Kazakhstan’s Banking Sector To Undergo Makeover

Kazakhstan’s government presented to Parliament on September 15 a new draft law focused on the banking sector, which aims to update the legislation to include the latest trends concerning fintech and small-size lenders.

Madina Abylkassymova, head of the Agency for the Regulation of the Financial Market, described the plan to introduce a new type of license for smaller financial institutions. Under the new “basic” license the volume of operations and the regulatory requirements will be limited, compared to regular banks.

“At the current stage, we plan to target institutions with a maximum asset size of 500 billion tenge and a minimum capital requirement of 10 billion tenge. Banks with a basic license will be prohibited from lending to non-residents and affiliated persons,” Abylkassymova said.

In terms of state intervention, the practice is also poised to change under the new rules, according to Abylkassymova. The government will establish a clear anti-crisis roadmap and apply it according to specific triggers.

“The only form of state support will be the direct entry of the state into the capital of a systemically important bank to maintain the stability of the financial environment,” Abylkassymova said.

This measure is likely a response to the heavy-handed state intervention in the banking sector over the past decade, which resulted in several institutions paying back in installments, without suffering significant corporate restructuring.

Abylkassymova also said that Kazakhstan’s banks will have more instruments to invest in the capital of fintech companies operating in the field of digital technologies and e-commerce.

“Yet there will be thresholds for such investments, according to the size of the bank and its participation in the capital of these companies,” Abylkassymova added.

Berik Sholpankulov, the Central Bank’s deputy chairman, also noted that under the proposed legal measures digital financial assets, such as stablecoins, derivative digital financial assets, and tokenized financial instruments, will be recognized as financial instruments. In addition, the bill will include a chapter on the establishment of the “digital tenge.”

“This would allow the recognition of the digital tenge as a legal tender in Kazakhstan along with cash and non-cash means of payment. The Central Bank will be the sole issuer of the digital tenge and its guarantor,” Sholpankulov said.

With reporting by Tamara Vaal.

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