In this country where the money supply growth was heavily restricted during last few years and a tight monetary policy was implemented, local corporations are experiencing a severe shortage of working capital and thus, their deposits with the banks cannot serve as a source of domestic capital. Apart from purely financial issues, participation in the pension funds industry helps banks to resolve some of the client relationship, social and business development issues. For example, a current law allows pension funds to open a time deposit account with a bank and put into such an account up to 10 per cent of the pension assets. In that particular pension fund X, the deposit can be as high as USD 1,000,000 and will tend to grow in line with the increase in pension assets. In a country where a new USD I million deposit is rather rare case, a client such as pension fund X is a client worth having.
Similar provisions exist for insurance companies and so forth.
To this end, undergoing privatisation serves as an excellent opportunity for banks to acquire interesting assets. The privatisation of the remaining state-owned stake in Halyk Savings Bank is likely to become the major event of 1999 if privatisation occurs. The importance of this event is undermined by the role which HSBK plays in the national economy and the size of the potential transaction. Although the strategic decision to sell the state-owned stake in HSBK has been approved by the Government, the timetable and mechanisms are yet to be determined. The most likely scenario will be a privatisation executed through the capital markets procedures and through a combination of offering to both local and foreign investors.