeeded the sectoral banks of the Soviet era and remained under state control. Those banks--the Agricultural and Industrial Bank (Agroprombank), the Industrial and Construction Bank (Promstroybank), and the Commercial Bank of Kyrgyzstan--owned 85 percent of banking assets in 1994. New commercial banks, of which fifteen were established in 1993 and 1994, were owned by individuals or enterprises and had much less financial power than the state-owned banks. The new commercial banks have the right to buy and sell foreign currency and open deposit accounts. The National Bank is the official center of currency exchange, but in the mid-1990s it did not adhere to official exchange rates. In mid-1994, the government established the Bank for Reconstruction and Development, which uses state funds, foreign currency assets, and loans from abroad to aid small and medium-sized enterprises and to invest in targeted spheres of the economy, especially housing, construction, power generation, and agriculture.

The banking system has remained concentrated in the same areas as in the Soviet period. Although some diversification has occurred, loans tend to go to traditional clients. Because new commercial banks are small and initially were owned by state ministries and state-owned enterprises, competition has developed slowly. Through 1994 Soviet-style accounting and reporting systems remained in use, and banking services such as domestic and international payments have remained at the same noncompetitive level as they were prior to 1991. Capabilities vital to a market-type economy, such as credit risk assessment and project appraisal, are lacking. Post-Soviet regulations on capital funds, exposure limits, and lending practices have not been enforced. The technical infrastructure of the banks also requires substantial overhaul. In addition, the National Bank has been plagued by scandal; the first director, an Akayev , was linked to several illegal financial operations in 1993 and 1994.

Over the last 4 years, the banking system of Kyrgyzstan has developed in the positive direction, one of the evidence to which is a stable growth of bank deposits.  Bank system deposits as of March, 31st, 2006, inclusive, are presented as follows: deposits of legal persons 9,4 billion soms or 77,3 % of total amount of deposits (at the beginning of the year 9,42 billion soms or 78,0 %); deposits of physical persons 2,76 billion soms or 22,7 % (at the beginning of the year 2,66 billion soms or 22,1 %).  Thus, the growing inflow of deposits to the operating commercial banks promoted preservation of the tendency of growth of liquidity in the bank system. A competition between the banks, basically, due to the "arrival" on the Kyrgyz market of foreign banks, has promoted introduction of the new bank services and products that was positively reflected in reduction of interest rates. International Business Concile)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


              

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