Financial Crime World

Kazakhstan’s Banks Face Unprecedented Challenges Amid Economic Uncertainty

A Resilient Sector in 2021

The Kazakh banking sector showed remarkable resilience in the face of economic challenges in 2021, with a 26.5% increase in annual lending to the economy and a 77.6% rise in net income compared to the previous year. However, the start of 2022 has brought new uncertainties, including unrest in Almaty and the war in Ukraine, which is expected to impact Kazakhstan’s economy due to its close connection with Russia.

The Kazakh Banking Services Market

The Kazakh banking services market is dominated by various players, including:

  • Banks
  • Banking organizations
  • Payment services providers
  • Microfinance organizations (MFOs)
  • Fintech companies offering traditional banking services such as payments and transfers of money

Key Players in the Market

There are currently 22 banks operating in Kazakhstan, with 14 having foreign participation. The top five banks by assets are:

  • Halyk Bank
  • Sberbank
  • Kaspi Bank
  • Otbasy Bank
  • First Heartland Jysan Bank

Regulatory Regime

The regulatory regime applicable to banks in Kazakhstan is overseen by three financial regulators:

  • Agency for Regulation and Development of the Financial Market (AFR)
  • National Bank of Kazakhstan (NBK)
  • Astana Financial Services Authority (AFSA)

Banks, banking organizations, and MFOs are subject to stringent regulatory requirements, including:

  • Minimal regulatory capital requirements
  • Prudential ratios
  • Other norms

Islamic banks operate alongside conventional banks in Kazakhstan, with separate regulation by the AFR.

Fintech Companies

Fintech companies have been forced to undergo re-registration as MFOs or payment services providers, which has led to a shift towards payments-only services. As of February 2022, there were:

  • 81 payment organizations operating in Kazakhstan
  • Local and international payment systems, with operators required to notify the NBK on commencement of operations and comply with general requirements of Kazakh law

Cross-Border Lending

Cross-border lending to Kazakh borrowers by foreign banks has become more common, although it is subject to mandatory provisions of Kazakh law, including:

  • Advertising restrictions
  • Securities market regulation
  • Currency control regulation