Financial Crime World

Kazakhstan’s Financial Sector Regulation Overhaul: A New Era for Securities Market, Insurance, and Banking Activities

On July 12, 2022, Kazakhstan’s financial sector underwent significant reforms with the enactment of a new Law. President Kassym-Jomart Tokayev signed the Law, marking a major modernization of the country’s securities market, insurance, and banking regulations. The Law took effect on September 12, 2022, with some provisions coming into force retroactively.

Modernizing the Financial Regulatory Framework

Kazakhstan is striving to maintain an efficient and competitive financial sector. The Law introduces various amendments aimed at modernizing the financial regulatory framework and fostering a favorable business climate.

Key Changes in the Securities Market

The securities market in Kazakhstan has undergone considerable transformation as a result of the Law. Key changes include:

  1. Unified securities registry
    • The current securities registry operated by the National Bank of Kazakhstan (NBK) and the unified register of securities holders maintained by the Kazakhstan Stock Exchange (KASE) will be merged.
  2. Central depository system
    • The introduction of a central depository system is intended to enhance transparency, reduce counterparty risk, and streamline collateral management.
  3. Exchange-traded funds (ETFs)
    • The Law opens the door for the regulation of Exchange-Traded Funds (ETFs) in Kazakhstan, signaling the country’s commitment to fostering a diverse investment environment.

Revamped Insurance Regulations

Insurance regulations have also seen numerous enhancements under the Law. Some of the most critical changes include:

  1. Co-insurance
    • The Law eases co-insurance requirements for insurance companies, allowing them to collaborate more effectively with reinsurers.
    • A mechanism has been introduced to incentivize the reinsurance market, promoting a more robust risk-sharing system.
  2. Solvency and capital adequacy
    • The Law strengthens the insurance regulatory framework by revising solvency requirements and introducing stricter capital adequacy rules.

Banking Sector Reforms

The Law brings about substantial changes to Kazakhstan’s banking sector. Reforms include:

  1. Digital banking
    • The Law addresses the incorporation of digital technologies in the banking sector, enabling financial institutions to offer innovative digital services and products.
  2. Regulatory oversight
    • The Law enhances the oversight regime for banks, introducing stricter administrative and financial penalty procedures.

A Modern, Efficient, and Competitive Regulatory Landscape

The financial sector overhaul in Kazakhstan marks a positive step towards creating a modern, efficient, and competitive regulatory landscape. Foreign and domestic investors stand to benefit from the Law’s significant changes in securities market, insurance, and banking activities.

Additional References