Kazakhstan National Bank Tightens Banking and Price Manipulation Rules

by Morgan Lewis

The amendments aim to strengthen the requirements for banks’ net equity and charter capital as well as the price manipulation restrictions.

The Kazakhstan banking regulator—the National Bank of the Republic of Kazakhstan (NBK)—has adopted important amendments to its rules on prudential limits, which aim to strengthen the requirements for banks’ net equity and charter capital as well as the restrictions related to price manipulation. Highlighted below are the key provisions of the amendments.

Prudential Limits

On 6 May, the NBK amended the prudential limits rules for all commercial (so-called “second tier”) banks, including Islamic banks. According to the amendments, the minimum charter capital amount for a newly founded bank, as well as the net equity amount for an existing bank performing main banking operations, would gradually increase as follows:

  • KZT30 billion (approx. USD165 million), from 1 January 2016
  • KZT50 billion (approx. USD275 million), from 1 January 2017
  • KZT75 billion (approx. USD412 million), from 1 January 2018
  • KZT100 billion (approx. USD549 million), from 1 January 2019

Starting 1 January 2016, the minimum amount of net equity capital for a bank that performs only limited banking operations would be KZT10 billion (approx. USD55 million).

At the beginning of 2014, nonperfoming loans (NPLs) were at a high level (about 31% across all commercial banks). An NPL is defined as a loan with more than 90 calendar days overdue debt (principal amount and/or interest), excluding reserves. The NBK intends to force a reduction of this level of credit risk to support banks’ competitiveness. The NBK has established a practice of making agreements with banks regarding specific measures to improve their loan portfolios. In addition, the NBK introduced new coefficient k11 (the maximum limit of NPLs in a bank’s loan portfolio), which takes effect on 1 January 2016. Coefficient k11 should not exceed 0.10 and would be calculated as a ratio of NPLs to a bank’s total loan portfolio.

Price Manipulation Restrictions

On 23 April, the NBK adopted new rules on the classification of transactions in organized or over-the-counter (OTC) markets that are aimed at manipulating the markets (the Manipulation Amendments). The Manipulation Amendments came into force on 15 July.


Manipulation on a securities market is defined as actions of securities market participants aimed at (i) establishing and/or supporting higher or lower prices for securities compared to fair market price, (ii) giving the appearance of trading with securities, and/or (iii) entering into transactions using insider information.

A list of transactions that are subject to monitoring and control for the purposes of manipulation includes, among other things, (i) sale and purchase transactions within five business days that did not result in a sufficient change (10% or more) in the securities volume held by the parties to the transaction and (ii) transactions entered on stock exchanges for pre-agreed prices that materially differ from prices at the securities market prior to the transaction.

A material difference in the price of stock exchange transactions should be evaluated as follows:

  • For share transactions, a 30% transaction price deviation test, based on the average prices on the stock exchange
  • For bond transactions, a 3% or more of yield to redemption deviation test, based on average market profitability

The Manipulation Amendments

The key provisions of the Manipulation Amendments are as follows:

  • The Manipulation Amendments provide for separate procedures for recognizing transactions as manipulative on the organized and OTC markets. Transactions entered into on the organized market require an opinion of the Kazakhstan Stock Exchange’s (KASE’s) expert committee (previously, this was done by KASE’s board of directors). For OTC transactions, KASE’s expert committee opinion is optional. Note that such opinion does not have a binding effect for the NBK, which is the final authority to decide whether a transaction is manipulative or not.
  • The list of transactions that are subject to monitoring (e.g., transactions where the seller and the purchaser are the same person acting on its own or via professional broker, sham transactions, etc.) was expanded. Currently, transactions that meet the material difference thresholds discussed above are also subject to monitoring and control.
  • The list of exempt transactions was expanded. For instance, sale and purchase transactions were added to the list when they are closed on the stock exchange via the “open trade” method within five business days and did not change the securities volume held by the parties to the transaction by 10% or more, provided that the securities were included into the so-called “representative list of KASE”.


Manipulative transactions may be challenged in court by any interested party. In addition, failure to comply with the restrictions related to manipulation may lead to administrative or, in some cases, criminal liability (e.g., fines or imprisonment). Criminal liability was added recently after the 10 June 2014 adoption of amendments to the Criminal Code.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.