A general introduction to banking supervision in Kazakhstan

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The events of 2021 left the Kazakh economy, particularly the financial sector, facing the combined challenge of an ongoing drop in oil prices and new strains of Covid-19. However, according to the Financial Market Regulation and Development Agency (AFR), the negative impact of these challenges on the Kazakh banking sector was not as severe as expected, and in 2021 the banking sector gradually began to recover. In 2021, annual lending to the Kazakh economy was 18.5 trillion tenge, up 26.5 percent year-on-year. The net income of the banking sector increased by 77.6 percent compared to the previous year.2 The proportion of non-performing loans fell from 6.8 percent to 3.9 percent in 2021.3 At the beginning of 2022, new challenges emerged, such as the riots in Almaty in January and the war in Ukraine with subsequent sanctions against Russia, which will definitely affect Kazakhstan due to the close connection of the Kazakh economy with the Russian economy. The local currency has already fallen dramatically. Time will test the stability of the Kazakh banking system in the face of these unprecedented challenges.

Kazakhstan’s banking services market is represented by various players, including banks, organizations that conduct specific types of banking (banking organizations), payment service providers, and microfinance organizations (MFOs). In line with the global trend, fintech companies are also becoming key players in the market. Banks operating in Kazakhstan include local banks (conventional and Islamic) and subsidiaries of foreign banks operating as Kazakh legal entities under Kazakh law. With recent changes in the law, foreign banks can now conduct banking not only through their subsidiaries but also through branches, which was previously prohibited. There are currently 22 banks in Kazakhstan; Of these, 14 banks have foreign interests, including 11 subsidiary banks, and one bank is 100 percent state-owned.4 The five largest banks by assets are Halyk Bank, Sberbank, Kaspi Bank, Otbasy Bank and First Heartland Jysan Bank.5

The regulatory system applicable to banks

i regulators

There are three financial regulators in Kazakhstan: the AFR, the National Bank of Kazakhstan (NBK) and the Astana Financial Services Authority (AFSA). The AFR is responsible for regulating banks, foreign bank branches, banking organizations, MFOs, insurance organizations, pension funds and securities market subjects. As the central bank of Kazakhstan, the NBC is responsible for monetary policy, the stability of the financial and payment systems, foreign exchange control and regulation, and the regulation of payment systems, payment system operators and payment organizations. The AFSA regulates financial and payment services provided under the Astana International Financial Center (AIFC); namely financial and payment services provided by AIFC entities to other AIFC entities.

ii Main players in banking of Kazakhstan

Banking in Kazakhstan consists of banks, banking organizations, MFOs and more recently fintech companies (without a banking license) that provide traditional banking services such as payments and money transfers. In addition, some special entities (mostly quasi-state) (e.g. the Development Bank of Kazakhstan, National Postal Operator, KazPost and Agrarian Credit Corporation) can also conduct banking operations without a banking license, provided that they are specifically granted that power by legislation.

banks and banking organizations

Banks and banking organizations may engage in banking activities on the basis of licenses issued to banks by the AFR or the NBK or the AFSA and operate within the AIFC. The list of permitted banking transactions for each individual bank or banking organization is detailed in its banking license. Subject to certain exceptions, banks are generally prohibited from engaging in any business other than banking. Banks, banking institutions and their shareholders are also subject to strict regulatory requirements, including a minimum capital requirement, regulatory ratios and other standards, management and premises requirements, and assets in which they are permitted to invest.

Islamic banks

In Kazakhstan, local Islamic banks and branches of foreign Islamic banks can operate alongside conventional banks. Islamic banks are subject to separate regulation by the AFR. They are generally prohibited from charging interest on loans and paying guaranteed interest on deposits. Islamic banks are prohibited from investing in companies related to tobacco, alcohol, weapons, gambling and certain other activities prohibited by the Council on Principles of Islamic Finance (Islamic Council). The Islamic Council is a mandatory corporate body of an Islamic bank that determines key issues of banking operations, including permissible transactions, rules of conduct and internal credit policies.6

branches of foreign banks

Since December 2020, branches of foreign banks have been allowed to conduct banking business in Kazakhstan, subject to extensive AFR requirements.


MFOs have a solid position in the Kazakh financial market. Recent changes in the law have left only MFOs, pawnshops and credit unions eligible to issue microloans. Microcredit lending by other legal entities is prohibited.

fintech company

Fintech companies are emerging as major players in the financial services market. Initially, fintech companies in Kazakhstan were involved in microcredit and payments. However, in 2020, the regulator forced companies offering online lending to undergo re-registration as MFOs subject to regulation by the AFR. As a result, most fintech companies are only active in payment transactions. In February 2022 there were 81 payment organizations in Kazakhstan.7 According to NBK, the value of non-cash payments increased 2.1 times to 73.1 trillion tenge in 2021.8th

payment systems

The payment industry in Kazakhstan is represented by both local payment systems, such as the interbank payment system operated by NBK, and international payment systems, such as Mastercard, Visa and UnionPay. Payment systems provide payment infrastructure and various high-tech services related to payments to Kazakh banks. Operators of foreign payment systems must inform the NBK about starting their activities in Kazakhstan and comply with the general requirements of Kazakh law, e.g. B. in relation to reports, personal data and antitrust regulations. However, foreign payment systems and their services do not yet have detailed regulation, which gives them great opportunities in the Kazakh market.

Cross-border lending to Kazakh borrowers by foreign banks

In practice, it is common for Kazakh borrowers to solicit cross-border financing from foreign banks that are not present in Kazakhstan. The provision of a loan or other financial service by a foreign bank located outside Kazakhstan to a Kazakh customer is generally not considered banking within the meaning of Kazakh law and accordingly can be conducted without a Kazakh banking license. Foreign banks intending to market and provide cross-border lending and other services to Kazakh customers must take into account mandatory provisions of Kazakh law, such as: B. Advertising Restrictions, Securities Markets Regulation and Exchange Control Regulation.

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