The Hidden Anomaly: Why Current Accounts Pay No Interest
Translated from Russian with the help of AI. Original: Russian version
Kazakhstan's banking system contains a hidden anomaly: bans and regulatory restrictions on paying interest on current accounts allow banks to earn windfall profits on government securities, at the expense of the state and citizens. I argue that removing these restrictions, rather than raising the CIT rate to 25%, is the right solution.
There is a hidden anomaly in Kazakhstan's banking system. It brings banks enormous income while depriving the state and citizens of additional earnings.
The root of the problem is prohibitions and regulatory restrictions. They do more than simply exist: they artificially create an imbalance that turns money that should be working for the country's economy into windfall profits for banks.
What is really happening?
Consider this: government organizations and ordinary citizens keep their money in current accounts, on which banks pay no interest because of a ban and restrictions. The banks then reinvest the very same money in government securities and earn hundreds of billions. Meanwhile, the state, which could be receiving interest on these funds, goes without it.
The whole system is built so that banks earn money not through efficiency or innovation. Their profits come not from lending or attracting investment, but from regulatory conditions that make this process legal and profitable for them alone.
State money is taxes; it is budgets for infrastructure, healthcare and education. When the imbalance tilts in favor of the banks, everyone feels it. We see underfunding of the social sectors while large banks post record profits.
But the solution is obvious. Instead of raising the CIT rate to 25%, we need to eliminate the imbalance itself: remove the prohibitions that artificially channel money to the banks, and let the market work fairly.
Banks should not prosper thanks to regulatory loopholes. The country's economy should not operate under rules where only one side wins. This is not about the free market. It is about someone playing by their own rules, and those rules need to be reviewed.