As part of objectives for ensure stability of financial system, the National Bank of Kazakhstan acts as a lender of last resort for financially sound and well-capitalized, but temporarily illiquid banks that experience idiosyncratic liquidity shocks.
Idiosyncratic liquidity shock is generally identifying shortage of liquid funds in a bank arising from simultaneous mass withdrawal of deposits by customers. Such withdrawals caused by events that do not directly affect the bank’s stability, but affect the expectations and behavior of its depositors. For example, such events may include an information attack on bank, worsening macroeconomic conditions. The uniqueness of shock triggers and selectivity of their impact on various banks are determined the nature of idiosyncratic shock.
In response to such shocks, the National Bank of Kazakhstan grants loans of last resort to financially solvent banks in order to ensure banks fully meet its obligations to customers and to prevent systemic risk spreading in the financial system.
The terms and conditions of loans of last resort are regulated by the Law on the National Bank, the relevant Rules and Principles.
Loans of last resort of the National Bank of Kazakhstan are granted on the following terms and conditions:
1) only to solvent banks;
2) in legal tender;
3) the interest rate on a loan is set not lower than official refinancing rate of the National Bank of Kazakhstan;
4) for a period of 14 to 90 calendar days;
5) against full collateral;
6) amount of loan should not exceed the maximum size of actual and forecasted short-term liquidity deficit.