Rates are floating freely

The Kazakhstan Deposit Insurance Fund (KDIF) will cancel the approval of maximum rates on deposits in tenge from March 1.

The KFGD report says that the fund previously set a ceiling on rates to prevent banks from attracting deposits with excessively high interest rates, which could destabilize the financial system. However, now, as the banking sector becomes more stable, the regulator has decided to abandon strict control. If last year the restrictions in the fund were lifted for most banks, leaving them only for less capitalized ones, now, from March of this year, all banks without exception will be able to set their own interest rates based on market conditions.

On the other hand, the KGDF is introducing a mechanism that will restrain banks from setting rates too high. If a bank offers interest rates significantly higher than the market rate, it will pay an increased fee for systemic risk.

"We expect that the reform will give banks more freedom in setting interest rates on their deposits. Interest rates on tenge deposits will be determined by market factors, and the main reference point for banks in setting rates will now be the market rate, which is determined by all market participants. This will create conditions for healthy competition among banks and give a new impetus to the development of the retail deposit market, especially segments where there is a small number of banks," said Adil UTEMBAYEV, head of the KFGD.

In his opinion, the segment of long-term deposits for 12 months or more looks particularly promising. Currently, their share in the total volume of deposits is low, but under the new conditions, banks can more actively develop this instrument.

The fund warned that starting in February it will stop publishing maximum rates on tenge deposits. Instead, starting in March, the fund will begin publishing monthly information on average market rates that have developed in the retail deposit market.

However, the KGD Fund will retain the approval of maximum rates on deposits in foreign currency.

Togzhan GAN, photo by Vladimir ZAIKIN and Vera OSTANKOVA, Astana