An important factor in the sustainable and progressive development of the financial sector, building a constructive dialogue between the banking community and the regulator, is the consistency, transparency and predictability of the actions of the financial regulator, the existence of a unified policy and understanding of its main priorities.
Determination of the main priorities of the supervisory policy of the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (hereinafter - the Agency) in relation to the banking sector in 2021 is intended to ensure the effectiveness of the supervisory process and increase transparency in the activities of the financial regulator.
In order to ensure the protection of the rights and interests of depositors and other investors, the stability of the financial sector, the fundamental principle of an effective supervisory process will be the further development of a risk-based approach with the use of supervisory judgment.
The main objectives of the risk-based approach are to identify and prevent risks and shortcomings in the activities of banks, in order to intervene early and take timely supervisory actions to ensure their financial stability, and to prevent an increase in risks in their activities.
At the same time, the risk-based approach takes into account the principle of proportionality, which assumes:
taking into account the size, significance, nature, scale and complexity of banks ' activities;
categorization according to the importance of banks in the financial market;
determination of the frequency, depth and intensity of control and supervision.
As part of the risk-based approach, the supervisory process will simultaneously continue to use the financial regulator's mandate to use reasoned judgment in legally defined areas (issuing permits for individuals and entities to enter the financial market, assessing the adequacy of provisions (reserves) created, identifying related parties, evaluating risk management and internal control systems).
In addition, taking into account the transition to a risk-based approach, new requirements for the risk management and internal control system have been introduced, which are aligned with the methodology of the implemented supervisory model SREP (Supervisory Review and Evaluation Process).
The conceptual innovation of these requirements is a departure from the formal requirements for regulating the quality characteristics of bank's procedures within the framework of the risk management and internal control system, the introduction of requirements for the effective definition of bank's business model, determining the risk profile and risk appetite based on the selected business model, the introduction of new risk assessment processes of bank to determine the target level of capital and liquidity (ICAAP/ILAAP), strengthening the role of the board of directors and building independent risk management.
The key supervisory priorities outlined in this document will allow systematizing the supervisory process and making full use of the risk-based component in the supervisory policy.