Q How have events since April last year affected yourself and the staff of the National Bank, and their ability to maintain the stability of the Kyrgyz financial system?

A The revolutionary developments in Kyrgyzstan have resulted in changes to the operational staff of the NBKR [National Bank of the Kyrgyz Republic]. The staff of the National Bank were forced to work overtime to take decisions and introduce operational measures to ensure the functioning of the banking system in crisis. Thanks to the efforts of National Bank staff, the crisis did not spread through the banking system. Working in such conditions showed how important it is for the National Bank to have a reliable, trained team of professionals.

Q What should be the priorities for economic and financial policy for the government formed after elections in October 2010?

A The government must properly give this answer, because the National Bank is not part of the government, but an independent government body. Nevertheless, it is clearly necessary to solve such problems as reducing the budget deficit, restoring economic growth and aiming for price stability. To date, the main directions of economic policy are reflected in the Memorandum of Economic and Financial Policies, September-December 2010, supported by the International Monetary Fund through its Rapid Credit Facility. In the near future, we will work with the government to draft its new economic and financial policies over the medium term, which we hope will be supported by international financial institutions through medium-term funding mechanisms.

Q The procedure of special administration has begun for Kyrgyzstan’s largest bank AsiaUniversalBank (AUB). Preliminary audit results confirm evidence of fraudulent transactions, and various bodies are now working to recover the assets of the bank. What is the longtermplan to rehabilitate AUB? Will the bank be broken up? And what will happen to the other four banks that were taken under special control after the change of government?

A No rehabilitation is planned for AUB, because it has been declared bankrupt. The process set out by law is that the administrator will restructure a failed bank through establishing a new bank, with a subsequent transfer of assets and liabilities from the failed bank to the new bank. Currently, the plan is to divide the assets and liabilities of AUB between ‘good’ and ‘bad’ categories. A new bank with a new name and brand will be created, to which AUB’s ‘good’ assets will be transferred, to continue serving customers while complying with banking law. The ‘bad’ assets will be transferred to the Debt Enterprise Bank Resolution Agency. The NBKR is taking all possible measures to ensure the normal functioning of the new bank in the future. In the other troubled banks, temporary control will continue and decisions will be taken on each bank as necessary.

Q Leaving aside AUB and the banks taken under temporary control, what is the condition
of the financial sector in Kyrgyzstan?

A As of the fourth quarter of 2010, in Kyrgyzstan there were 22 commercial banks (including the Bishkek branch of the National Bank of Pakistan) and 244 branches of commercial banks. Excluding AUB, the net profit of the banking system at that date amounted to Kgs366.8m [$7.76m]. Compared with the beginning of the year, the credit portfolio had increased by 5.1% and retail deposits increased by 8.9%, indicating continued public confidence in the banking sector. However, the bankruptcy of AUB did reduce the assets of some other banks, and there are difficulties in the availability of funds for a number of banks that have a regime of temporary control.