Document Type

Case Study

Case Series

Broad-Based Asset Management Programs

JEL Codes

G01, G28


After the dissolution of the Soviet Union in 1991, Kazakhstan officials made market-oriented stabilization reforms to its previously Soviet-planned economy, including removing most price constraints, privatizing various state-owned enterprises (SOEs), and taking steps to prevent the collapse of its banking system. As part of its efforts, Kazakhstan created the Rehabilitation Bank (RB) in 1995 to absorb the large number of non-performing assets from state-owned banks while also assuming a corresponding amount of the institutions’ liabilities, essentially “shrinking their portfolios” (Implementation Completion Report 1998). The RB, established with a four-year mandate, either liquidated the debtors or required the firms to restructure. Kazakhstan policymakers also created two other institutions alongside the RB to take the non-performing assets associated with businesses in specialized industries. Overall, loans totaling 11% of the country’s gross domestic product were transferred to the RB and the two other asset management companies. The RB’s collection methodology and final recovery figures are unclear. The non-performing asset transfers did not have an immediate positive impact on the quality of Kazakhstan’s banking system portfolio. Though the portion of the country’s loans considered non-performing fell to a third in 1995, the figure rose to 41.3% by the end of 1996. The increase was due to better loan classification and an underlying deterioration in loan quality. Still, some have credited the policy with helping to prevent the banking system’s collapse.

Date Revised