DESCRIPTION
The main priorities of the work of the Agency of the Republic of Kazakhstan for Regulation and Development of Financial Market (hereinafter referred to as the Agency) are to increase transparency and trust in the banking sector, assess the financial stability of banks through building a comprehensive model of the supervisory process.
For this purpose, the Agency is further improving the supervisory process according to the SREP methodology (Supervisory Review and Evaluation Process) and developing priority supervisory tools based on asset quality assessment (AQR) and supervisory stress testing.
In 2020, the Agency and the National Bank of the Republic of Kazakhstan (hereinafter referred to as the National Bank) for the first time conducted stress testing and a comprehensive analysis of the stability of second-tier banks in order to assess the depth of the impact of the crisis associated with the spread of the coronavirus pandemic. The results of the work conducted made it possible to identify risks in the internal processes of banks and confirmed the need to implement supervisory stress testing on an ongoing basis.
The introduction of stress testing tools into the supervisory process will make it possible to assess the capital adequacy of banks on an annual basis, taking into account negative scenarios for the economy development.
Within the period from October 2021 to March 2022, the Agency conducted supervisory stress testing in a pilot mode with the participation of a limited number of banks, which made it possible to test the process and update the target model.
This document discloses the concepts and goals of supervisory stress testing, the scope of participants and the approaches used, the main processes of interaction and other key aspects of supervisory stress testing. In addition, sections of this document describe the characteristics of the target model for supervisory stress testing.