State regulation and supervision of the banking sector of Kazakhstan: does it create the right incentives for the banks?

Abstract

The history of the financial sector of Kazakhstan has been a short, but an eventful and tumultuous one. Just as it was struggling to gain ground in the post-socialist world, the authorities were also faced with an important and difficult task: to design a regulatory and supervisory framework that could ensure efficient operation of the financial industry in the country. This leads us to the research question of this work: does the National Bank of the Republic of Kazakhstan, as a regulator of the banking sector, create the right incentives for the banks to achieve best practice and efficiency, and in cases it does, does it succeed in making sure banks follow through? In this research, interviews with representatives from the three major stakeholders (National Bank as the regulator, private banks as the regulated and the Association of the Financiers of Kazakhstan as a mediator) were collected to identify pressing issues in Kazakhstani bank regulation. This information, along with the existing research done on bank regulation around the world, will be used to arrive at possible recommendations for the National Bank.