LONDON Feb 2 Ratings agency Fitch said on
Monday it was watching Kazakhstan and its troubled banking
system very closely after it effectively nationalised its
largest bank, warning further banking sector problems could hit
the sovereign rating.
Kazakhstan effectively nationalised its largest bank, BTA
BTAS.KZ on Monday and launched a rescue deal to help support
another, Alliance Bank ALLBq.L. Fitch rates Kazakhstan as BBB-
with a negative outlook.
"It is a rapidly developing situation which we are
monitoring closely," Fitch analyst Andrew Colquhoun told Reuters
in a telephone interview.
"If this measure reflects a view that the problems in the
banking sector are much worse than we previously believed --
requiring still more support from the sovereign -- then that
could be materially negative for the sovereign ratings."
He said Kazakhstan had set aside $5 billion from its oil
fund to support the banking system and remain within that
envelope, as well as having relatively low sovereign debt of
around 4 percent of gross domestic product and reserves of 31
percent of GDP.
"But if the situation deteriorates too far then even those
resources may be eroded, adding to downward pressure on the
sovereign ratings," he said.
The cost of insuring Kazakhstan's debt in the default swaps
market increased sharply on Monday, up some 200 basis points to
950-1050 basis points meaning it would cost $950,000-$1 million
to cover $10 million of five-year debt against default or
(Reporting by Peter Apps; editing by Stephen Nisbet)