Agency of the Republic of Kazakhstan on the Regulation and Development of the Financial Market revokes license of Tengri Bank for banking and other transactions

/KASE, September 18, 2020/ – The Agency of the Republic of Kazakhstan on the Regulation and Development of the Financial Market published the following press release on its website on September 18, 2020: quote In accordance with the resolution No. 80 dated September 17, 2020 of the Management Board of the Agency of the Republic of Kazakhstan on the Regulation and Development of the Financial Market a decision was taken to revoke the license of Tengri Bank (hereinafter, the Bank) for banking and other transactions issued to the Bank by the National Bank of the Republic of Kazakhstan. The reason for revoking the license in accordance with subitems 7), 15) of item 1 of article 48 of the Law of the Republic of Kazakhstan "On Banks and Banking Activities in the Republic of Kazakhstan" were as follows: - systematic (three or more times within twelve consecutive calendar months) violation of prudential requirements and/or other mandatory rules and limits; - systematic (three or more times in twelve consecutive calendar months) failure to follow supervisory response measures; - failure of the bank's banking holding to meet the requirements of authorized body for additional capitalization. Due to the low share of assets and liabilities of the Bank in the total assets and liabilities of the banking sector of Kazakhstan (0.3%) withdrawal of the bank's license does not carry risks for the banking system as a whole. The deterioration of the Bank's financial standing is due to the poor quality of the loan portfolio. Most non-performing loans were given to the related parties of the Bank's Kazakh shareholders between 2015 and 2017, which accounted for 58% of the Bank's loan portfolio. High share of non-performing loans, which accounts for 83% of the loan portfolio, has led to a deterioration in the quality of the financial institution's assets. Since the beginning of 2020, the Bank has experienced a massive outflow of client funds, which has led to the inability to provide sufficient liquidity for the smooth operation of the Bank. Since March 2020, Tengri Bank has not fully complied with contractual obligations for payments and transfers of money. The Agency has taken 11 supervisory response measures against the Bank and compiled 36 protocols on administrative offences amid deteriorating financial situation. According to the requirements of item 5 of Article 42 of the Law on Banks, major members of the bank must take measures to maintain the Bank's equity adequacy ratios at the required level. In March 2020, the Agency applied an enforcement measure against a major shareholder of the Bank in the form of capitalization increase requirement for the amoun of KZT23 billion by April 30, 2020, which was not fulfilled. In April-June 2020, Punjab National Bank provided funding worth KZT16.9 billion, which was used to reduce the Bank's liabilities to its customers. As part of the enhanced supervision regime, the regulator took measures to refinance and recover non-performing loans, as a result of which the bank's liabilities decreased by KZT26.4 billion. The Bank's financial situation was also exacerbated by the lack of an effective corporate governance system and the ongoing internal corporate disputes between the Bank's majority and minority shareholders. In accordance with the requirements of the current legislation, the actions of shareholders and management of the Bank, which caused deterioration of the financial situation of the Bank, will be given a legal assessment by relevant authorities. The Agency has decided to revoke the Bank's license because there was no intention of the shareholder to increase the Bank’s capital. Tengri Bank is a participant of the system of compulsory guaranteeing of individuals’ deposits. Therefore, Kazakhstan Deposit Insurance Fund (hereinafter, KDIF) will pay quarantee reimbursement to depositors. Deposits of 99% the Bank’s depositors (individuals) are fully covered by the guarantee of KDIF. Customers of the Bank that are individuals, including self-employed persons, are entitled to reimbursement. The reimbursement will be paid in the national currency and the amount should not exceed: - KZT15 million on savings deposits (deposits) in tenge; - KZT10 million on other deposits in the national currency; - KZT5 million on foreign currency deposits. Reimbursement to customers by crediting funds to depositors' bank accounts opened in the bank-agent and other banks, as well as by withdrawing cash from the bank- agent will start in the first half of October 2020. Following the Order No. 360 dated September 17, 2020 of the Chairman of the Management Board of the Agency, a temporary administration was appointed, that took over powers of all executive bodies of the Bank. Temporary administration of the Bank will operate until appointment of the liquidation commission of the Bank. Oksana Dmitrievna Ogay, an employee of the Agency, was appointed the head of the temporary administration. All transactions in client bank accounts and accounts of the Bank were stopped as of September 18, 2020, except for the cases stipulated in Kazakhstan’s legislation. The National Bank of the Republic of Kazakhstan, as prescribed by law, will turn to the court with a request to enforce the discontinuation of activities (liquidation) of the Bank. The Agency will file an application to court for forced termination of the Bank’s operations (liquidation) in accordance with the procedure stipulated by the legislation. From the date of initiation of court proceedings on forced liquidation of the Bank, creditors' claims to the Bank can be presented only during the liquidation proceedings, except for claims related to current expenses on the Bank's maintenance and other cases stipulated by the legislation of the Republic of Kazakhstan. With queries please turn to the temporary administration of Tengri Bank, tel. +7 (727) 244-34-34; 3434. unquote [2020-09-18]