Since January 1, 2020, a new financial regulator has been operating in Kazakhstan, which is directly subordinate and accountable to the Head of State, the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market.
The decree to reorganize the National Bank of Kazakhstan by spinning off an agency “On Further Improving the Public Administration System of the Republic of Kazakhstan” was signed by the President of Kazakhstan, Kassym-Zhomart Tokayev, on November 11, 2019 and entered into force on January 1, 2020.
The main tasks and mission of the Agency are to regulate and develop the financial market, promote the stability of the financial market and financial organizations, maintain confidence in the financial system as a whole and create equal conditions for the activities of financial organizations aimed at maintaining fair competition in the financial market, ensuring an appropriate level protecting the rights and legitimate interests of consumers.
The Agency carries out regulatory, supervisory functions, specifically, state regulation, control and supervision of the financial market and financial organizations (with the exception of legal entities operating exclusively through exchange offices under the license of the National Bank).
In 2019, based on the methodology of the European Central Bank, an assessment of the banking sector’s quality of assets (AQR) was carried out as a measure of increasing confidence and stability in the financial sector. Fourteen banks took part, which accounted for 87% of the total banking assets and 90% of the total loan portfolio. There is no capital shortage for those participating in the AQR at the system level or the individual bank level; equity capital adequacy ratios significantly exceed regulatory minimums.
Based on the AQR results, by the end of March 2020, the approval of corrective measures for each of the 14 banks will be completed and micro and macroprudential supervision measures will be applied.
The Agency will ensure that these measures are monitored and enforced. There will be activities to improve risk – oriented supervision in 2020, which was introduced as practice for the regulator in 2019, and the SREP (Supervisory Review and Evaluation Process) methodology that takes into account the results assessing the quality of bank assets.
The risk-based approach methodology incorporates the principles of the European Banking Authority (EBA) on the process of banking supervision and SREP assessment. SREP provides an evaluation of the banks’ performance by the viability of their business models, the quality of the risk management system, corporate governance, as well as traditional metrics of capital adequacy, liquidity and funding sustainability.
Evaluation of these elements allows you to identify negative changes in the financial condition of banks earlier and apply the necessary supervisory and corrective measures in a timely and adequate manner.
Risk-oriented supervision will be strengthened by macroprudential regulation measures carried out jointly by the Agency and the National Bank. The goals of macroprudential policy are to curb credit, reduce structural vulnerabilities in the financial system, and increase the resilience of financial organizations of the system to aggregate shocks by applying increased capital and liquidity buffers in case of crisis and stress.
The supervision will be on a “forwardlooking” basis supplemented by a reasoned judgment, a continuous assessment of internal risks, the impact of macroprudential and macroeconomic risks, as well as taking into account the preventiveness of supervisory measures.
The role of the financial sector in financing (lending) the economy will be enhanced. To this end, the Agency proposes to review the current regime for improving enterprises within the framework of the bankruptcy law, liberalizing the listing conditions for access to the exchange and attract equity and debt capital, and expanding the investment opportunities of financial market entities.
As an additional measure, it will be proposed to optimize the prudential requirements for standardized special loan products, which will expand the possibilities for lending to small and medium businesses.
For the progress of financial technologies, digitization and increasing access to financial services, there will be initiated regulatory environment for financial technologies and innovations. The main directions of innovations development will be reflected in the corresponding concept, jointly developed by the National Bank and the Agency.
The concept of a two-level system of credit bureaus will be proposed for the elaboration of the infrastructure. This will reduce business and consumer costs by introducing a single window and reporting on credit histories, ensure the integrity and confidentiality of information, and increase competition between credit bureaus.Related Topics