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

FINANCIALSECTOR ASSESSMENT PROGRAM DETAILED ASSESSMENT OF OBSERVANCE—BASELCORE PRINCIPLES FOR EFFECTIVE BANKINGSUPERVISION ThisDetailed Assessmentof Observance of the Basel Core Principles for Effective BankingSupervisionfor theRepublic ofKazakhstanFinancial Sector Assessment Programwasprepared by a staff team of the International Monetary Fundand the World Bankasbackground documentation for the periodic consultation with the member country. It isbased on the information available at the time it was completedinJanuary2024. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.orgPrice: $18.00per printed copy International Monetary FundWashington, D.C. REPUBLIC OFKAZAKHSTAN DETAILED ASSESSMENT OF OBSERVANCE BASEL CORE PRINCIPLES FOR EFFECTIVE BANKINGSUPERVISION This report was prepared in the context of a jointIMF-World Bank Financial Sector AssessmentProgram (FSAP) mission in Kazakhstan during March-April 2023, led by Pierpaolo Grippa, IMF and PietroCalice, World Bank, and overseen by the Monetaryand Capital Markets Department, IMF, and theFinance, Competitiveness and Innovation GlobalPractice, World Bank. Further information on theFSAP program can be found athttp://www.imf.org/external/np/fsap/fssa.aspx, andwww.worldbank.org/fsap. Prepared By Monetary and CapitalMarkets Department, IMF,and Finance,Competitiveness andInnovation Global Practice,World Bank INTERNATIONAL MONETARY FUND Glossary_____________________________________________________________________________________________4 Executive Summary_________________________________________________________________________________7 INTRODUCTION AND METHODOLOGY_________________________________________________________10 A.Introduction_______________________________________________________________________________10B.Methodology______________________________________________________________________________11 INSTITUTIONAL AND MARKET STRUCTURE—OVERVIEW_____________________________________12 A.Institutional Structure_____________________________________________________________________12B.Overview of the Banking Sector__________________________________________________________13 PRECONDITIONS FOR EFFECTIVE BANKING SUPERVISION____________________________________14 A.Sound and Sustainable Macroeconomic Policies__________________________________________14B.Framework for Financial Stability Policy Formulation______________________________________14C.Public Infrastructure_______________________________________________________________________14D.Framework for Crisis Management, Recovery, and Resolution.____________________________15E.Public Safety Net__________________________________________________________________________15F.Effective Market Discipline_________________________________________________________________16 MAIN FINDINGS__________________________________________________________________________________16 A.Responsibilities, Objectives, Powers, Independence (CP 1–2)_____________________________16B.Licensing, Changes in Control, and Acquisitions (CP 4–7)_________________________________17C.Supervisory Cooperation, Consolidated and Cross Border Supervision(CP 3, 12, 13)_______________________________________________________________________________18D.Supervisory Approach (CP 8–10)__________________________________________________________18E.Corrective and Sanctioning Powers of Supervisors (CP 11)________________________________20F.Corporate Governance and risk management (CP 14, 15)_________________________________20G.Capital (CP 16)_____________________________________________________________________________20H.Credit Risk and Problems Assets, Provisions and Reserves (CP 17–18)____________________21I.Risks (CP 19–25)___________________________________________________________________________21J.Disclosures and Transparency (CP 27–28)_________________________________________________22K.Abuse of Financial Services (CP 29)________________________________________________________23 DETAILED ASSESSMENT_____________________________________________________________________24 A.Supervisory Powers, Responsibilities and Functions______________________________________24B.Prudential Regulations and Requirements_______________________________________________115 SUMMARY COMPLIANCE WITH THE BASEL CORE PRINCIPLES_________________________231 A.Recommended Actions__________________________________________________________________241B.Authorities’ Response to the Assessment________________________________________________247 Glossary ACAdditional CriterionACFAnalysis of Credit FilesAFSAAstana Financial Service AuthorityAIArtificial IntelligenceAIFCAstana International Financial CenterAMCAsset Management CompanyAML-CFTAnti-Money Laundering / Combating the Financing of Terrorism and Finan