On Banks and Banking Activity in the Republic of Kazakhstan (стр. 2 )

Article 9. Prohibition of Untrue Advertising

  1. The banks shall be prohibited to advertise their activities which are not true to fact on the date of publishing of the advertisements.
  2. The authorized body shall have a right to require from a bank to introduce amendments to the untrue advertisements, to terminate it or to publish a refutation.
 In the case of failure to execute such a requirement within the period established by the authorized body, the authorized body shall have a right to publish information concerning the untrue information contained in the advertisement or to clarify the information at the expense of the bank, which published such an advertisement.
  3. Legal entities which have not the license of the authorized body and (or) the National Bank for conducting of bank operations, shall be prohibited to advertise the activities which fall under the category of bank operations.
  Reference. Article 9 with amendments – by the RK Laws dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 8th of July 2005 N 72 (enactment procedure see art.2)

Article 10. Associations (Unions) of Banks

  1. For coordination of activities, protection and representation of the common interests, implementation of joint projects and solutions of other common tasks, the banks shall have a right to establish associations and unions of banks in compliance with the current legislation.
  2. Associations (unions) of banks shall be non-commercial organisations.
  3. Associations (unions) of banks may not be used for the purposes to restrict the competition in the banking system, manipulation of interest rates, terms of loans and other banking services.
  Reference. Article 10 was amended by the RK Law dated 11th of July 1997 N 154.

Article 10-1. Consortiums and Other Unions with Participation of the Banks

For implementation of the joint projects associated with granting of loans and for other purposes, the banks shall have a right to establish consortiums on the basis of joint agreements and to participate in the activities of other consortiums, associations.
  Reference. Added with Article 10-1 – by the RK Law dated 16th of July 1999 N 436.

  Article 11. Subsidiaries of Banks, Branches of Representative Offices and Cashing Departments (Saving Departments) of Banks
  Reference. Article 11 is excluded – by the RK Law dated 23rd of December 2005 N 107 (enactment procedure see art.2 of the Law N 107).
 

Article 11-1. Banks’ Subsidiaries and Large Participation of Banks in Charter Capital of Organizations

  1. Bank, for the purposes of execution of authorities, established by Article 8 of this Law, may establish or have a subsidiary organization only upon the authorized body’s permission.
 Procedures for issue of the permission for foundation or acquisition of a subsidiary organization shall be determined by the normative legal acts of the authorized body.

Legal entities, whose shares or participation shares in the charter capitals are transferred into ownership of a bank, if accepted as a pledge in accordance with the civil legislation of the Republic of Kazakhstan, and the term for sale of such shares or participation shares in the charter capital shall not be more than one year, as well as legal entities, whose shares or participation shares in the charter capital were purchased by an Islamic bank at financing of industrial and trade activity through participation in the charter capital of the legal entities and (or) the partnership terms, shall not refer to the subsidiary of the bank.

  2. Subsidiaries of banks shall not have a right to establish and/or have subsidiaries.
 A bank’s subsidiary is obliged to point out in its full name the word “subsidiary” and to use the name of the parent bank.

  3. Application for the receipt of permission shall be supplemented by the following documents:
  1) foundation documents of a subsidiary, protocols on approval of the charter;
  2) decision of the authorized body of a bank to found or acquire a subsidiary organization;
   3) information on management staff of the subsidiary;

   4) organisational structure of the subsidiary and information on the affiliates.

 In the event if a bank does not have a bank holding, there shall be submitted additional information on the institutions related to its subsidiary:

 through management of activities on a consolidated basis as provided by the memorandum or provisions on association of those institutions;

 when the Board of Directors or the Maganement Board of the said institutions is represented by more than one-third of the same persons;

  5) information of the type or types of activities of an affiliated organization with submission of the business plan;

  6) information on the preliminary payment for shares made by the founders of the subsidiary organization;
  7) information on the bank’s share and participation in the charter capital of the established subsidiary, as well as on the number of purchased shares and preliminary amount of payment for shares;
  8) information on the terms and conditions of acquisition of a subsidiary organization;

  9) opinion of an auditing organization and financial statement of the acquired subsidiary organization, certified by the auditing organization;

  10) notarized copy of the legal entity’s state registration (re-registration) certificate of the acquired subsidiary;

  11) information on the charter capital of the acquired subsidiary (if such information is not included into the auditors’ report), as well as on share of the bank’s participation in the charter capital or on the number of shares of the acquired subsidiary, and on the purchase price;

  12) information on the legal entity whose share in the charter capital or shares were acquired by a bank, and through this acquisition the bank acquired a subsidiary organization, including:

 name and address of such legal entity;

 information on the bank’s share in the charter capital of a legal entity in which the bank is a founder (participant), and on its purchase price;

 information on the number of shares, purchase price and percentage to the total number of placed shares (except for preference and repurchased shares) of a legal entity, where the bank is a stockholder;

 information on the share of a legal entity (in which a bank is a founder, participant, stockholder), and its purchase price in another legal entity’s charter capital;

 information on the number of shares, purchase price and percentage to the total number of placed shares (except for preference and repurchased shares) acquired by a legal entity, where bank is a stockholder (founder, participant);

  13) documents confirming availability of the systems of risk management and internal control, including in regards to the risks associated with activities of the subsidiary;

  14) documents confirming grounds for control and supervision of the subsidiary;

  15) in case of establishment or acquisition by the subsidiary’s bank of a bank, an insurance (reinsurance) organization, a public accumulative pension fund, being residents of the Republic of Kazakhstan, documents for obtaining a permit to acquire the status of a bank holding, large participant in a bank, an insurance (reinsurance) organization, a public accumulative pension fund, established by this Law and (or) the legislation of the Republic of Kazakhstan On insurance and Insurance Activity, Pension Provision.

  4. A bank shall have a right to establish a subsidiary on the condition of its stable financial status as per the end of the last two financial years and observance of the prudential standards, established by the authorized body during the last 3 months preceding the date of application to the authorized body to obtain its permission.

  5. The following shall be recognised as the reasons for denial of a permit for establishment, acquisition of a subsidiary:

1) non-submission of the documents, required for obtaining a permit;

2) non-compliance of the subsidiary’s executive officers (or candidates who are recommended for appointment or election to the executive positions) with the requirements of subparagraphs 3of paragraph 2 of Article 20 herein;

3) non-observance of the prudential requirements by a bank conglomerate which includes a bank, as a result of assumed availability of the bank’s subsidiaries;

4) analysis of the financial implications, which forecast deterioration in the financial condition of the bank and/or damage to the interests of the bank's investors due to operation of the subsidiary or investments scheduled by the bank;

5) non-compliance of the submitted documents, confirming availability of the systems of risk management and internal control, including in regards to the risks associated with operation of a subsidiary and requirements of the authorized agency to the systems of risk management and internal control;

6) non-observance by a bank of the specified prudential requirements and other compulsory standards and limits within the last three months prior to the date, when the application for a permit was submitted and (or) within the pending period of the application;

7) validity of the limited remedial measures and sanctions against a bank at the submission date of the application;

8) in case of establishment or acquisition by a bank of a subsidiary, i. e. a bank, an insurance (reinsurance) organization, a public accumulative pension fund, being residents of the Republic of Kazakhstan, non-observance of the requirements, established by this Law, legislation of the Republic of Kazakhstan On Insurance and Insurance Activity, Pension Provision with regard to issue of a permit for obtaining the status of a bank holding, large participant in a bank, an insurance (reinsurance) organization, a public accumulative pension fund, being residents of the Republic of Kazakhstan.
  5-1. In case of submission of the full set of documents and observance of all requirements, established in this Article, the authorized body shall issue a permit for establishment or acquisition of a subsidiary and simultaneously a permit for acquisition of the status of a bank holding, large participant in a bank, an insurance (reinsurance) organization, a public accumulative pension fund, being residents of the Republic of Kazakhstan in accordance with this Law, the legislation of the Republic of Kazakhstan On Insurance and Insurance Activity or Pension Provision.
  6. The authorized body is obliged to issue a permit or deny issue of a permit within three months after submission of the application.

In the case of denial, the authorized body is obliged to notify an applicant in written form on the reasons for such denial.

7. A bank’s subsidiary is obliged to notify the authorized body on any changes and amendments incorporated into the foundation documents.

8. In case of failure to receive a permit from the authorized body, a bank shall be obliged within three months to execute alienation of shares (participation shares) of the subsidiary organization to the persons, not connected by specific relations with this bank, and submit confirming documents to the authorized body.

In case of acquisition by a bank of a right to control the subsidiary under the grounds, not depending on such bank, the bank shall within one month since disclosure of such event to submit the documents, established by paragraph 3 of this Article, for obtaining a permit of the authorized body to purchase the subsidiary.

9. Large participation of banks in the charter capital of organizations shall be allowed only when banks obtain a permit from the authorized body. Issuance of a permit for large participation in the charter capital of organizations shall not be required for an Islamic bank in case of purchase of shares (participation shares) by such bank at financing of industrial and trade activity through participation in the charter capital of legal entities and (or) on the partnership terms.

Issuance of a permit for large participation in the charter capital of organizations shall be regulated by the normative legal act of the authorized body.

In case of non-receipt of a permit for large participation from the authorized body, a bank shall be obliged within three months to alienate shares (participation share) of an organization to the persons, not connected through specific relations with this bank, and submit the confirming documents to the authorized body. In case of acquisition of large participation by a bank under the grounds, not depending on such bank, the bank shall within one month since disclosure of such event to submit the documents, established by paragraph 10 of this Article, for obtaining a relevant permit of the authorized body.

  10. Application for issue of a permit shall be submitted with the documents attached as stipulated by subparagraphs 2), 3), 5)-8) of paragraph 3 herein.

Application for issue of a permit for large participation in the charter capital may be denied on the grounds set out in paragraph 5 of this Article.

Non-compliance of the submitted documents, confirming availability of the systems of risk management and internal control, including in regards to the risks associated with operation of a subsidiary, with the requirements of the authorized body to the systems of risk management and internal control shall not be the grounds for denial of a permit for large participation in the charter capital of organizations.

11. The authorized body shall revoke a decision on establishment, purchase of a subsidiary, large participation in the charter capital of organization in the cases as follows:

1) disclosure of untrue information, which served as a basis for issue of a permit;

2) taking of a decision by a subsidiary organization, in which a bank has large participation in the charter capital, or by the court on termination of activity of the mentioned organization through reorganization or liquidation;

3) absence of the features of control over a subsidiary organization and organization, in which a bank has large participation in the charter capital within one year since issue of a permit;

4) disclosure of incompliance of activity of a subsidiary organization and organization, in which a bank has large participation in the charter capital with the requirements of paragraph 2 Article 8 of this Law.

In case of revocation of a permit for establishment, purchase of a subsidiary organization and large participation in the charter capital of organizations, a bank shall be obliged within three months to alienate shares (participation shares) it owns in the subsidiary organization and organization, in which a bank has large participation in the charter capital, to the persons not connected through special relations with such bank, and submit the confirming documents to the authorized body.

Procedure for revocation of a permit for establishment, purchase of a subsidiary organization and large participation in the charter capital of organizations shall be defined by the normative legal acts of the authorized body.

Reference. Article 11-1 is stated in the wording of the RK Law dated 23.12.2005 N 107 (enactment procedure, see art. 2 of the Law N 107); with amendments, inserted by the RK Law dated 19.02.2007 N 230 (enactment procedure, see art. 2); dated 23.10.2008 N 72-IV (enactment procedure, see art. 2); dated 20.11.2008 N 88-IV (enactment procedure, see art. 2); dated 12.02.2009 (enactment procedure, see art. 2).

Chapter 2. Establishment of a Bank and Execution of Banking Activity

  Reference. The title is stated in the wording of the RK Law dated 10th of July 2003 N 483 (effective since 1st of January 2004). Inserted amendments by the RK Law dated 8th of July 2005 N 72 (enactment procedure, see art.2).

Article 12. Organizational and Legal Form of Banks
 
  Reference. Article 12 was amended by the RK Laws dated 11th of July 1997 N 154; dated 10th of July 1998 N 282; dated 16th of July 1999 N 436; dated 2nd of March 2001 N 162 (see art. 2); dated 16th of May 2003 N 416; Article excluded by the RK Law dated 10th of July 2003 N 483 (effective since 1st of January 2004).

Article 13. Permission of the Authorized Body for Establishment of a Bank

 
  1. The procedure for issuing and grounds for denial of a permit for establishment of a bank shall be defined by the banking legislation.
  2. A permit for establishment of a bank shall have legal force until the authorized body takes a decision to issue a license for a banking operation to the bank.
 A permit for establishment of a bank may be revoked by the authorized body.
  3. A permit for establishment of a bank shall be returned by the bank to the authorized body when a license for a banking operation is issued to the bank, or in case of the court’s decision to terminate the bank’s activities and in case of revocation of the permit on the grounds, set out in paragraph 2 Article 49 of this Law.
  4. A bank shall have a right to voluntarily return of a permit for establishment of a bank and to re-registration in accordance with the procedure established by the legislation.
  Reference. Article 13 is stated in the wording of the RK Law dated 11th of July 1997 N 154; amended by the RK Law dated 10th of July 2003 N 483 (effective since 1st of January 2004).

  Article 14. Foundation Documents of a Bank
 
  1. A bank shall be established in accordance with the procedure, defined by the civil legislation of the Republic of Kazakhstan for legal entities, subject to the special considerations established by the banking legislation.
  2. A foundation agreement on establishment of a bank shall apart from the information, established by the current legislation, contain in the obligatory manner:
 information on the founders, including full name and address of each founder, and data on their state registration (for legal entities), name, citizenship, place of residence and identity document (for individuals);
 information on the number, categories and offer price of shares.
  3. The charter of a bank shall apart from information established by the current legislation contain in the obligatory manner:
 full and abbreviated name of the bank;
 information on the types and the procedure for use of funds (reserve capital) of the bank;
 the procedure for adoption of decisions by the bank’s bodies.
  information, set out in Article 52-4 of this Law (for an Islamic bank).
  Reference. Article 14 with amendments, inserted by the RK Laws dated 11.07.1997 N 154; dated 16.07.1999 N 436; dated 16.05.2003 N 416; dated 12.02.2009 N 133-IV (enactment procedure, see art. 2).

Article 15. Organizational and Legal Form and Name of a Bank

  1. Banks shall be incorporated in a form of joint-stock companies.
  1-1. A bank shall use the name which is inscribed in its charter as its name.
 Name of a bank shall contain the word “bank” or its derivative.
  2. It shall be prohibited for all banks, except for the National Bank, to use in their names the words “National”, “Central” in full or abbreviated form in any language.
  3. It shall be prohibited for all banks to use in their names the word “State” in full or abbreviated form in any language.
  3-1. Name of an Islamic bank shall contain the phrase “Islamic bank”.
  4. It shall not be allowed to use in the names of banks the designations, which are identical or similar to the degree of confusion with the names of earlier established banks, including the banks being non-residents of the Republic of Kazakhstan, except for the bank subsidiaries.
 Subsidiaries shall be obliged to use name of their parent banks in the names.
  Reference. Article15 with amendments, inserted by the RK Laws dated 11.07.1997 N 154; dated 16.07.1999 N 436; dated 02.03.2001 N 162 (see art. 2); dated 10.07.2003 N 483 (effective since 01.01.2004); dated 12.02.2009 N 133-IV (enactment procedure, see art. 2).

  Article 16. Charter and Own Capital of a Bank
 
  1. Charter capital of a bank shall be paid in the national currency of the Republic of Kazakhstan at the expense of sold shares.
  2. A bank’s shares upon placement shall be paid only in money terms. 
  3. (Excluded by the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107)
  4. (Excluded by the RK Law N 72 dated 8.07.2005)
  5. Fifty percent of the charter capital of a newly-established bank shall be paid by its shareholders by the time of its registration and in full within one calendar year from the date of its registration.
  6. (excluded by the RK Law N 162 dated 2.03.01)
  7. The calculation technique of a bank’s own capital and investments shall be defined by the authorized body.
 In the event if value of a bank’s liabilities exceeds the value of its assets, own capital of the bank is negative.
  8. In case of negative own capital of a bank, upon approval of the Government of the Republic of Kazakhstan, the authorized body may take a decision on the forced repurchase of shares of the bank’s shareholders and immediate sale of such shares to a new investor at the acquisition price, on the conditions which guarantee increase in the bank's capital and its normal operation, subject to the obligations taken by the investor.
 Forced repurchase of a bank’s shares by the authorized body shall be made at a price, defined on the basis of the bank’s assets less the amount of its liabilities at the date of taking a decision on forced repurchase of shares (stock of shareholders) of the bank for the purposes of its sale to a new investor. Sale of the repurchased shares shall be made by the authorized body immediately at the acquisition price. Rights and obligations of the shareholders of all forcedly repurchased shares shall be transferred to the new investor.
 In case of maturity for fulfilment of obligations, which may be claimed to a bank, but which are not claimed prior to adoption of the decision on forced repurchase of the bank’s shares, such claims shall be recognized as satisfied, except for the claims to the deposits of individuals and legal entities.
   The procedure for forced repurchase of a bank’s shares and its obligatory subsequent sale to the investors shall be established by the authorized body.
  Reference. Article 16 was amended by the RK Laws dated 7th of December 1996 N 50; dated 11th of July 1997 N 154; dated 10th of July 1998 N 282; dated 16th of July 1999 N 436; dated 2nd of March 2001 N 162 (see art. 2); dated 16th of May 2003 N 416; dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 8th of July 2005 N 72 (enactment procedure, see art.2); dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107); dated 19th of February 2007 N  230 (enactment procedure, see art.2).