Kazakhstan eases conditions for non-resident legal entities operating in financial market

Kazakhstan Materials 10 August 2023 13:15 (UTC +04:00)
Madina Usmanova
Madina Usmanova
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ASTANA, Kazakhstan, August 10. The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARDFM) has developed and published on the platform of regulations a proposal to simplify the conditions for non-resident legal entities operating in the financial market of Kazakhstan, Trend reports.

A long-term credit rating of at least "BBB" on the standard scale of the Standard & Poor's agency or its equivalents is required for foreign banks with subsidiaries or branches in Kazakhstan, foreign banks holdings in the local market, and foreign banks holdings under the resolution issued by the National Bank of Kazakhstan in 2012. These amendments are included in the prepared document.

Foreign nationals who represent nations having minimum sovereign ratings of "BB-" or higher on the Standard & Poor's scale are exempt from this criterion. The ARDFM mandates the presence of a mutual information exchange agreement between the agency and the relevant authorities of such nations.

In addition, if a holding has a credit rating of at least ‘AAA’ on the Japan Credit Rating Agency scale and the country of its registration has a rating of at least ‘BB-’ on the Standard & Poor's scale and has also concluded an agreement with the ARDFM on mutual exchange of information, then a rating of ‘BBB’ or higher is not required for foreign bank holdings operating in the Kazakhstan market, which received their status until 2013.

The ARDFM proposes to extend exceptions from the general rating requirements to foreign bank holdings that acquire such status through the ownership of shares of an operating bank holding company on the territory of Kazakhstan.

According to the current legislation, a company is considered a bank holding company if it owns directly or indirectly at least 25 percent of the bank's shares.

Moreover, the holding applying for these changes must have a credit rating of at least ‘B-’ on the Standard & Poor's scale, be a resident of a country with a rating of at least ‘A’ on the Standard & Poor's scale, have a net worth of at least $200 million, a return on equity ratio of at least 3 percent, a term liquidity ratio of not less than 0.8 percent (the ratio of liquid assets with a maturity of up to 3 months to the relevant obligations), and the equity capital adequacy ratio is not less than 8 percent (the ratio of capital to risk-weighted assets).

In addition, the shares of such a holding must be represented on at least one of the international stock exchanges, and the audit of the company must be conducted by one of the Big Four global audit companies: Deloitte, Ernst & Young, KPMG, or PricewaterhouseCoopers.