IMF Staff Country Reports

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. However, 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. In addition, the authorities should take more stringent corrective measures vis-à-vis gaps in banks’ related party framework and practices.