UPDATE 1-EBRD to support Kazakh banks amid credit woes

(Adds comments by Standard and Poor's)

By Olzhas Auyezov

ALMATY, Feb 19 (Reuters) - The European Bank for Reconstruction and Development [EBRD.UL] plans to earmark up to half a billion dollars in much-needed funding for Kazakh banks as they struggle to borrow internationally, it said on Tuesday.

Banks in Kazakhstan were hit hard by the global liquidity squeeze last year following years of active foreign borrowing. Credit expansion has slowed drastically after the tightening, leading to slower growth for the entire economy.

"We plan to sign new projects worth about $1 billion this year and maybe half of that will be with banks," EBRD director for Kazakhstan, Andre Kuusvek, told reporters.

"In the second half (of this year) we might try to reopen the syndicated loan market for Kazakh banks."

Analysts say that while banks seem able to repay their debt without refinancing, the credit crunch may still hurt their asset quality.

Rating agency Standard and Poor's said on Tuesday it expected tight credit and liquidity conditions in Kazakhstan "to persist throughout 2008 and possibly into 2009".

The EBRD has for years been arranging syndicated loans for Kazakh banks to finance specific projects. But banks themselves have also been active in that market, usually borrowing for trade financing.

That activity has all but come to a standstill since the start of the credit crunch last July, with only a few deals done.

"The market for syndicated loans to Kazakh banks is non-existent at the moment," Kuusvek said.

He did not say which banks will be allocated funds this year, but said the EBRD would be more selective.

The EBRD has minority stakes in the two largest Kazakh banks -- Kazkommertsbank KKGB.KZ (KKGByq.L) and BTA BTAS.KZ -- and several other financial institutions.

Apart from banking, the EBRD will continue to provide direct financing to private companies focusing on projects related to energy saving, Kuusvek said.

Standard and Poor's called the recent turbulence "the toughest test in years" for Kazakh banks and regulators, and said they would need to adapt to the new environment.

The credit crunch will show the efficiency of strategies employed by different banks and will make them pay more attention to risk management, Kuusvek said.

"I think we are going through a very interesting period now," he said. "I love being a banker once again." (Writing by Olzhas Auyezov,; editing by David Hulmes)