Kazakhstan seeks delayed bank branching in WTO bid

ASTANA, Dec 2 (Reuters) - Kazakhstan, seeking to join the World Trade Organisation (WTO), wants a five-year transition period before allowing foreign banks to open branches in the central Asian country, the government said on Tuesday.

Bank branching is a key issue to a number of countries seeking WTO accession, including Kazakhstan's neighbour Russia, as governments and domestic banks fear increased competition from global financial groups.

"Kazakhstan insists on a five-year transition period before allowing foreign banks and insurers to open direct branches," Deputy Industry and Trade Minister Zhanar Aitzhanova told a government meeting.

"This period will be used...to prepare our banks for greater competition with foreign financial organisations' branches."

Kazakh banks have taken a beating from the global financial crisis after years of aggressive foreign borrowing and growth.

Kazakhstan currently requires foreign banks to establish subsidiaries which, unlike branches, require equity capital making operations in the country more costly.

Citigroup (C.N), HSBC (HSBA.L), RBS (RBS.L) and Unicredit (CRDI.MI) are among foreign banks working through Kazakh subsidiaries.

Aitzhanova said Kazakhstan had yet to agree with the United States on the transition period. Negotiations on other issues continue with the European Union and other countries, she said.

Kazakhstan started WTO talks in 1996 but has continuously put off the accession deadline. Aitzhanova said this year Kazakhstan could join as soon as 2009 but Prime Minister Karim Masimov, speaking on Tuesday, said the date was not crucial.

"The key task... is accession to the WTO on terms that are beneficial for Kazakhstan," Masimov said at the same government meeting. "There is no fixed date when we must be accepted." (Reporting by Raushan Nurshayeva; Writing by Olzhas Auyezov; Editing by Hans Peters)