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In all economically developed countries the regulation of banking activities was a priority. Banks in a market economy at the same time play the role of leading economic agents and the most important channels of influence on macroeconomic processes. It is crucial their role in maintaining a stable social environment.
Chapter I. The theoretical basis for regulation and supervision of banking activities
Aims, principles and objectives of state regulation and supervision of banking activities.4-11
The legal basis for state regulation of bank.....................................................................11-16
Regulation of the banking sector at the macro level.......................................................16-19
Chapter II . Analysis of the regulation and supervision of banks in the Republic of Kazakhstan
2.1 Analysis of the implementation of prudential norms of banks........................................20-23
2.2 Improvement of banking supervision in the Republic of Kazakhstan.............................23-27
List of literature
Bank regulation: necessity, essence and main directions
Table of content:
Chapter I. The theoretical basis for regulation and supervision of banking activities
Chapter II . Analysis of the regulation and supervision of banks in the Republic of Kazakhstan
2.1 Analysis of the implementation
of prudential norms of banks.........................
Improvement of banking supervision
in the Republic of Kazakhstan....................
List of literature
In all economically developed
countries the regulation of banking activities was a priority. Banks
in a market economy at the same time play the role of leading economic
agents and the most important channels of influence on macroeconomic
processes. It is crucial their role in maintaining a stable social environment.
As world practice shows, online and integrated control over all financial institutions and protecting the rights and interests of investors are most effective for financial sector development. Last but not least the role played by improving quality and reducing the cost of financial services due to the conversion of financial services and to create conditions of fair competition.
The main purpose of banking regulation and supervision in Kazakhstan, as elsewhere, is to maintain the stability of the banking system, protecting the interests of depositors and creditors. Specific tasks that are put before the supervisors at any given time period, immediately determined that the main purpose of supervision of credit institutions and the current state of the banking sector, socio-economic situation in the country as a whole. In Kazakhstan, for the introduction of consolidated supervision of financial groups, in particular the centralized operational control over all financial institutions, making coordinated decisions in order to prevent crisis situations created by the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (AFS).
In his address to the nation of Kazakhstan "The growth of welfare of citizens of Kazakhstan - the main goal of public policy" on February 6, 2008 President, NA Nazarbayev as the main task of the Agency in conjunction with the National Bank and the Ministry of Finance has identified improving the competitiveness and sustainability of the financial system, particularly the banking sector. FSA should more closely monitor the situation in each bank and, if necessary, to take preventive and effective measures.
Provide a solution to these problems in a market economy is impossible without a strong, mature, independent of the national banking system. World experience shows that development of the banking system becomes a strategic character. This is a question of preserving the Republic of Kazakhstan as an economically independent state and its economic and political sovereignty. Of competitiveness, resources of the banking system depends on the state of human development, development of national economy, primarily manufacturing and high technology industries, provision of quality housing of Kazakhstan, the formation of a competitive education system.
Thus, the problems of state regulation of the banking sector, the practical significance of their decisions underscore the relevance of research topic and led to her selection.
Chapter I. The theoretical basis for regulation and supervision of banking activities
In all economically developed
countries the regulation of the banking system was a priority. Banks
in a market economy at the same time play the role of leading economic
agents and the most important channels of influence on macroeconomic
processes. It is crucial their role in maintaining a stable social environment.
In most countries banking supervision is regarded as one of the most
important functions of the central bank or finance ministry. It is especially
great value in periods of instability of the monetary and credit markets.
Currently, Kazakhstan has a two-tier banking system. It includes the National Bank of Kazakhstan. The formation of the modern Kazakh banking system took place in a very short time and coincided with a period of deep the economic crisis, the strongest inflation in the country, which could not affect its status. Part of the commercial banks, organized on the basis of former state-owned specialized banks, even entering the stage of a genuine economic independence and proclaimed the policy of universalization of its activities, will retain not only their own economic potential and built up over many years, the infrastructure, but also to their customers and originality performed functions for its operation .
Regulation of market-oriented banks and supervision of the provision is effective management of the bank, a timely solution of problems faced by banks, banks' incentives to conduct effective operations and liquidation of insolvent banks. A good system of regulation and control of the legal regulatory framework acts as a basis, a market-oriented private and well-managed banking system. Setting the framework for competition bank, the system of banking regulation in the country will ensure fair competition and prosperity of the most efficient banks. In turn, the supervision of banks ensures that banks of the rules governing their activities, and promotes effective leadership. Therefore, the most efficient banks should be interested in creating a good system to regulate their activities, as well as creating a situation in which the supervision of state banks to ensure compliance with relevant rules and regulations.
On 01.01.2008 the total number of banks was 35, for activities which directly affects the system of banking supervision.
Banking supervision system - a system of regulation and control of cash flow in the banking system, whose main task is to create financially stable banking system, help solve the problems of stabilization and economic growth, aimed at preventing these macroeconomic effects, such as: systemic financial crisis, the excessive change in money supply, the collapse of the payment system. At the microeconomic level, the problem of the banking supervision aimed at improving the efficiency of the banking sector, protect depositors' interests, the development of healthy competition within the banking sector and prevent a major concentration in the banking sector, the orientation of bank cash flows in the real economy.
System of banking supervision comprise:
- Supervisory Authority (FSA);
- Principles of Supervision (Basle Core Principles for Effective Banking Supervision);
- Methods of supervision.
Medium-term prospects of Kazakhstan's economy remains favorable. However, without the need to tighten macroeconomic policies with monetary policy and exchange rate appreciation in the short term, possibly securing higher inflation, and increasing vulnerability of the banking system. Such circumstances can lead to serious negative consequences for economic growth and competitiveness.
Proposed restrictions on external borrowing may lead to reduced credit crunch that both legal and natural persons, because of lack of sufficient funds in the market. Today, loans are the only opportunity for many citizens to provide themselves with shelter and a stable future, by reason of the fact that house price growth does not cease to grow, and many of today the purchase of housing is a daunting task. Leveraging the restrictions, the FSA has set the country's banks, complex task, whose implementation will lead to a lack of funds in the market and higher prices.
To meet the challenges of the situation is invited to consider the generally recognized principles of Basel, consisting of 25 basic principles of banking supervision, followed by most banking systems in the world. Despite the functioning of the Financial Supervision Agency and the fulfillment of the basic functions of government regulation and supervision of the banking system, including on a consolidated basis, yet the activities of the agency requires the improvement of the regulation of the banking system.
These principles were developed by the Basel Committee in close cooperation with the banking supervisory authorities of 15 countries with emerging economies and fruitful consultations with a number of banking supervisory authorities worldwide. Developed principles represent the basic elements of an effective system of banking supervision. They are comprehensive in nature and create the preconditions for effective banking supervision, licensing and the creation of structures, the introduction of reasonable rules and requirements management, development of methods of the current banking supervision and information requirements, the definition of the formal powers of banking supervision and banking organizations on an international scale
"Basel Core Principles" are intended to serve as a starting point for supervisors and other government agencies worldwide. Rates of the possible introduction of appropriate changes will vary, depending on the availability of supervisors required statutory powers. Where necessary changes in legislation, national legislatures are called upon to urgently address the issue of making those to enable application of the Basel principles.
Consider the Basel principles as a prerequisite for effective banking supervision.
Effective banking supervision system sets clear limits of responsibility and tasks of each body that is associated with the supervision of banking organizations. Each of these agencies should have operational independence and adequate resources. It is also necessary that appropriate legal framework for banking supervision, including empowering banking organizations, and currently supervises them, the authority to enforce compliance, as well as addressing safety and feasibility, and guarantee the legal protection of the banking supervision authorities. Should establish appropriate mechanisms for information sharing between banking supervisors and ensure the confidentiality of such information. Licensing and structure
Necessary to clearly define the permissible activities of institutions receiving permission to banking and banking supervision be, to use the term "bank" in names of institutions should be monitored maximum.
Providing the license authority should have the right to set criteria and reject applications of institutions that do not meet accepted standards. The licensing process should at least include an assessment of the structure of ownership of the banking organization, its directors and senior executives, its operational plan of activities and internal controls, as well as assessment of the expected financial situation of the organization, including its own funds, in cases where the alleged owner or parent organization is a foreign bank must obtain the prior consent of the relevant banking supervisory authority in the country.
Banking supervision authorities shall have the authority to consider proposals to transfer significant ownership interest or a controlling stake in existing banks to other parties and to deny such transfers.
Banking supervision authorities shall have the authority to establish criteria for review of acquisitions of large companies and assets or investments of a large capital one way or another bank and to ensure that, where the branches of companies or corporate entities are not subjected to unreasonable risk, the bank or would impede implementation of effective control of the banking activities.
Supervisors are required to install for all the banks are reasonable and appropriate requirements regarding the availability of an appropriate minimum capital requirements. Such requirements should reflect the assumed by the banks of the risks and identify the components of capital, taking into account the ability of these banks recover their losses. At least for the banks, conducting active in the international arena, these requirements must not be below the requirements established by the Basel Capital Accord and the relevant amendments to the agreement.
A vital part of any system of banking supervision - evaluation of policies, practices and procedures of the bank relating to the granting of loans and other loans, as well as capital investment and ongoing management of credit and investment portfolios.
Banking supervision authorities must ensure that banks set appropriate policies, practices and procedures for assessing asset quality and appropriate provisions for adequate security in the event of losses on loans and the establishment of reserves to compensate for losses on loans - and stick to them.
Supervisors must ensure that banks have information systems that enable management to determine the concentration of the various portfolios and agencies bank supervision should set reasonable limits in order to limit losses when the bank failure to meet requirements to individual borrower or group of related borrowers.
In order to prevent abuses by credit-related banking supervisory authorities should make demands on banks to extend credit to related companies and individuals, as if the parties do not have any relations to avoid conflict of interest, to provide such loans to an effective monitoring and to take other appropriate measures to control the associated risks, or reducing it.
Supervisors must ensure that banks have adequate policies and procedures to identify, monitor and control the risk inherent in a particular country, and the risk associated with the transfer of funds in foreign lending and investment, as well as the policy of maintaining appropriate reserves in the event such risks.
Banking supervision authorities must ensure that banks have a system of accurate measurement, tracking, and appropriate monitoring of market risks, the banking controls must be empowered, if necessary, to establish specific restrictions and / or pledge of the capital due to the risk of potential losses.
Banking supervision authorities should make sure that banks have comprehensive risk management process (including appropriate oversight by the board or senior management), allowing to define, measure, monitor and control all the other major type of risk, and, where appropriate, have the desired capital stock in the event of these risks.
Banking supervision authorities must determine that banks have internal controls appropriate to the nature and scope of their activities. These internal controls should include clear mechanisms for the transfer of authority and responsibility, separation of the total activity of the bank of its functions relating to the taking of liabilities, payment of its assets and taking into account its assets and liabilities, consolidation of these processes, the protection of its assets; conducting independent internal or external audit checks for verification of compliance with these control measures, as well as relevant laws and regulations.
Supervisors must ensure that banks have appropriate policies, practices and procedures, including strict rules of "know your customer" to promote the maintenance of high ethical and professional standards in the financial sector and prevent the deliberate and unintended use of the bank's criminal elements.
Effective banking supervision system should be composed of certain forms of oversight by both on-site and outside the bank.
Supervisors are required to maintain regular contact with bank management and a good understanding of the peculiarities of its activities.
Banking supervision authorities should be able to collect, view and analyze a reasonable set of reports and statistical data from individual banks and groups of them.
Supervisors should be able to independently verify the supervised information either through on-site inspections, either through the use of external auditors.
An essential element of banking supervision - an opportunity of supervising the banking group on a consolidated basis.
Supervisors must ensure that the bank maintains adequate records, compiled in accordance with consistent accounting policies and accounting practices, which allows the banking control to get a true and clear picture of the bank's financial position and profitability of its activities, and that Bank on a regular basis publish its financial statements which give a real idea about his condition Formal powers of banking supervision.
Banking supervisors must have at its disposal an adequate range of measures of supervision over banking activities in order to take timely remedial action when banks do not comply with reasonable requirements (such as maintaining a minimum proportion of equity), when there are violations of regulations or when investors face any other danger. In extreme circumstances they should have the authority to revoke the banking license or recommend its revocation.
Banking supervision authorities are obliged to implement a global consolidated supervision over their banking organizations operating in the international arena, with suitable monitoring and applying appropriate reasonable rates to all aspects of business activities conducted by these banking organizations worldwide, and especially in their foreign branches, joint companies and subsidiaries.
A key component of consolidated banking supervision is to establish contact and exchange information with various other banking supervisory authorities, especially bodies to control banking activities in foreign countries, where banking transactions are conducted.
Supervisors should ensure that the local operations of foreign banks were at the same high standards required from domestic financial institutions and have the authority to provide information to the banking supervision authorities of the nationality of the banks in the information resources.
The basic methods of banking supervision in more detail.
I. Prudential (Off-site) supervision - is ongoing monitoring on a regular basis, the mechanism of realization of which is a credit organization of different types of reporting FSA regulated.
The main directions of prudential banking supervision:
1) an analysis of the credit organization and identification of problem banks;
2) establishment and verification of compliance with economic regulations;
3) analysis of documents provided by the credit institution for the registration and licensing;
4) control over the quality of the administrative board of a credit institution, 5) Application of measures of exposure to the credit institution.
II. Inspection on the ground - is a set of interrelated, targeted interventions, the implementation of authorized units FSA directly to the credit institution to determine compliance of the operations to existing legislation and regulatory acts and FSA National Bank, as well as for the validation provided by the reporting and assessment of the real financial condition of the bank .
Thus, the supervision of the banking system broadly divided into three interrelated parts: a macroeconomic analysis, monitoring of the banking system, supervision of individual banks. Supervision should be aimed primarily at the maximum public confidence in the banking system, prevent massive bank failures.
Republic of Kazakhstan Law "On State Regulation and Supervision of Financial Market and Financial Institutions" from July 4, 2003 established that the regulation and supervision of financial markets and financial organizations have a single authority, defined by the President of the Republic of Kazakhstan (Agency for Public Management and Supervision of Financial Markets and financial institutions).
Republic of Kazakhstan Law "On State Regulation and Supervision of Financial Market and Financial Institutions" have been identified new targets of government regulation and oversight in the financial market and financial organizations:
1) ensuring the financial stability of financial markets and financial institutions and maintain confidence in the financial system as a whole;
2) ensuring an adequate level of protection of consumers of financial services;
3) creation of equal conditions for the activities of financial institutions, aimed at maintaining fair competition in the financial market.
Principles of state regulation and supervision of banks are:
1) effective use of resources and management tools;
2) the transparency of financial institutions and financial supervision;
3) promoting governance of financial institutions, based on risk assessment;
4) comprehensive measures to protect the interests of consumers of financial services by supporting the development of new financial instruments and services, as well as the introduction of modern technologies in the financial market;
5) the responsibility of the financial institution.
The objectives of state regulation and supervision of banks are:
1) establishing standards of financial institutions, creating incentives to improve corporate governance of financial institutions;
2) monitoring the financial market and financial organizations in order to preserve the stability of the financial system;
3) focusing supervisory resources on areas of the financial market, the most exposed to risks in order to maintain financial stability;
4) encouraging the introduction of modern technology, ensuring the completeness and accessibility of information to consumers about the activities of financial institutions and their financial services.
Most issues of banking supervision is seen as strengthening the systems approach, overcoming the isolation of individual units of the supervisory unit, further improving their activity. Briefly describe the possible ways to improve banking supervision in a systematic manner, keeping in mind the basic documents of the Basel Committee.
Organizations that do not fall under certain criteria, have no right to engage in banking business. When considering applications for licenses supervisors carefully analyze the minimum capital and ownership structure of the bank, and personalities of the directors and senior managers, operational financial plan, the organization of internal management development plan for the bank in the near future.
Systematic approach to banking supervision means, first of all, the approach to the activities of commercial banks as a branched complete system, consisting of some basic elements (banks), interconnected complex multilevel relations. Within the general framework of the subsystem formed by different criteria: size · capital and assets (large, medium, small); · organizational-legal form (joint stock, shares); · priority areas of activity (commercial, mortgage, export-import, etc.) · accessories of capital (domestic and foreign), etc. In turn, each individual commercial bank (the basic element of the overall system) is also a complex system, subject to certain laws of development of individual life cycle. Because of this systematic approach to banking supervision includes: · supervision over the banking system as a whole, given its major subsystems; · supervision separately taken by commercial banks. Each of these types of surveillance has its own priorities, goals and objectives, as well as tools and mechanism of action by public authorities.
Main objective of banking supervision - to maintain the overall stability of the monetary and credit markets, the prevention of systemic crises by constantly monitoring the entire banking community and take timely corrective action. A special place in the play mechanism of early diagnosis.
Preventive measures of a general nature, used by oversight bodies in Kazakhstan in order to ensure stability of credit institutions, and is monitoring the expansion of their activities through the creation of separate divisions and expanding the circle of the operations, the reorganization of credit institutions, changes in the composition of participants and executive branches of credit organizations and their affiliates. Existing banks are applying for extension of its activities must have a minimum capital amount for the corresponding period. Their financial situation must be stable, ie, they must comply with mandatory reserve requirements, to comply with all prudential regulations and other requirements of the FSA, have no losses and debts to the budget and state extra-budgetary funds, to implement technical and skill requirements .
They should also have the intended direction of the structure, including Internal Oversight Services (internal audit). A credit institution must inform the supervisors about changes in the composition of its members in providing information about the participants, whose share in the authorized capital of the bank exceed 5%. And also to inform the supervisor of any changes in the personal composition of the executive bodies and to replace the Chief Accountant. If the candidates for these positions do not meet the requirements of the legislation to these categories of bank employees, the FSA does not give consent to such appointment.
Regulation of banks is carried out both on an individual bank, and on a consolidated basis, ie the banking group.
In order to implement the regulation and bank supervision agency:
1) determine the procedure for issuing and refusal to issue a permit for the purchase of natural and legal persons a big shareholder of the bank and bank holding company in the creation and acquisition of the subsidiary banks, issue or refuse to issue these permits;
2) establishes a minimum size of equity baggkov;
3) establishes requirements for the establishment of the reserve banks' capital;
4) approve the prudential standards and other mandatory standards and limits for the banking group;
5) establishes the procedure for compulsory collective guarantee (insurance) contributions (deposits);
6) establishes the procedure for classification of assets and contingent liabilities and the creation of provisions against them. The order of allocation of assets and contingent liabilities classified as doubtful and loss is determined in consultation with the public authority, ensuring tax control over fulfillment of tax obligations to the state;
7) maintain a register of banks and audit firms licensed to conduct audits of banks;
8) defines the application and decide whether the application to the affiliates of the bank of coercive measures envisaged by legislative acts of the Republic of Kazakhstan;
9) takes in the cases established by the banking legislation of the Republic of Kazakhstan, the decision on preservation of the bank and appoint the interim administration (temporary bank);
10) takes in the cases established by the banking legislation of the Republic of Kazakhstan, the decision to revoke the license for all or some operations provided by the banking legislation of the Republic of Kazakhstan, and appoints the interim administration (temporary administrator);
11) perform other functions in accordance with the laws of the Republic of Kazakhstan.
The signs of the existence of financial difficulties at banks are: · violations of laws and regulations, primarily non-economic standards and reserve requirements; • availability of unpaid customer documents and claims to the correspondent account; · swings daily balances on correspondent accounts with banks, especially if the minimum residues are critical, which is close to zero value; • Identifying the audits of the bank violations of accounting rules, the submission of false reporting of risky credit and interest rate policy; · unsatisfactory performance evaluation of the bank in the system of early diagnosis · loss-making activities, including those which are not secured by bank's own funds the development of internal infrastructure · payment of dividends in an unsatisfactory financial position (including prior to the reporting year), abrupt changes in the composition of actors and directors of the bank, the lack of an annual audit of the bank; · information of negative nature of the bank and its activities, coming from ministries and departments, citizens, media, customer complaints on his work. Devepoled recommendations for determining the extent of problem banks, make it possible to accurately assess their condition. All credit institutions, depending on the nature of the identified their problems and their causes are divided into financial stability of banks, banks with the first signs of problematical; banks experiencing temporary difficulties, banks with the first signs of bankruptcy; critical (financial fragility) banks.
Thus, the need for banking regulation and supervision justified by the need to maintain and strengthen confidence in the banking system, prevent violations of banking laws and regulations, the ability to understand the depth and determine the cause of problems in a particular bank.
1.2The legal basis for state regulation of banks
State regulation and supervision
of banking activities based on the Constitution of the Republic of Kazakhstan.
Control and supervision of commercial banks of Kazakhstan by the Agency
of the Republic of Kazakhstan on supervision of financial markets and
financial institutions based on the Law of the Republic of Kazakhstan
on July 4, 2003 № 474-11 "On State Regulation and Supervision
of Financial Market and Financial Institutions" . In addition,
the organization of banking supervision in the Republic of Kazakhstan
is based on a national legislative framework and recommendations of
international banking committees.
Part of the policy of the Republic of Kazakhstan in the sphere of regulation and supervision of domestic financial market are the priorities of the new system of state regulation of financial institutions, providing, taking into account best international practices on this issue, the unification of all supervisory and regulatory functions within a single specialist body.
In Kazakhstan, for the introduction of supervision of banks on a consolidated basis as far back as 2001 have been taken, initiated by the National Bank of Kazakhstan, changes and additions to the Law "On Banks and Banking in the Republic of Kazakhstan", establishes the basic principles of this supervision. In addition, the National Bank have developed a number of regulations on consolidated supervision, in particular:
1) "Rules of the Bank's participation in the second level in the charter capital of other entities, as well as permitting the creation or acquisition of second-tier bank subsidiary" of November 14, 2001 № 427;
2) "The rules for reporting and information, major participants in banks and bank holding company on June 25, 2001 № 256;
3) rules on the consent of the National Bank of Kazakhstan for the acquisition of status of a major party's second-tier bank or bank holding company on June 25, 2001. № 255;
4) The rules of the consolidated financial statements of second-tier banks of Kazakhstan on February 11, 2000 № 25;
5) The rules on prudential regulations for banking groups from 25 July 2003. № 250;
6) Law of the Republic of Kazakhstan "On State Regulation and Supervision of Financial Market and Financial Organizations" on July 12, 2003
The main motive for change was the desire to bring the banks to the interests of economic and intensify their activities.
A characteristic feature of the new phase of reform is to create well-organized market structures that provide the conditions for the development of competition in the banking sector. State regulation allows us to determine the most important, the priority sectors of the economy, targeted and efficient use of available resources.
In 2003, the National Bank of the Republic occupied a key position in regulating the financial market. Such a concentration of regulatory and supervisory functions in the country's central bank was an intermediate step toward creating an independent public oversight body, through its release from the National Bank of Kazakhstan.
Until 2004, the National Bank was the only organization regulating the banking sector in Kazakhstan. An important factor in the development of the banking sector was the start of a January 1, 2004 Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (AFS RK), which were transferred to the respective functions and powers of the National Bank.
In accordance with the Law "On banks and banking activities in Kazakhstan," the bank - legal entity, a commercial organization which is authorized to conduct banking activities. The official status of the bank is determined by the state registration of legal entity as a bank in the Ministry of Justice of the Republic of Kazakhstan (further - the bodies of the Ministry of Justice) and the availability of a license of the National Bank of Kazakhstan (hereinafter - the National Bank) to conduct banking operations.
In January - March 2008 on regulating the activities of banks and banking conglomerates by the Board of the Agency was adopted on 9 decrees:
- "On Amending Resolution of the Republic of Kazakhstan Agency for Regulation and Supervision of Financial Market and Financial Institutions on March 30, 2007 № 76" On amending some regulations on submitting documents to the Agency of the Republic of Kazakhstan on Regulation and Supervision Financial Market and Financial Institutions ";
- "On the Rules of issuance, refusal and withdrawal of consent for the acquisition of a big shareholder of the bank, bank holding company, a major party insurance (reinsurance) company, a major party's public pension savings;
- "On Making Addenda and Amendments to the Board of the National Bank of Kazakhstan on June 2, 2000 № 262" On approval of instruction on placement of funds of banks in domestic assets;
- "On Amendments and Additions to the Board of the Republic of Kazakhstan Agency for Regulation and Supervision of Financial Market and Financial Institutions on January 9, 2006 № 6" On approval of rules and the appointment of the interim administration (temporary administrator) of a bank, insurance (reinsurance) and pension fund;
- "On amendments to some legal acts of the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Institutions."
- "On Amendments and Additions to the Board of the Agency of the Republic Agency for Regulation and Supervision of Financial Market and Financial Institutions on December 25, 2006 № 300" On approval of rules for reporting second-tier banks of Kazakhstan and the Amendments to the Resolution of the Agency of the Republic of Kazakhstan regulation and supervision of financial markets and financial institutions from 27 August 2005 № 310 "On amendments and addenda to some legislative acts of the Republic of Kazakhstan on regulation and supervision of financial markets and financial institutions;
- "On Amendments and Additions to the Board of the Republic of Kazakhstan Agency for Regulation and Supervision of Financial Market and Financial Institutions on 30 April, 2007 № 128" On establishment of rating agencies and the minimum rating for the bonds, which banks may conduct transactions;
- "On Amendments and Additions to the Board of the Republic of Kazakhstan Agency for Regulation and Supervision of Financial Market and Financial Institutions on 30 September 2005 № 358" On Approval of the normative values and calculation methods for prudential norms for commercial banks;
- "On Amendments and Additions to the Board of the Republic of Kazakhstan Agency for Regulation and Supervision of Financial Market and Financial Institutions on June 17, 2006 № 136" On approval of rules for reporting on the implementation of prudential norms second-tier banks.
It is the responsibility of the Agency is to identify and reduce to some extent, the major risks faced by commercial banks in lending to customers.
In accordance with the Rules of the classification of assets, contingent liabilities and the establishment of provisions (reserves) against them (hereinafter - the classification rules), approved by the Board of the Agency of 25.12.2006, № 296, introduced with effect from 1 April 2007, provided the concept of "portfolio homogeneous loans "and the order of their formation, monitoring, establishment of provisions (reserves) against them.
Classification rules set features the classification of homogeneous loans, the basic requirements for a uniform credit and the bank's internal policies.
In this regard, the internal policy of the Bank plays an important role in the portfolio approach to risk assessment, which details should disclose signs of homogeneity, including procedures, methods and timing of their group, as well as monitoring, methodology, procedures, classification (reclassification) and the formation (dissolution) in provisions (reserves) against such loans.
In order to diversify the loan portfolio of the bank's internal policy may contain requirements for the scope of homogeneous portfolio of loans and certain types of loans included in the portfolio.
It should be noted that before creating a homogeneous portfolio of loans, banks should adopt domestic policies, arrange for the creation of homogeneous loan portfolio. The authorized body of the bank decided to create a homogeneous portfolio of loans and approve the internal rules for this type of homogeneous loan portfolio, the content of which corresponds to paragraph 34 of the Rules for the classification. Loans are grouped into homogeneous loan portfolio in accordance with the internal politics within 0.02 percent of the value of bank equity, calculated in accordance with the requirements of the authorized body by the method of calculation of prudential norms for banks.
In accordance with paragraph 41 of the rules of classification, provides a quarterly analysis of the portfolio, respectively, the date of risk assessment is the first of every quarter following the reporting period. Thus, during the quarter in the homogeneous portfolio of loans include loans that size does not exceed 0.02 percent of the value of bank equity, calculated at the beginning of the quarter.
Note, however, that in calculating the amount of loans to be included in a portfolio of homogeneous loans, the basis of a total amount of debt per borrower.
Loans included in the portfolio of homogeneous loans from the date of their issuance in an amount fixed by the contract of a bank loan, and not allowed to include loans on the balance of the debt. Also according to paragraph 39 of the Rules for the classification does not provide for withdrawal of individual loans from the portfolio because of the deterioration of their quality.
Homogeneous loan portfolio can be configured separately for natural and legal persons, by within the relevant characteristics of homogeneity.
In accordance with paragraph 21 of the Rules of the classification criteria used by banks when analyzing the creditworthiness of borrowers (debtors), including when assessing the financial condition of the borrower and the value of the collateral, as well as procedures for making and implementing decisions on the establishment of provisions (provisions) are governed by rules of classification as well as internal documents of the bank, determining credit, investment and accounting policies and, in particular, contain the requirement to order the suspension of accrual and accrual of interest on assets.
In addition, when considering this issue, banks should be guided by the provisions of IFRS.
Regulating the rights of depositors in the Republic of Kazakhstan is based on the Law "On mandatory guarantee deposits placed in banks of the Republic of Kazakhstan" dated January 12, 2007 № 222-III. This law aims at protecting the rights of depositors - individuals and determines the legal basis for functioning of the obligatory deposit, located in second-tier banks of Kazakhstan, the procedure for the establishment and operation of the organization performing the obligatory deposit insurance, the participation of banks in the system of compulsory deposit insurance, and well as other aspects of the relationship participants in the system.
The purpose of obligatory deposit insurance system to ensure stability of the financial system, including the maintenance of confidence in the banking system by guaranteeing payment of compensation for depositors in the event of compulsory liquidation of a member bank.
The basic principles of obligatory deposit insurance system are:
1) mandatory participation of banks engaged in accepting deposits, opening and maintaining bank accounts of individuals in a system of compulsory deposit insurance;
2) ensuring the transparency of the system of compulsory deposit insurance;
3) reduction of risks associated with operating the obligatory deposit insurance system;
4) The cumulative nature of the formation of a special provision designed to guarantee the payment of compensation.
Depositors largely independently bear all risks associated with investing money in the bank, with the exception of guaranteed JSC Kazakhstan Deposit Insurance Fund (hereinafter - the Fund) with the balance on deposit without accrued interest not exceeding the maximum amount of guaranteed compensation - 700 000 thousand tenge .
According to the Law of the Republic of Kazakhstan "On compulsory guarantee deposits placed in banks of the Republic of Kazakhstan since January 2007, the Fund has no right to determine the maximum size of the interest rates on deposits (deposits) of individuals that is broadly consistent with contemporary international practice.
Banks to attract deposits to independently establish the remuneration, without complying with restrictions limiting their maximum size, previously determined by the Fund. Thus, at present completely lacking a quasi-regulatory measures which provide an acceptable "ceiling" rates to attract deposits.
In a competitive environment, some banks have been aggressive, including through the establishment of interest rates on deposits and loans above the market average, lending without requiring confirmation of the solvency of the borrower, offers various prizes and other unusual bonuses to customers.
Such a policy bank should generate a minimum of caution and careful study of its performance for the presence of hidden problems with liquidity and the possible insolvency of banks.
In particular, the increased income on deposits is set by the bank - for example, to raise funds for high-yield investment projects, promoting new products, increasing the share of the retail sector, or development of new regional markets. However, high rates on deposits may be indicative of risk the bank's policy.
Thus, the gains of savings implies an increase in the loan portfolio. In an effort to conquer a niche or expand its share of new and emerging markets such as consumer lending, mortgages, overdrafts on credit cards, loans to small businesses, etc., banks often lend to companies and individuals who do not have a credit history without confirmation their incomes and the availability of collateral.
The activities of commercial banks as participants in the payment system - second-tier banks - is regulated by the Law on payments and transfers of money "on June 29, 1998 Resolution of the Board of National Bank on April 25, 2000, which defines the types and procedure of registration and use of payment instruments as well as rights, duties and responsibilities of payments and money transfers. In order to regulate the production and handling of checks, bills, credit cards, the use of documentary credits, order direct debit bank account and make payments without opening a bank account have been developed relevant regulations of the National Bank of Kazakhstan.
To regulate relations connected with the provision of services to Kazakhstan Interbank Settlement Center (KISC) by wire transfer of funds, the Board of the National Bank of Kazakhstan № 242 of 21 November 1998 were developed and approved the "Rules of Money in the Interbank System of Money" and " The rules of the clearing in the Republic of Kazakhstan approved by Resolution of the Board of National Bank June 16, 2000 № 273.
Thus, government regulation and banking supervision is aimed at improving the stability of the banking system of Kazakhstan and to create conditions to prevent violations of rights and legitimate interests of consumers of banking services.
1.3 Regulation of the banking sector at the macro level
The banking sector in Kazakhstan
operates on market principles. Dynamics of the main parameters characterizing
the state of the banking sectors in 2000-2007, indicates that consolidation
trends in the banking sector. Rapidly increasing assets and capital
of credit institutions, expanding their resource base, particularly
through external borrowing. Increased confidence in the banks by depositors
and creditors is one of the most important features of the banking sector
during this period. Preserved a steady trend of credit investments,
according to the reporting of credit institutions, the quality of their
loan portfolios remains largely satisfactory. The banking market there
is some development of competition, especially for deposits of individuals.
Kazakh banks have shown strong growth. Actively qualitative changes in the development of the banking system. Lending institutions tend to the greatest transparency, openness to customers. Introduced innovative business models, new banking technologies (the bank-client system of money transfers, debit cards and credit cards, etc.), various types of loans (consumer, mortgage, etc.).
Basic condition for successful development of the banking sector is holding the state balanced, coherent policy in this area. State policy in the banking sector is based on preserving and strengthening the market start-up of credit institutions and the use of mainly indirect, ie, economic methods of influence on the processes occurring in the banking sector. The impact of the state in the banking sector is done by forming the regulatory framework for credit institutions and the functioning of the financial services market, as well as monitoring compliance with the requirements of legislative and other normative acts.
Supervisory practices take into account the different stages of the life cycle of bank licensing, reaching maturity, the cessation of activities, seeing them as elements of a unified system. Achieving these goals is necessary to develop new approaches to reporting banks. Documentation should be possible to identify early signs of insolvent banks and at the same time be clear and non-overloaded. In this regard, the fullest possible implementation of innovative economic and statistical methods for monitoring. Improving supervisory practices should be based on relevant structural changes, modernization methods of operation, the maximum coordination of all departments of the supervisory unit. Impact on the activities of commercial banks can involve wearing as a purely economic (ie, indirect) and economic and administrative (line) character.
Credit regulation, further, includes a set of methods, the choice of which depends on the object and purpose of the regulation, as well as the maturity of market relations. In the process of interference with commercial banks subject to regulation are certain macroeconomic characteristics of the loan, allowing the one hand, to influence the economy in general, and on the other - to ensure the liquidity of the banking system.
National Bank of Kazakhstan belongs to the leading role in the functioning of the banking system and the state as a whole, since he contributes to the achievement of macroeconomic stabilization state.
On the banking system of Kazakhstan National Bank has a direct influence through monetary policy. The effectiveness of monetary policy largely depends on the choice of instruments (methods) of the monetary regulation. They can be divided into general and selective. Overall impact on virtually all parameters of the monetary sphere, affect the capital market as a whole. Selective methods are aimed at regulating certain forms of credit, credit terms, etc. The main common tools of monetary policy are changes in interest rates and reserve requirements, open market operations. This indirect method of regulation.
National Bank, thus regulates the flow of investment, inflation, exchange rate, and, ultimately, growth in gross domestic product and employment rate.
The main instruments of monetary regulation, the most commonly used by central banks, are:
- The establishment of minimum reserve requirements;
- Regulation of the official discount rate;
- Refinancing of commercial banks;
- Open market operations.
Establishment of minimum reserve requirements - one of the oldest and most used by the central bank instruments of monetary regulation. Minimum reserves - is a mandatory norm of deposits of commercial banks in the country's central bank, serving collateral commercial banks on deposits. Minimum reserves are established in law as a percentage of total deposits. Base policy bank reserve requirements is a multiplier. Multiplier effect arises from the fact that banks create new money when the outstanding loans and, conversely, the money supply is reduced when customers returned by the bank before their loans.
These reserves have a dual purpose: first, they must ensure a constant level of liquidity in commercial banks, and secondly, they are tools to control money supply and credit banks. By changing the norm of minimum reserve requirements, central banks maintain the money supply in the given parameters and adjust the level of liquidity of commercial banks. As a result of increasing rates of obligatory reserve requirements reduced the amount of available funds at the disposal of commercial banks. In the recent policy of setting minimum reserve requirements as an effective instrument of monetary policy considerably lost its value.
Changing the discount rate - the oldest method of monetary management. It is based on Law of the National Bank to provide loans to commercial banks, which have a strong financial position, but because of certain circumstances, require additional funds. For providing funds to the National Bank charges the borrower a certain percentage. The norm of such a proportion is called the discount rate. Thus, the discount rate - is the "price" of additional reserves which the Central Bank provides commercial banks. The Central Bank has the right to change it by adjusting the supply of money in the country .
By lowering the discount rate increases the demand of commercial banks for loans. Providing them, the National Bank increased by a corresponding amount reserves of commercial banks' borrowers. These reserves are redundant, since the maintenance of such loans usually do not require mandatory reserves. Therefore, taken from the Central Bank funds, commercial banks can fully use for lending, thus increasing the money supply. Growth in money supply leads to lower lending rates, ie that percentage by which provides loans to entrepreneurs to the population. Credit becomes cheaper, which stimulates production.
An increase in the discount rate, the reverse process. It leads to a reduction in demand for loans to central banks, which slows the rate of growth (or decrease) the money supply and raises lending rate. "Dear" credit entrepreneurs take less and therefore less money invested in production development.
It was believed that the required reserves of commercial banks are required to guarantee payment to depositors of money in the event of bankruptcy. However, experience shows that they were ineffective way to protect deposits. Therefore, to guarantee the repayment of money began to use the insurance of deposits and required reserves have a different purpose: they help the control over money supply and credit.
In virtually all countries, commercial banks resorted to borrowing of central banks, which are provided under a certain percentage. The discount rate applied by central banks, taking into account government bonds, bill discounting is the official and serves as a benchmark for market interest rates. Setting the discount rate, the central bank determines the cost of attracting credit resources. The discount rate is a method of controlling the cost of bank loans.
Higher interest rates on loans, the central bank to encourage other lending institutions to reduce borrowing. This hinders the completion of reserve accounts leads to an increase in interest rates on commercial loans and, ultimately, to reduce lending operations in the country. If the central bank reduces interest rates, it makes it easier for commercial banks replenishment, and thus encourage credit expansion. Refinancing of commercial banks - is providing credit to commercial banks in the form of direct loans, loans against securities (lombard loan), discounting bills .
Tightening of monetary policy involves changing the direction of the influence of official rates of the National Bank at market rates for loans to implement the transition to the level of market returns rather than the previously used level of liquidity in the banking system. Examples of central banks in developed countries show that the operating target is more efficient for financial market regulation.
To strengthen the regulatory properties of the official refinancing rate, the National Bank introduced the practice of periodic (quarterly) review and establish the official refinancing rate.
In the Republic of Kazakhstan
only in the second half of 1995, the first time the National Bank refinancing
rate was positive, that is exceeding the rate of inflation, which reduced
demand for inflation. Meeting the requirements of the IMF to reach a
positive value of the interest rate on centralized credits and National
Bank refinancing rate has be ongoing.
Information about the refinancing rate and the dynamics of its changes over the past five years.
To strengthen the regulatory properties of the refinancing rate of the National Bank plans to put into practice a periodic (quarterly) review and establish the official refinancing rate. Experience of central banks in developed countries has shown the feasibility of such practices. National Bank of periodically reviewing the official refinancing rate depending on the overall money market conditions, supply and demand for loans, inflation and inflationary expectations, thus gives the financial market updated guidance on the expected trends in the financial sector.
The second important tool to ensure the balance of the money market, regulate the level of bank liquidity, reduced risk of defaults by banks on their obligations, as well as protect the interests of depositors and shareholders of banks is a norm of obligatory reserves. Required reserves - is the contribution of commercial banks at the central bank. The size of these contributions is set by law within defined boundaries (there is a minimum limit). Required reserves allow the central bank to regulate money supply in circulation and solvency of commercial banks.
The positive side of the required reserves of the central bank is that the state is always centralized resources, there are sources for the expansion of the credit market. As one of coercive measures, standard of mandatory reserves allows you to instantly freeze without the direct impact of cost factors of bank liquidity and, if necessary to defrost this accumulated liquidity.
Introduction reserve rate - historically one of the earliest forms of state intervention in banking. Solid ratios of bank debt used in the second half of last century. But as a tool of monetary policy reserve system became applicable only much later. It was first introduced in the U.S. in 1913 (not by chance the U.S. central bank called the Federal Reserve System). Its development was linked to the global economic crisis in 30-ies. The most widespread, it was after World War II in Italy, Germany and England .
Standards vary by the central bank reserves in accordance with the ongoing credit policy. So, wanting to limit the credit expansion of banks, central bank raises rates. This reduces the creditworthiness of banks in the implementation of active operations and acts as a deflationary measure. Lowering of standards, by contrast, enhances lending, intensifies inflationary pressures. Changing the reserve requirements the central bank to influence the situation in the desired direction for him. Depending on the value of deposits it calculates the marginal value of changes in reserve rate, below which there is increasing liquidity and higher - its decline.
Thus, the high rate of required reserves established to:
provide liquidity to banks;
reduce emissions credits when inflation is high;
expand financial capacity of the central bank in monetary management.
For second-tier banks redundant high standards mean more expensive cost of funds. Expensive resources, in turn, can be placed only in profitable transactions with a high degree of risk. Gradual decrease in reserve requirements will activate the possibility of lending to the economy, respectively, increases the money supply. Higher level of reserve funds associated with the problem of maintaining liquidity in the banking system and the high risk of accumulation of money capital the banks.
Implications of changing reserve requirements is ambiguous. Multiple Changing the central bank of a boomerang effect on the liquidity of commercial banks and could lead to a significant violation of the monetary and financial equilibrium of the economy. Consequently, when inept use of this policy may become a kind of generator instability.
Therefore, changes in reserve requirements, except in periods of crisis, characterized by low amplitude (typically, an increase of one or half a point), and that the banker was not caught unawares by these modifications are often announced in advance.
The regulation of reserve requirements, the types of established norms, their levels vary in different countries. In the U.S. banks that are members of the Fed, the Fed must keep 3% of account balances, and demand deposits. Only some remnants of the value of reserves increased to 12%. In Switzerland, the required reserves ratio - 2,5%. In Kazakhstan (and, for example, in Russia), the required reserves ratio is higher today than in other countries. Initially, it was fairly high at 30%, but decreased gradually with decreasing the money supply and inflation.
12 July 2006 by the National Bank of Kazakhstan was amended in the mechanism of formation of mandatory reserves. Thus, the structure of bank liabilities, which are taken for the calculation of minimum reserve requirements, includes the amount of domestic bank liabilities and other obligations of the bank. Domestic bank liabilities are defined as the sum of liabilities to residents on a strictly defined list, regardless of their maturity dates. Other bank liabilities calculated as the sum of the bank's liabilities to nonresidents and liabilities on debt securities, regardless of the residency criterion. When allowance reserve liabilities (for both domestic and for non-compliance) is taken into account the amount of bank liabilities of principal, remuneration and arrears on them. Period of minimum reserve requirements amounts to fourteen calendar days and begins on the first Tuesday of the week and ends on the last Monday in fourteen-day period, the definition of minimum reserve requirements.
Implementation of minimum reserve requirements by banks through the formation of reserve assets, which include cash on hand and the money on correspondent accounts with the National Bank in the national and freely convertible currencies. The Bank should place money in reserve assets in such a way that the average value of reserve assets for the period of formation of reserve assets was not less than the average size of the minimum reserve requirements for the period of determining minimum reserve requirements.