New type of banking license will appear in Kazakhstan
A new type of banking license, "basic", will appear in Kazakhstan. The innovation was included in a draft of a new law on banks and banking activities. The draft law was developed by the Agency for Regulation and Development of the Financial Market on instruction of the Head of State.
Introduction of the basic license will ease entry of new banks into the market and enhance competition. It will also make a difference for lending to the economy. The basic license will differ from a general license in terms of its restrictions on certain operations. Scale of operations will also be limited, and related party lending will be banned.
Meanwhile, along with restriction of operations, some prudential requirements will be cut. In particular, requirements in terms of capital, liquidity and other indicators, and a reduced scope of reporting is also planned.
Banks with basic license will have a limit on size of assets. If the bank reaches the established threshold, it will need to obtain a general license. For example, in various countries, operations under basic banking license is considered an adaptation period before the general license is obtained.
Along with that, despite the streamlined regulation, the suggested approach to supervision will be sufficient to ensure financial stability and protect consumer rights. The main supervisory model, given the relaxations in risk management systems, will be SREP (Supervisory Review and Evaluation Process), inspections, etc.
It is expected that introduction of the basic license will increase competition in the banking sector and provide an extra incentive for development of the financial market.
External Communications Department