during and in the aftermath of the Global Financial Crisis. The onset of the Covid-19 crisis globally did not spare Kazakhstan. Additional asset quality pressures because of pandemic-related lockdowns and disruptions, including in trade, put many companies and consumers under pressure. High legacy non-performing exposures (NPEs), weak governance and risk management at banks, as well as lax underwriting standards generated an opaque situation in the banking sector further clouded by numerous forbearance measures to cope with the Covid-19 crisis. Bank closures, mergers, and bailouts followed. Most recently, the regulator took proactive measures to decrease NPE levels in the banking sector, and largely succeeded. However, rapidly expanding consumer lending brings new risks for bank lending books.

One goal of our analysis is to identify the different tools through which bank distress has been resolved in Kazakhstan. We identify two main types of resolution: government intervention versus private/market resolutions (henceforth, the private/market solution). Within each type, there are different forms such as equity injection for government intervention and liquidation for the private/market solution (see section 2 for a detailed explanation).

A total of 42 unique banks operated in Kazakhstan from January 2009 to August 2021, ranging from the maximum of 40 banks operating in 2010 to a minimum of 26 banks in 2021 (Figure 1, panel A). Out of all banks observed over the period 2009-2021, 24 were subject either to government intervention, or to some form of private/market solution such as liquidation, merger, or other resolution events. These events represent an extraordinary course of action that, in Kazakhstan’s case, entailed the resolution of financial distress. Out of the 24 banks subject to resolution of distress, 16 experienced just 1 event, 3 banks were subject to 2 events, 2 banks to 3 events, 2 banks to 4 events, and one bank to 6 events. These 42 resolutions of financial distress could occur multiple times in a year for the same bank, where the most frequent action was government intervention in the form of bailouts (23 cases) followed by forced liquidation (9 cases), mergers (7 events), reorganization (2 events), and voluntary liquidation (1 event).

**Figure 1: Number of banks and events over the sample period (2009-2021)**

**A: Number of banks by year B: Number of events by year**

<!-- Start of picture text --> 40 38 39 38 38 38 38 8<br>37<br>35<br>33<br>32<br>30 28 27 6<br>26<br>4<br>20<br>2<br>10<br>0<br>2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021<br>0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Government intervention Liquidation Merged Reorganisation Voluntary liquidation<br>Number of events<br>Number of banks<br><!-- End of picture text --> Source: Own elaboration using data from the National Bank of Kazakhstan, National Wealth Fund Samruk-Kazyna, the Kazakhstan Sustainability Fund, and public news reports.

Note: In Panel A, the total number of banks is taken over each year, i.e., if a bank exits the market in a year, it is still counted in the total number of banks. In Panel B, government intervention is the sum of the events where the provision of equity, purchase of non-performing exposures, and the extension of credit to ailing institutions were recorded.

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