Article by Dauren Salimbayev, Deputy Chairman of the Agency for Regulation and Development of the Financial Market

Since early 2025, extensive and systematic work has been carried out to develop a new Banking Law. This is one of the most significant legislative packages prepared in the financial sector for the past decade.

The law has been developed at the instruction of the Head of State and is a result of a thorough review of the current banking regulations. Approaches to regulation, supervision, licensing, consumer protection, particularly for credit products and ensuring bank stability have been revised. The document rests on best international practices, including recommendations from the International Monetary Fund, as well as experience of leading countries –the United Kingdom, the United Arab Emirates, Malaysia and the European Union.

From January to May 2025, over 30 working meetings, discussions and open consultations were held with participation of banks, experts and international consultants. All key provisions of the draft were openly discussed with detailed feedback from the market. As a result, we have developed a comprehensive, logically structured law covering the entire lifecycle of a bank – from obtaining a license and commencing operations to terminating operations and regulation of insolvency. The law includes 135 articles, 9 sections and dozens of related amendments to other legislative acts. Essentially, it creates a new legal framework for sustainable and technologically advanced financial sector.

One of the central areas is the issue of digitalization. Today, digital technologies are no longer just a tool but a foundation of the banking system. That is why the new Law introduces, for the first time, a legal regime for digital financial assets (DFAs) – the so-called tokenized financial instruments. Three types of DFAs are envisaged: stablecoins backed by money; secured digital assets issued against a specific underlying asset; and digital financial instruments – stocks, bonds and other securities in token format. Such assets are considered financial instruments and are regulated in the same way as traditional ones, with mandatory platform registration, oversight of operations, internal control requirements, information disclosure and investor protection.

To create a sustainable, technologically neutral and competitive financial environment, the National Bank will establish technical standards for operation of digital platforms and infrastructure. The National Bank will also regulate issue and circulation of stablecoins and oversee their integration into a unified legal system. The Agency, in turn, will focus on the investment side of the market, regulating issue and circulation of digital securities and other financial instruments, establishing requirements for issuers, monitoring information disclosure and ensuring investor protection. Together, both bodies will determine operating rules for key infrastructure – platforms, registrars, and exchanges – to enable development of a transparent and secure digital asset market.

Legal status of the digital tenge is also fixed as a new form of national currency that can be used in the digital environment – through mobile apps, internet services and other technologies. It will become an important element of the fast and secure payment system. Furthermore, it is proposed to tighten requirements for payment institutions. Specifically, these relate to registration of payment institutions and grounds for removal from the register of payment institutions.

Digitalization is impossible without updating the very model of access to the banking market. One of the key innovations of the new Law is introduction of a two-tier bank licensing system: basic and general licenses. This model allows for creation of a more flexible and competitive environment in which not only large banks but also new participants, including small regional banks and microfinance organizations, can develop. This is particularly important to stimulate financial inclusion, foster entrepreneurship and reduce territorial and digital gaps in banking services.

Basic license is intended for small banks focused on a limited range of operations. Such organizations are subject to simplified minimum capital requirements and restrictions on types of activities. Specifically, lending to affiliates and non-residents is prohibited, volume of risky investments and large transactions is limited, and a limit is set on deposits from individuals. These restrictions help mitigate potential risks without overburdening participants with excessive regulatory burdens.

However, availability of a basic license does not exempt such banks from supervisory requirements. They will undergo regular inspections, including a sustainability assessment procedure under the SREP (Supervisory Review and Evaluation) supervisory model. It is a comprehensive methodology to assess bank's stability that encompasses corporate governance, capital adequacy and other indicators. Thus, reliability and integrity of new participants will be ensured on par with universal banks, but with due consideration for the scale of their operations.

General license is retained for existing large banks and allows for a full range of operations, from traditional lending to investment banking. This approach, on the one hand, increases competition and attracts new players, and on the other, maintains stability of the system and differentiates requirements depending on the nature and volume of operations.

Creation of conditions for occurrence of small but stable banks is an important step toward increasing the financial inclusion, emergence of new business models, including digital ones and overall improvement of the competitive environment. In the long term, this will allow clients, both individuals and SMEs, to receive a wider choice of banking products, including with the use of innovative technologies.

The next major focus area was implementation of behavioral supervision. We have shifted from an approach where supervision was limited to financial indicators to a model where client protection is the key priority. The new law introduces requirements for honest advertising, disclosure of product terms, prohibition of solicitation and assessment of service suitability. Financial institutions have to verify suitability of a particular product for a particular individual. Responsible lending standards are being introduced to prevent excessive debt burdens, especially among vulnerable groups.

The complaint handling system is structured in two stages: first, complaint is reviewed by the service provider itself, then by a unified financial ombudsman service. This institution will combine all existing ombudsman functions and will become primary pre-trial mechanism for resolution of disputes between clients and financial institutions. We have also established the obligation of banks and microfinance organizations to implement initiatives to improve financial literacy. This is especially important against the background of digitalization and emergence of new complex products – clients must understand their choices.

Considerable attention has been paid to resilience of banks and their preparedness for potential crises. The law includes a three-stage anti-crisis regulation system: enhanced supervision, recovery mode and regulation mode. Banks are required to develop recovery plans in advance in case of deterioration in their financial condition. If the situation continues to deteriorate, the regulation mode is initiated. At this stage, a temporary administration is appointed, bank's viability is assessed, and, if necessary, special measures are implemented: from transfer of some or all assets and liabilities to another financial institution to creation of a transition bank or write-off of debt to shareholders and investors.

The law provides for specific regulation instruments consistent with the international practice. These first of all include write-off or conversion of capital and debt obligations, sale of businesses, transfer of assets, creation of a temporary organization (bridge bank), and separation of bank functions into "good" and "problem" assets (asset separation). Such measures ensure continuity of critical services, protect interests of depositors and maintain confidence in the financial system.

Backbone banks are required to establish a safety margin – the TLAC (Total Loss Absorbing Capacity) mechanism. This means that the bank must have sufficient capital and debt instruments prepared in advance for possible write-offs or conversion to equity in case of significant losses. Thus, losses are first of all covered by shareholders and investors without resorting to budgetary funds.

Direct government participation in regulation is now possible only in the most extreme cases – if the use of all market instruments has proven insufficient, and the bank poses a systemic risk to the country's financial stability. Even in such cases, government assistance is permitted only under strict conditions: transparency of decisions must be ensured, minimal intervention in market mechanisms, and mandatory compliance with the NCWO (No Creditor Worse Off) principle. This means that no creditor must suffer losses during the regulation process greater than they would have suffered under a standard bankruptcy procedure. This eliminates the possibility of arbitrary redistribution of losses and guarantees protection of rights of bona fide creditors.

The new system completely eliminates automatic or politically motivated provision of the state aid. The approach to regulation has become predictable, economically justified and fair. This fundamental change is designed to eliminate moral hazard, increase responsibility of bank owners and protect interests of depositors and taxpayers.

We have also strengthened corporate governance requirements, as bank’s stability and protection of client interests depend on quality of management decisions. The new law establishes clear standards for all levels of management, from shareholders to specialized functions within the bank.

Heads of risk management, internal control and compliance departments are now officially recognized as key management personnel. This means that they are subject to the same strict requirements as members of the management board: experience, relevant education, business reputation and transparent professional history. Their independence and powers are fixed at the legislative level, allowing these functions to effectively influence decision-making and prevent violations at an early stage.

Requirements for composition of boards of directors have also been tightened. Members of the board of directors, especially independent ones, must meet a number of criteria, including lack of affiliation with the bank, business reputation and qualifications. Term limits are being introduced to prevent excessive closeness to management and maintain an independent view. Annual verification of compliance with independence criteria will become mandatory, both by the bank itself and with the possibility of subsequent assessment by the regulator. This is necessary to ensure that boards of directors truly perform an oversight function, rather than merely formally approve decisions.

Additionally, the law expands regulator's tools of reasoned judgment. This means that the authorized agency will be able to assess not only formal but also factual circumstances – for example, actual independence of a board member or a shareholder's influence on operations, even if all regulations are met on paper. This approach will help identify potential conflicts of interest and mitigate risks of abuse.

To improve efficiency of asset management, a limit has been set for a period during which recovered assets can remain on a bank's balance sheet – no more than three years. This is important to prevent banks from turning into the so-called "real estate holdings" or "factory owners," and to focus on their core business – financial intermediation. This requirement will encourage rapid realization of collateral, return of assets to the real economy and reduction of non-core risks.

Finally, an important part of the new law is development of the Islamic finance. A flexible "Islamic windows" model is being introduced, allowing traditional banks to provide Islamic services within their existing license without establishment of a separate structure. All such operations will be conducted separately, with separate accounting, internal barriers, and mandatory presence of a Shariah compliance council. This will ensure compliance with the principles of the Islamic law while integrating such services into the existing banking system.

This model is already being successfully applied in countries with developed Islamic markets, including the UAE, Malaysia and Pakistan. It makes Islamic products more accessible, reduces costs for banks and opens up new opportunities for clients who prefer ethical or religiously oriented products, as well as for attracting investment from Islamic countries. Introduction of this model will be an important step toward development of an inclusive and diversified financial system in Kazakhstan.

All these innovations are more than just regulatory updates. They represent a comprehensive legislative reform that opens a new chapter in development of the banking sector. The new Banking Law is a systemic document that zeroes in on sustainability, fairness, technological advancement and protection of interests of consumers of financial services.

It is the result of joint and transparent efforts of the government, market participants and the expert community. The law establishes clear and predictable rules of the game, enhances confidence in the financial system, increases responsibility of all its participants and creates foundation for its sustainable, competitive and inclusive development.

Source : https://www.gov.kz/memleket/entities/ardfm/press/news/details/1081970?lang=kk