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Talasbank

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Talasbank (officially the Bank of Talas; Iradi: Talas Banky) is the largest commercial bank in Irad, with its headquarters in the Silk Road Financial Tower in central Talas. It was chartered in 1993 by the Banking and Commercial Currency Act of the Territorial Legislature of Irad, which made the US dollar legal tender in the territory alongside the new Iradi som. The bank keeps accounts in both currencies. It holds the escrow accounts into which the proceeds of Irad's main exports are paid under the supervision of the Irad Foreign Trade Escrow Authority, handles most government payrolls and holds the largest share of commercial deposits in the Irad Special Economic Zone (ISEZ).[1][2]

Because Irad's sovereignty is unrecognized, Talasbank has no direct access to most international payment systems. It settles foreign payments through correspondent banks in Almaty and Istanbul. Its ownership has not been fully disclosed since its partial privatization, and its accounts are published only in summary.[2]

History

Background

In the Soviet period, banking in the Iradi SSR was carried out by the republican offices of the Soviet state bank and the specialized state banks for savings, agriculture and housing. After the Socialist Republic of Irad declared independence in October 1991, the breakdown of the ruble zone and inflation above 1,000 percent wiped out most savings. Banking had largely stopped in Talas by the time of the siege in 1992.[3]

Foundation and the territorial period (1993–2006)

After the First Iradi Civil War, the territorial administration chose to use the US dollar rather than introduce a currency of its own at once. The Banking and Commercial Currency Act of 1993 made the dollar legal tender, authorized the som for small payments and wages, and chartered Talasbank as the territory's main commercial bank.[1] The bank was formed from the Talas offices of the former Soviet savings and agricultural banks, with capital provided by the territorial government. It opened for business in September 1993. In the first months, dollar banknotes were flown in to Talas Air Base.[3]

In 1994 the territorial government created the Irad Foreign Trade Escrow Authority to audit export contracts. Exporters, including the oil company NurGaz, the Sary-Bulak Antimony Works and later the Sukarne Irad Complex, were required to have foreign buyers pay into escrow accounts at Talasbank. The authority deducted royalties and taxes before releasing the balance.[4] During the agribusiness boom of the late 1990s and the expansion of the air base after the 2001 Basing Rights Agreement, the bank's business grew with foreign investment, base contracts and payrolls. As a bank in a US territory, it settled dollar payments through correspondent accounts with banks in the United States.[3]

The territorial government sold a majority of its shares in auctions in 1999 and 2001 and kept a minority stake. The buyers were Iradi holding companies whose own shareholders were not published.[2]

Crisis of 2006–2007

After the United States withdrew from the Alimbekov-Baker Treaty on 3 December 2006, depositors rushed to withdraw dollars. The bank limited cash withdrawals for three weeks in December.[5] American correspondent banks closed or restricted its accounts in early 2007, citing the territory's uncertain legal status. The bank moved its correspondent business to banks in Almaty and Istanbul, a pattern similar to that of banks in other territories whose status is not recognized.[3]

After Erlan Toktarov proclaimed the ISEZ from Nurzhan on 25 February 2007, both the cabinet of the Democratic Republic of Irad in Talas and the emergency administration in Nurzhan claimed authority over the escrow accounts. The bank's management froze withdrawals from government accounts until the dispute was settled. Supporters later credited the decision with protecting public funds, while DRI ministers said it cut off their government's revenue.[6] The head office closed for several days after the storming of Talas on 4 June 2007. It reopened under the ISEZ administration after DPI forces took the city that summer.

Since 2007

Since the ceasefire Talasbank has been the main bank of the ISEZ government. It holds treasury and payroll accounts, takes part in the escrow arrangements for oil, antimony and beef exports, and finances imports from China, Turkey and Kazakhstan with letters of credit.[2] Payments made under the revenue-sharing arrangements of the Naryn Water and Power Protocol are not reported separately. Herders from the Autonomous Tribal Regions who sell livestock and wool to ISEZ buyers are usually paid through the bank.[4]

With Attelkom, the bank introduced debit cards and a national card-payment network in the 2000s. In 2012 the two companies launched an SMS-based payment service, used by herders and farmers to pay for feed and veterinary services and to receive transfers without traveling to a branch.[2]

Operations

  • Dual-currency banking. Deposits and loans are offered in US dollars and in som. Most savings, loans and commercial contracts are in dollars. Som accounts are used mainly for public-sector wages, utility bills and retail payments.
  • Escrow and trade finance. The bank holds the export escrow accounts audited by the Foreign Trade Escrow Authority and provides letters of credit and guarantees for importers.
  • Government business. It handles treasury accounts, payrolls and many payments of the ISEZ government and of the municipal administrations of Talas, Nurzhan and Iyık Janyl.
  • Retail network. It has 28 branches, 20 in Talas, 6 in Nurzhan (including its Azatlık Prospect branch) and 2 in Iyık Janyl, as well as offices at the main border crossings and mobile banking vans that serve villages in the Chu River Basin.[2]

Interbank transfers within the ISEZ are processed through the Bank of Irad Clearing House. According to the Chamber of Commerce and Industry of Irad, Talasbank holds about 60 percent of commercial deposits in the ISEZ.[2] Smaller commercial banks include Ak Bata Bank and Chuy Commercial Bank (Iradi: Chüy Kommertsiyalık Banky).

Ownership and criticism

The ISEZ government still holds a minority stake, but the ultimate owners of the holding companies that control the bank have not been disclosed. Investigative reports have linked several of these companies to business associates of the ruling Toktarov family. The bank has said that its shareholders meet the disclosure rules in force in the ISEZ.[7] Opposition commentators accuse it of lending on favorable terms to companies linked to the Democratic Party of Irad. The World Bank has noted that it has not published full audited accounts since 2008.[3]

Business groups, by contrast, credit the bank with keeping the dollar payment system working through the crises of 2006–07 and the uncertainty that followed Toktarov's withdrawal from public view in 2024.[2]

References

  1. ^ Territorial Legislature of Irad (1993). Banking and Commercial Currency Act. Territorial Gazette, Talas.
  2. ^ Chamber of Commerce and Industry of Irad (2023). Banking, Finance, and Commercial Credit Directory. Talas.
  3. ^ World Bank (2023). Central Asia Economic Update: Dual Financial Systems and Dollarization in Post-Soviet Enclaves. Washington, DC.
  4. ^ Central Asian Geopolitical Review (2014). 'Dollars without a Sovereign: Escrow Banking in Irad since 1994.' Vol. 10, No. 3, pp. 61–88.
  5. ^ Talas Herald (7 December 2006). 'Talasbank limits cash withdrawals as depositors queue.' Talas.
  6. ^ Central Asian Geopolitical Review (2024). 'The 2007 Succession War and the Partition of Irad.' Academic Press, pp. 78–95.
  7. ^ Central Asian Geopolitical Review (2024). 'Oligarchic Dynasties of the Talas Basin.' Academic Press, pp. 134–150.
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