General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
September 14, 2018

IMF published its staff report and selected issues report under the 2018 Article IV consultation with the Republic of Kazakhstan. The Executive Board notes that certain risks and challenges remain, despite extensive and costly financial support to banks. Actions are needed in the areas of asset quality and governance, supervision and regulation, emergency liquidity assistance (ELA), credit subsidies, collateral and foreclosure, and disposal of distressed assets. Further strengthening of the resilience of the banking sector will contribute to sound macro-financial linkages and growth, while reducing risks.

The staff report notes that the authorities have taken major steps to secure the stability of the financial sector, although certain risks remain and nonperforming loans (NPLs) also remain elevated. Legal changes to enhance the National Bank of Kazakhstan's (NBK) regulatory powers, particularly on use of supervisory judgment, were adopted by parliament in June. NBK withdrew or suspended licenses of several medium-size and small banks that were in violation of prudential requirements. Long-term funding remains limited and a number of initiatives are being rolled out, including NBK support for mortgage lending and purchase of bank bonds by the pension fund. High NPLs and large volatility of deposits affected lending and, in 2017, private sector credit was flat.

Although certain actions of authorities actions have helped preserve systemic stability, state support has been costly. The banking sector continues to experience difficulties from weak credit risk assessment and management and needs to adopt a substantially stronger business model, with enhanced governance, management, operations, and profitability. The IMF staff urged that policy actions be taken in several areas:

  • Large banks—including those that received state support and NBK subordinated loans—should undergo a thorough balance sheet evaluation. A comprehensive asset quality review—ideally by an external party—would help define the magnitude of remaining potential problem loans. Further capital support should come from shareholders or new private investors.
  • Banks that received state support, and those with continuing constraints on portfolios and profitability, should undertake operational restructuring to ensure sound governance and proper risk assessment. This would address the moral hazard concerns.
  • Recent amendments to the Law on NBK and the Law on Banks and Banking Activity aim to reflect international good practices in bank supervision and resolution. NBK should prepare regulations to formalize its use of broader powers. Another weakness that should be addressed relates to capital regulations, which allow banks to shift NPLs to non-bank subsidiaries that are not subject to consolidated capital requirements.
  • The ELA framework for banks also needs attention. ELA should be provided only to institutions that are assessed as viable and should be adequately collateralized or provided under government guarantee.
  • Further financial infrastructure improvements are needed, including in collateral valuation and foreclosure and disposal of distressed assets. 

The selected issues report addresses fiscal risk management, key elements of the new regime of natural resource taxation, use of interest rate rules to inform monetary policy, reforms related to reserve requirements, macro-financial assessment, and economic diversification through trade. The report highlights that stronger and more effective macro-financial linkages would require improvement in the condition of banks and enhancements to the regulatory framework. Over the longer term, efforts are needed to promote financial development, which will be critical for diversified, sustainable, and inclusive growth.


Related Links

Keywords: Asia Pacific, Kazakhstan, Banking, Article IV, NPLs, NBK, IMF

Related Articles

HKMA Decides to Maintain Countercyclical Capital Buffer at 2.5%

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%.

April 16, 2019 WebPage Regulatory News

EP Approves Agreement on Package of CRD 5, CRR 2, BRRD 2, and SRMR 2

The European Parliament (EP) approved the final agreement on a package of reforms proposed by EC to strengthen the resilience and resolvability of European banks.

April 16, 2019 WebPage Regulatory News

FDIC Consults on Approach to Resolution Planning for IDIs

FDIC approved an Advance Notice of Proposed Rulemaking (ANPR) and is seeking comment on ways to tailor and improve its rule requiring certain insured depository institutions (IDIs) to submit resolution plans.

April 16, 2019 WebPage Regulatory News

EP Resolution on Proposal for Sovereign Bond Backed Securities

The European Parliament (EP) published adopted text on the proposal for a regulation of the European Parliament and of the Council on sovereign bond-backed securities (SBBS).

April 16, 2019 WebPage Regulatory News

PRA Seeks Input and Issues Specifications for Insurance Stress Tests

PRA announced that it will conduct an insurance stress test for the largest regulated life and general insurers from July to September 2019.

April 15, 2019 WebPage Regulatory News

PRA Finalizes Policy on Approach to Managing Climate Change Risks

PRA published the policy statement PS11/19, which contains final supervisory statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change (Appendix).

April 15, 2019 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for April 2019

EBA published answers to nine questions under the Single Rulebook question and answer (Q&A) updates for this week.

April 12, 2019 WebPage Regulatory News

EIOPA Statement on Application of Proportionality in SCR Supervision

EIOPA published a supervisory statement on the application of proportionality principle in the supervision of the Solvency Capital Requirement (SCR) calculated in accordance with the standard formula.

April 11, 2019 WebPage Regulatory News

FED Updates Form and Supplemental Instructions for FR Y-9C Reporting

FED updated the form and supplemental instructions for FR Y-9C reporting. FR Y-9C is used to collect data from domestic bank holding companies, savings and loan holding companies, U.S intermediate holding companies, and securities holding companies with total consolidated assets of USD 3 billion or more.

April 11, 2019 WebPage Regulatory News

OSFI Finalizes Guidelines on Liquidity Adequacy and NSFR Disclosures

OSFI published the final Liquidity Adequacy Requirements (LAR) guideline and the net stable funding ratio (NSFR) disclosure requirements guideline.

April 11, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 2920