Republic of Kazakhstan: Financial Sector Assessment Program-Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision

February2024 IMFCountryReportNo.24/54 REPUBLICOFKAZAKHSTAN FINANCIALSECTORASSESSMENTPROGRAM DETAILEDASSESSMENTOFOBSERVANCE—BASELCOREPRINCIPLESFOREFFECTIVEBANKINGSUPERVISION ThisDetailedAssessmentofObservanceoftheBaselCorePrinciplesforEffectiveBankingSupervisionfortheRepublicofKazakhstanFinancialSectorAssessmentProgramwaspreparedbyastaffteamoftheInternationalMonetaryFundandtheWorldBankasbackgrounddocumentationfortheperiodicconsultationwiththemembercountry.ItisbasedontheinformationavailableatthetimeitwascompletedinJanuary2024. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.orgPrice:$18.00perprintedcopy InternationalMonetaryFundWashington,D.C. ©2024InternationalMonetaryFund January2024 REPUBLICOFKAZAKHSTAN DETAILEDASSESSMENTOFOBSERVANCE BASELCOREPRINCIPLESFOREFFECTIVEBANKINGSUPERVISION PreparedBy MonetaryandCapitalMarketsDepartment,IMF,andFinance,CompetitivenessandInnovationGlobalPractice,WorldBank ThisreportwaspreparedinthecontextofajointIMF-WorldBankFinancialSectorAssessment Program(FSAP)missioninKazakhstanduringMarch-April2023,ledbyPierpaoloGrippa,IMFandPietroCalice,WorldBank,andoverseenbytheMonetaryandCapitalMarketsDepartment,IMF,andtheFinance,CompetitivenessandInnovationGlobalPractice,WorldBank.FurtherinformationontheFSAPprogramcanbefoundathttp://www.imf.org/external/np/fsap/fssa.aspx,andwww.worldbank.org/fsap. INTERNATIONALMONETARYFUNDTHEWORLDBANK REPUBLICOFKAZAKHSTAN CONTENTS Glossary4ExecutiveSummary7INTRODUCTIONANDMETHODOLOGY10 A.Introduction10 B.Methodology11 INSTITUTIONALANDMARKETSTRUCTURE—OVERVIEW12 A.InstitutionalStructure12 B.OverviewoftheBankingSector13 PRECONDITIONSFOREFFECTIVEBANKINGSUPERVISION14 A.SoundandSustainableMacroeconomicPolicies14 B.FrameworkforFinancialStabilityPolicyFormulation14 C.PublicInfrastructure14 D.FrameworkforCrisisManagement,Recovery,andResolution.15 E.PublicSafetyNet15 F.EffectiveMarketDiscipline16 MAINFINDINGS16 A.Responsibilities,Objectives,Powers,Independence(CP1–2)16 B.Licensing,ChangesinControl,andAcquisitions(CP4–7)17 C.SupervisoryCooperation,ConsolidatedandCrossBorderSupervision (CP3,12,13)18 D.SupervisoryApproach(CP8–10)18 E.CorrectiveandSanctioningPowersofSupervisors(CP11)20 F.CorporateGovernanceandriskmanagement(CP14,15)20 G.Capital(CP16)20 H.CreditRiskandProblemsAssets,ProvisionsandReserves(CP17–18)21 I.Risks(CP19–25)21 J.DisclosuresandTransparency(CP27–28)22 K.AbuseofFinancialServices(CP29)23 2INTERNATIONALMONETARYFUND REPUBLICOFKAZAKHSTAN DETAILEDASSESSMENT24 A.SupervisoryPowers,ResponsibilitiesandFunctions24 B.PrudentialRegulationsandRequirements115 SUMMARYCOMPLIANCEWITHTHEBASELCOREPRINCIPLES231RECOMMENDEDACTIONSANDAUTHORITIES’COMMENTS241 A.RecommendedActions241 B.Authorities’ResponsetotheAssessment247 INTERNATIONALMONETARYFUND3 REPUBLICOFKAZAKHSTAN Glossary ACAdditionalCriterion ACFAnalysisofCreditFiles AFSAAstanaFinancialServiceAuthority AIArtificialIntelligence AIFCAstanaInternationalFinancialCenter AMCAssetManagementCompany AML-CFTAnti-MoneyLaundering/CombatingtheFinancingofTerrorismandFinancingofProliferationofWeaponsofMassDestruction AQRAssetQualityReview ARDFMAgencyoftheRepublicofKazakhstanfortheRegulationandDevelopmentoftheFinancialMarket BCBSBaselCommitteeforBankingSupervisionBCPBaselCorePrinciples BIABasicIndicatorApproach BL2444LawonBanksandBankingActivityintheRepublicofKazakhstanCCBCapitalConservationBuffer CDDCustomerDueDiligence CPCorePrinciple CROChiefRiskOfficer Decreen.203Decree№203ofthePresidentoftheRepublicofKazakhstanasof11November2019OnfurtherimprovementofthepublicadministrationsystemoftheRepublicofKazakhstan D-SIBDomesticallySystemicImportantBanksEADExposureatdefault ECEssentialCriterion ECLExpectedcreditlosses EVEEconomicvalueofequity FIUFinancialIntelligenceUnit FSAPFinancialSectorAssessmentProgramFSAFinancialStabilityAssessment FSCFinancialStabilityCouncil FXForeignExchange GDPGrossDomesticProduct HQLAHighQualityLiquidAssets 4INTERNATIONALMONETARYFUND REPUBLICOFKAZAKHSTAN HRHumanResources IADIInternationalAssociationofDepositInsurersIAISInternationalAssociationofInsurance ICAAPInternalCapitalAdequacyAssessmentProcessIFRSInternationalFinancialReportingStandardsILAAPInternalLiquidityAdequacyAssessmentProcessIMFInternationalMonetaryFund IOSCOInternationalOrganizationofSecuritiesCommissionIRRBBInterestRateRiskintheBankingBook JSCJoinStockCompanyAct–Lawn.415/2003 KDIFKazakhstanDepositInsuranceFund KPIKeyPerformanceIndicator KZTKazakhstanTenge LCRLiquidityCoverageRatio LGDLossGivenDefault LoLRLenderofLastResort MDBsMultilateralDevelopmentBanks MFIMicro-FinancialInstitutions MLMoneyLaundering MMOUIOSCO’sMultilateralMemorandumofUnderstandingConcerningConsultationandCooperationandtheExchangeofInformation MOUMemorandumofUnderstanding NBFINonbankfinancialintermediaries NBKNationalBankofKazakhstan NIINetInterestIncome NPANon-PerformingAssets NPLNon-PerformingLoan NSFRNetStableFunding