In order to comprehensively cover the existing shortcomings in working with collateral, the Agency of the Republic of Kazakhstan for the regulation and development of the financial market (hereinafter referred to as the Agency) plans to establish uniform principles and procedures for working with collateral, which will strengthen the requirements for internal policies and procedures of banks for working with collateral and reduce the risks of disputes and problematic situations for consumers of financial services.   

In this regard, as part of the instructions of the President of the Republic of Kazakhstan, the Agency has developed an additional package of amendment and additions to the Rules for the formation of a risk management and internal control system regarding the work of banks with collateral.   

The measures taken will also be aimed at strengthening control mechanisms to prevent abuse by individual employees of banks and appraisal companies, when working with collateral.   

It should be noted, that the risks associated with the quality of banks’ internal policies and procedures for dealing with collateral were identified, based on supervisory practices, as well as AQR results. One such example is the use of incorrect approaches to valuation of collateral, which led to an increase in the credit risk of banks.    

As a part of this direction, at the end of 2021, the Agency, together with the Supreme Court, the Ministry of Justice, the National Bank and other state bodies, also made changes to the laws and regulations governing the mortgage of real estate and work with collateral.     

The draft of the proposed changes is currently in the process of discussion with stakeholders, and will soon be posted on the Open NLA portal for public comment.