Article 46. Measures to improve the financial condition and/or minimize the risks of the Law on Banks and Banking Activities in the Republic of Kazakhstan

     1. In order to eliminate deficiencies, risks or violations, including those identified using reasoned judgment, the authorized body applies measures to improve the financial condition and (or) minimize the risks of a bank, an organization engaged in certain types of banking operations, a bank holding company, a banking conglomerate and (or) organizations that are part of a banking conglomerate, a large a member of the bank by submitting claims for:

     1) maintaining equity capital adequacy ratios and (or) liquidity ratios above the minimum values established by the authorized body;

     2) suspension and (or) restriction of certain types of banking and other operations, certain types of transactions, or the establishment of a special procedure for their implementation;

     3) restructuring of the bank's assets and (or) liabilities, including changes in their structure;

     4) cost reduction, including through termination or restriction of additional hiring of employees, closure of individual branches and representative offices, subsidiaries, limitation of monetary remuneration and other types of financial incentives for senior employees;

     5) suspension and (or) restriction of investments in certain types of assets or the establishment of a special procedure for their implementation;

     6) the formation of provisions (reserves) according to international financial reporting standards;

     7) recognition of an individual or legal entity as a person associated with a bank, a bank holding company, or an organization engaged in certain types of banking operations, as a special relationship;

     8) changing the terms of a transaction concluded on preferential terms with a person associated with a bank, a bank holding company, an organization engaged in certain types of banking operations, or a special relationship, to the terms of similar transactions with third parties concluded on the date of the transaction with preferential terms;

     9) restriction of transactions with persons associated with a bank, a bank holding company, an organization engaged in certain types of banking operations, by special relations;

     10) termination of accrual and (or) payment of dividends on ordinary and (or) preferred shares and (or) perpetual financial instruments;

     11) review of internal policies and procedures, limits on the permissible amount of risks, procedures for evaluating the effectiveness of the risk management and internal control system;

     12) removal from official duties of persons specified in Article 20 of this Law and the regulatory legal act of the authorized body establishing the procedure for forming a risk management and internal control system, including in the case of removal by a bank, a bank holding company, an organization engaged in certain types of banking operations, a non–resident bank of the Republic of Kazakhstan of persons specified in Article 20 of this Law, from the performance of official duties to the application of this supervisory response measure by the authorized body. When applying this supervisory response measure to a senior employee, the authorized body revokes consent to the appointment (election) to the position of a senior employee.;

     13) carrying out an assessment of the value of property owned by a major bank participant and (or) a bank holding company;

     14) elimination of the causes and (or) conditions that contributed to the violation of the rights and legitimate interests of depositors, and (or) creditors, and (or) clients of banks, organizations engaged in certain types of banking operations;

     15) ensuring compliance of their activities with the legislation of the Republic of Kazakhstan.

     For the purposes of applying subparagraph 1) of Part one of this paragraph to branches of non-resident banks of the Republic of Kazakhstan, the equity capital adequacy ratio is understood to mean the adequacy ratio of assets accepted as a reserve.

     2. The measures provided for in paragraph 1 of this article shall be applied in the form of a written order or written agreement.  

     3. A written instruction is an instruction to a bank, an organization engaged in certain types of banking operations, a bank holding company, organizations that are part of a banking conglomerate, or a major participant in a bank to take mandatory measures established by paragraph 1 of this article and (or) to submit an action plan for their implementation within the prescribed period (hereinafter referred to as – action plan).

     The action plan contains a description of deficiencies, risks or violations, the reasons that led to their occurrence, a list of planned activities, the timing of their implementation, as well as responsible managers.

     4. A written agreement is a written agreement concluded between the authorized body and a bank or an organization engaged in certain types of banking operations, or a bank holding company, or organizations that are part of a banking conglomerate, or a major participant in the bank, on the implementation of measures established by paragraph 1 of this article, indicating the time frame for eliminating identified deficiencies, risks or violations, and (or) a list of restrictions that these persons assume until the identified violations and (or) deficiencies are eliminated.

     A written agreement must be signed by the bank or an organization engaged in certain types of banking operations, or a bank holding company, or organizations that are part of a banking conglomerate, or a major participant in the bank.

     5. A bank, an organization engaged in certain types of banking operations, a bank holding company, an organization part of a banking conglomerate, or a major participant in a bank must notify the authorized body of the implementation of the measures specified in the written instruction and written agreement within the time limits provided for in these documents.

     6. If it is not possible to eliminate the violation within the time limits set out in the written order and /or action plan, written agreement, for reasons beyond the control of the bank, bank holding company, an organization part of a banking conglomerate, a major participant in the bank, an organization engaged in certain types of banking operations, the deadline for the execution of the written order and (or) the action plan, written agreement may be extended until the date set by the authorized body.

The Law of the Republic of Kazakhstan dated August 31, 1995 No. 2444.

President    

Republic of Kazakhstan     

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