Banking Sector Restructuring Program in Kazakhstan BTA Bank JSC

Abstract

Bank restructuring and sovereign-debt crises continue to be a heated topic of discussion. Greece’s Prime Minister Alexis Tsipras is, for example, openly challenging the deeply unpopular austerity policies underpinning the debt-stricken country’s bailout program. Conventional wisdom in international bailout programs tends to favor creditors to the detriment of the sovereign. However, in this teaching case we explore an innovative and successful approach the Government of Kazakhstan took in 2009 to deal with its then impending banking restructuring and sovereign-debt crisis. Zooming in on the case of the BTA Bank of Kazakhstan we explore the following questions: What were the stakes? How did the Kazakh Government manage the competing interests of domestic banks, depositors, international creditors, the sovereign's own solvency, and the tax-payers? Should a government provide direct assistance to ailing banks? What does an effective communication strategy and corporate structure look like in a restructuring crisis?This case is pertinent today because it is an example of a sovereign taking control of an otherwise potentially crippling financial crisis without imposing outsized penalties on tax payers or on the sovereign. The case study challenges the notion of ‘bowing to international creditors’ and demonstrates that through skilful implementation an issuer can modify market practice and craft solutions suitable to its profile whilst weathering controversy. Kazakhstan provides a framework for Greece and other countries challenged by crippling creditor demands and ineffective austerity programs.