The Agency for Regulation and Development of the Financial Market organized a round table to discuss  a draft of new Bank Law of the Republic of Kazakhstan.

The event was attended by the chief executives of the Agency, the National Bank, the Association of Financiers of Kazakhstan, second-tier banks, representatives of ministries, international organizations and experts.

The new laws are developed within the instruction of the Head of State voiced in the Address to the nation of Kazakhstan "Fair Kazakhstan: Law and Order, Economic Growth, Public Optimism" dated September 2, 2024. The law is designed to make the banking sector more sustainable, develop innovations and stimulate an increase in the role of banks in financing the real sector of the economy.

During her welcoming speech, Chairperson of the Agency Madina Abylkassymova pointed out that the Law on Banks and Banking Activities adopted in 1995 needs revision.

"Significant changes in business models of banks, spread of digital services, emergence of new participants and changing consumer expectations require a deep and comprehensive upgrade of the regulatory framework. The new law takes into account these transformations and lays the foundation for sustainable development of the banking sector in the current conditions," the Head of the Agency emphasized.

Today, the banking sector is the largest segment of the financial market. At the end of 2024, assets of the sector grew by 19.7%, reaching 61.6 trillion KZT. In general, the average annual growth of the sector's assets over the past 5 years was 18%. Positive changes have occurred in the structure of the banks' deposit base, its stable double growth is noted (since 2020), which confirms a high level of trust in the banking system.

"In recent years, the Agency has implemented a number of key reforms in the banking sector. Significant areas of transformation include full implementation of risk-oriented supervision, including the annual asset quality assessment (AQR), supervisory stress testing, and the SREP (Supervisory review and evaluation process). Since January 2025, implementation of the ICAAP and ILAAP principles, transition to consolidated supervision, introduction of a supervisory capital buffer, formation of provisions subject to IFRS 9, as well as integration of requirements in the field of sustainable development (ESG) have been completed. These steps have contributed to formation of a balanced and modern regulatory environment,” the Head of the Agency indicated.

1. Abylkasymova emphasized that the banking system has entered a new stage of its development. Widespread introduction of digital technologies and artificial intelligence provides new opportunities to increase accuracy of risk assessment, improve credit scoring, strengthen data protection and anti-fraud mechanisms.

Taking into account transformation of the financial sector and new trends in regulation, the Agency, together with the National Bank, has prepared a draft of the new law.

The law was developed with active involvement of experts, representatives of international organizations such as the EBRD, the IMF, financial market participants, and the best practices of the European Central Bank, the Bank of England, the Central Bank of the Russian Federation and the Central Bank of the UAE were used. Therefore, it was possible not only to reflect current challenges and take into account the opinion of market participants, but also to introduce advanced international approaches to regulating banking activities. Draft of the new Bank Law includes seven key areas.

The first direction concerns upgrade of the licensing system and regulation of access to the banking market, including introduction of a basic banking license.

"Basic banking license is introduced and it streamlines entry of new participants to the market and promotes increased competition. Unlike general license, basic license provides for restrictions on the size of assets, and also reduces requirements for minimum capital to 10 billion KZT, the risk management system and supervisory burden, which creates more flexible regulatory conditions while maintaining the stability of the system. Along with that, certain high-risk operations and transactions with related parties will be prohibited. The new approach is especially relevant for MFOs that pro-actively work with small and medium-sized enterprises, including in the regions that have already expressed interest in obtaining a banking license," M. Abylkassymova said.

Moreover, requirements for non-banking organizations that provide financial services to the population are made stricter, and conditions are created for development of the Islamic banking.

The second direction is related to development of behavioral supervision and improved protection of consumer rights. A comprehensive supervision system will be built, comparable in importance to prudential supervision. The regulation rests on an approach that integrates principles of responsibility in management of financial products, including their development, advertising, provision and monitoring.

The third direction concerns mechanisms for regulation of insolvent banks. It is envisaged to introduce a three-stage system, including enhanced supervision, financial stability restoration regime, and regulation regime.

"At the first signs of deteriorating financial condition, the bank will be switched to intensive supervision with an update of recovery plans. In case of further deterioration, the stability restoration regime is launched with use of stabilization measures, and if the bank is recognized as insolvent, a regulation mechanism is implemented, which provides for appointment of a temporary administration and a viability assessment. The main goal is to minimize use of state support, which is limited only to exceptional cases for systemically important banks, with minimal risks to the financial system," Agency Chairperson added.

The fourth direction covers improvement of the banking regulation. These changes are based on recommendations following the Financial Sector Assessment of Kazakhstan (FSAP) conducted by the IMF and the World Bank in 2023. It is planned to expand instruments of macroprudential regulation, as well as establish qualification standards for chiefs of key subdivisions, expand the scope of application of the regulator's motivated judgment, tighten requirements for transactions with related parties, and others.

The fifth direction covers stimulation of lending and business activity in the economy. Conditions will be created for further development of syndicated loans, creation of a guarantee fund for SMEs with participation of banks, formation of conditions for promotion of factoring in order to expand access to financing for SMEs and stimulate business activity in the economy.

The sixth direction is related to optimization of the structure of banking laws.

"The new law will be logically structured subject to the life cycle of a bank - from its creation and licensing to liquidation procedures, while removing the outdated and duplicate rules. Requirements to shareholders and management will be systematized and transferred to a separate law "State Regulation, Control and Supervision", which will increase legal clarity and ease application of rules for market participants," the Agency Chairperson added.

The seventh direction concerns development of the national digital financial infrastructure. This block is designed to create a technologically advanced and sustainable financial system that provides a legal and technical basis for further digitalization.

During the round table, representatives of the Agency discussed each area in detail, presented goals and objectives, as well as international experience.

Representatives of the National Bank voiced initiatives for development of the national digital financial infrastructure.

During the discussion, second-tier banks highlighted the need to maintain a balance between regulation and development of the financial market, prevent regulatory arbitrage between banks and non-bank players, and comply with the principles of banking secrecy.

The experts voiced their questions and suggestions, and conceptually supported the new draft Law. M. Temirkhanov offered to legislatively fix the principle of proportional regulation depending on the level of risks of banks, take measures to prevent competition between the quasi-public sector and second-tier banks, separate micro- and macroprudential regulation, and extend the new mechanism for regulation of insolvency to the entire financial sector.

In connection with development of the new Law on Banks, expert F. Karagussov offered to amend other legislative acts, in particular to revise the relationship between provisions of the Civil Code and banking laws in order to ensure proper protection of property rights of financial market participants.

The new draft Law will be presented for public discussion in April, and its submission to the Majilis of Parliament is scheduled for August 2025.

External Communications Department

press@finreg.kz

Source : https://www.gov.kz/memleket/entities/ardfm/press/news/details/976120?lang=kk