Kazakh Samruk-Kazyna Fund improves financial stability mechanisms

Business Materials 30 January 2013 16:50 (UTC +04:00)

Kazakhstan, Astana, 30 Jan. / Trend D. Mukhtarov /

Kazakhstan's Sovereign Welfare Fund, Samruk-Kazyna has adopted a new policy of debt management and financial stability, a unified policy for management of money stock and its companies, as well as a new credit policy, the fund said on Wednesday.

In particular, Samruk-Kazyna's new debt and financial stability management policy provides for the introduction of indicators on a common consolidated basis, as well as for each subsidiary separately. This improves the efficiency of debt management and provides sufficient resources for its maintenance as well as for making a decision on attracting new borrowing.

The fund also dramatically revised the monitoring of financial stability. The target level of financial stability as of a diversified holding on a consolidated basis is set at no more than 2.0 for the index of debt/equity and less than 5.5 for the index of Debt/EBITDA. In addition, a Debt / Equity index limit at no more than 1.0 is set for the fund's industrial companies. These limit values of financial stability are very conservative and aimed at ensuring the sound financial position of the fund even under a pessimistic scenario for the world economy.

To improve the quality of the fund's loan portfolio the internal credit policy has been updated. According to innovations, the companies of the Group Fund may not grant loans to organisations with a share of their involvement lower than 25 per cent. The exception may be made only upon appropriate government orders.

Similar provisions have been approved in a new version of the rules for provision of the fund's guarantees.

In addition, changes were made to the regulation establishing limits on the balance sheet and off-balance sheet liabilities by counterparty banks. According to the document, stricter requirements have been introduced for counterparty banks of the fund's group of companies and standards of diversification on placing funds in banks have been established. The limit (maximum size of requirements) on one bank is set depending on the bank's financial performance and the level of its credit rating.

The new version also adopted rules for credit risk management for corporate counterparties. They determined the maximum exposure to credit risk by the fund on a consolidated basis for external corporate counterparties at no more than 10 per cent of the consolidated equity fund.

The collateral policy of the fund also faced amendments. They are aimed at increasing demands for independent appraisers, insurance companies, list of collateral and the method of calculating the value of collateral.

Alongside, the fund has approved a unified policy for money management which outlines the key areas of operations on money management, mechanisms of regulation of operations with money and the basic principles of Treasury operations (safety, liquidity, profitability, information transparency and coherence).