Overview Of Banking In Kazakhstan

Kazakhstan's commercial banking sector has grown

dramatically in recent years. While the sector, like that in

many other countries, is currently stressed as a result

of the credit and liquidity crises that have rippled

around the globe since the Fall of 2007, the longer term

prospects of Kazakhstan's banks remain bright

primarily because of Kazakhstan's very positive economic

outlook associated with its vast oil, gas and mineral

resources. In addition, Kazakhstan's Government took

relatively quick action in response to the crises by

establishing a large program to deposit State reserve fund

moneys with certain large banks to be used to support the

country's real estate, construction and small and medium

sized business sectors that began to experience difficulties

toward the end of 2007. The Government's action appears to

have helped most of the country's top banks, although

international rating agencies continue to express concern about

the banks' asset quality and levels of foreign borrowings.

Despite near term issues connected to the crises,

Kazakhstan's banking sector presents an attractive

investment opportunity for foreign banks.

Kazakhstan's Banking Sector

Kazakhstan's banking sector has two tiers. The National

Bank of Kazakhstan (NBK) is the central bank and represents the

first tier of the sector. The NBK develops and pursues the

State's monetary and credit policy, issues the national

currency (the tenge), maintains the country's foreign

currency and gold reserves and carries out foreign exchange

control and regulation. The NBK has delegated to the Agency for

Regulation and Supervision of Financial Markets and Financial

Institutions (FMSA) the general authority to oversee and

supervise the second tier banks, although the NBK retains

authority in certain limited areas. The FMSA

generally supervises and regulates, among other

things, the chartering of banks, the establishment of

representative offices of foreign banks, the acquisition of

banks or significant interests in banks, minimum reserve and

capital adequacy requirements and the level of external

borrowings that may be made by banks. The FMSA also monitors

the asset quality of the banks and periodically inspects their

operations and, together with the NBK, continuously works

toward improving the governance and transparency of

Kazakhstan's banking system. Kazakhstan is generally

considered to have the strongest bank regulatory regime in the

countries of the former Soviet Union.

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