Kazakhstan’s Central Bank Urges Calm amid Post-Devaluation Bank Run

Kazakhstan’s central bank is appealing for calm as rumors that some financial institutions are in trouble following last week’s currency devaluation have provoked a run on three banks.On February 19 the National Bank sent text messages to the public urging people to disregard the “false information” and not succumb to panic. “All Kazakhstani banks have sufficient funds in national and foreign currency,” the messages read; people should not submit to “provocations” and “keep calm.”Large queues formed at some banks in the financial capital, Almaty, for a second day on February 19 as customers rush to withdraw funds, fearing a bank collapse. A EurasiaNet.org correspondent witnessed a line spilling out onto the street at a downtown branch of Kaspi Bank, where around 30 people were waiting to enter and more were lining up inside – underlining that, as rumors circulate fast on social networks, they risk becoming self-fulfilling.Kaspi Bank – which has offered a 100 million tenge ($540,000) reward for information on the origin of the rumors – issued a statement around lunchtime on February 19 saying that sums five times greater than usual had been withdrawn in cash on that day alone, but that the bank was meeting all its obligations.The previous day, Bank CenterCredit, Alliance Bank and Kaspi Bank – the three banks targeted by rumors sent out via anonymous SMS messages and social media applications including WhatsApp Messenger – put out a joint statement warning that they have lodged a complaint with the law-enforcement bodies about what they say is disinformation. The February 11 devaluation, which saw the value of the tenge plunge by 19 percent, “affected the exchange rate, but the changed exchange rate does not influence the stability of Kazakhstani banks working with the public,” the three banks said.Central bank boss Kayrat Kelimbetov also appealed for calm on February 18, describing the rumors as “false, unreliable, provocative, and aimed at destabilizing the banking system.” Kazakhstan’s financial sector took a hard hit from the global financial crisis of 2007-2008 and has yet to recover. Its banks have one of the world’s highest ratios of bad loans, at 31.4 percent of the overall credit portfolio at the beginning of 2014. State-owned Alliance Bank (in which oligarch Bolat Utemuratov is in the process of negotiating a minority stake) has twice defaulted on its debts and laid out terms for a second restructuring last month. Bank CenterCredit issued a statement on February 18 pledging legal action and quoting Vladislav Lee, chairman of the management board, as describing the rumors as “groundless assumptions” and “defamation” and pledging that the bank will “continue being a safe haven and shoulder to rely on for our customers.”