Amendments To Kazakhstan Legislation

During the fourth quarter of 2009, the Government of Kazakhstan, the Agency of the Republic of Kazakhstan on the Regulation and Supervision of Financial Market and Financial Organizations (the "FMSA"), and the National Bank of Kazakhstan (the "NBK") introduced a number of amendments to Kazakhstan legislation regulating activities of commercial banks, pension funds and other financial institutions operating in Kazakhstan.

This update contains a brief overview of the most significant changes to such legislation. Some of these new regulations (for example, new provisions in respect of anti-money laundering, transactions with derivatives and investments of pension funds, as summarized below) affect not only domestic activities of Kazakhstan financial institutions, but also their cross-border dealings with foreign counterparties.

Banking

Amendments to the Law on Banks and Banking Activity (the "Banking Law") and to the Law on Securities Market (the "Securities Law"), effective 8 March 2010. The amendments introduced anti-money laundering provisions to the Banking Law and the Securities Law within the general framework of anti-money laundering amendments to a number of Kazakhstan laws and legislative acts. The amendments comprise the following powers of the FMSA:

suspension and/or termination of a banking license in the event of regular violations of anti-money laundering requirements or participation by a bank (or a professional securities market participant) in transactions related to money laundering or financing of terrorism; and suspension of operations through bank accounts of any individual or legal entity in certain cases. The amendments also provide that mandatory notification of the FMSA concerning operations that are subject to financial monitoring to counteract money-laundering and financing of terrorism by the banks shall not be deemed a breach of banking secrecy or commercial secrecy in the securities market.

Amendments to the prudential norms of banks, effective 14 September/1 October 2009. The amendments introduced changes to k4 ratio (current liquidity ratio), k8 ratio (total liabilities to non-residents to equity) and k9 ratio (total liabilities including issued foreign currency denominated securities to equity) to include certain liabilities of a bank into calculation of these ratios.

In accordance with the amendments, unsecured guarantees and sureties of a bank issued to secure external borrowings of a bank's subsidiary or...