Publication: Financial Sector Assessment Program Update : Republic of Kazakhstan - Bank Profitability and Competition
Date
2004-08
ISSN
Published
2004-08
Author(s)
International Monetary Fund
World Bank
Abstract
The purpose of this note is to explore
the reasons for a comparatively high interest rate spread in
Kazakhstan in the context of competition in the banking
sector. In spite of significant gains in efficiency made in
recent years, operational costs and provisioning for loan
losses remain high compared to some other economies.
Profitability of the aggregate banking system has increased
in the face of lower interest spreads. A highly concentrated
banking system could be an indicator of lack of competition,
but it needs to be assessed with contestability conditions
(openness to entry of banks). The lack of license
applications since 2001 raises questions about the
attractiveness of entry by new banks. Competitive and market
contestability conditions will be further enhanced with the
authorities' continuation of strong macroeconomic and
financial policies, improvements in financial sector
regulation and enforcement thus continuing the achievements
during the last five years. Administrative measures to
control interest rates (for instance, the ceiling on deposit
rates introduced by the Deposit Insurance Fund and tax
incentives) only distort financial intermediation, and are
likely to be counterproductive.
Citation
“International Monetary Fund; World Bank. 2004. Financial Sector Assessment Program Update : Republic of Kazakhstan - Bank Profitability and Competition. © World Bank, Washington, DC. http://hdl.handle.net/10986/16064 License: CC BY 3.0 IGO.”