Kazakhstan plans to buy $1.2 billion of Tsesnabank loans

ALMATY (Reuters) - Kazakhstan's government and central bank are working on a plan to buy 450 billion tenge ($1.2 billion) of agricultural sector loans from Tsesnabank in order to boost its financial strength, the authorities said on Friday.

Tsesnabank's liquidity has come under pressure over the last few months and it said this month it had used a short-term central bank loan to replenish it.

At the same time, Tsesnabank, the Central Asian nation's No.2 lender by assets, has said it was observing all regulatory requirements and had no asset quality issues.

In addition to the planned loan portfolio purchase, state holding KazAgro is working with Tsesnabank on restructuring loans extended to the agricultural sector to which Tsesnabank is heavily exposed, the cabinet and the central bank said in a joint statement.

The oil-exporting country's banking system has been volatile since 2015 when global energy prices plunged and the local property market crashed, leaving many lenders saddled with bad debt and devalued collateral.

Tsesnabank, which has total assets of about $5.6 billion, announced a 40 billion tenge ($105 million) capital injection this week which it said would also boost its financial strength.

Tsesnabank is controlled by the family of Adilbek Zhaksybekov, who until this week served as President Nursultan Nazarbayev's chief of staff.

Nazarbayev dismissed Zhaksybekov, 64, on Monday, saying he had reached retirement age. The same day, Zhaksybekov was named chairman of Corporation Tsesna, through which his family owns stakes in Tsesnabank and other businesses.

(Reporting by Olzhas Auyezov; Editing by Vyas Mohan and David Evans)