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

IMF Staff Country Reports, February 29, 2024

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

This paper presents Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision for the Republic of Kazakhstan Financial Sector Assessment Program.
Along with the financial stability mandate, the Agency of the Republic of Kazakhstan for the Regulation and Development of the Financial Market (ARDFM) pursues a development objective, including by supporting the expansion of banks’ loans portfolio, which can conflict with the safety and soundness of banks and the banking system, and it is not subordinate to it.
ARDFM began its activities during the coronavirus pandemic.
Banks’ asset quality, while improving, remains a source of concern.
Supervisory discretion is constrained as the law enables the ARDFM to exert its motivated judgment.
The ARDFM should perform a more intrusive oversight of related party transactions, including onsite reviews.
The authorities should take more stringent corrective measures vis-à-vis gaps in banks’ related party framework and practices.

Increase supervisory intrusiveness on related party transactions:
- Undertake onsite reviews focused on related party exposures and controls.
- Strengthen oversight procedures and documentation requirements for related party dealings.
Address conflicts between development objectives and prudential mandate:
- Reassess ARDFM’s dual objectives to ensure financial stability and safety and soundness are not compromised by development goals that promote loan portfolio expansion.
Enhance corrective measures for weaknesses in banks’ frameworks:
- Apply more stringent corrective actions where gaps exist in banks’ related party frameworks and practices.

Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Credit risk, Crime, Financial regulation and supervision, Financial sector policy and analysis, Internal controls, International organization, Market risk, Monetary policy, Operational risk, Revenue administration, Stress testing
Keywords: adequacy ASSESSMENT process, AML/CFT, Anti-money laundering and combating the financing of terrorism (AML/CFT), banking group, consolidated supervision, Credit risk, due diligence, Global, IMF-World Bank Financial Sector Assessment Program, interest rate risk, Internal controls, Kazakhstan tenge, Market risk, NPL definition, Operational risk, prudential mandate, regulator's independence, related parties, risk weight assets, risk-based supervision, staff team of the International Monetary Fund, Stress testing

1kazea2024004 — Detailed Assessment
- 1kazea2024004 — Detailed Assessment (Markdown version)
- 1kazea2024004 — Detailed Assessment (PDF)