On Banks and Banking Activity in the Republic of Kazakhstan (стр. 4 )

   Article 17-2. Peculiarities of Purchase of a Bank’s Authorized Shares by the Government of the Republic of Kazakhstan

   1. In the case, set out in subparagraph 1) paragraph 4 Article 17 of this Law, the Government of the Republic of Kazakhstan may take a decision on purchase of a bank’s authorized shares by the Government of the Republic of Kazakhstan or the national management holding in the amount of at least ten percent from total placed shares, including the shares purchased by the Government or the national management holding.
  Right of the state property to a bank’s shares shall be assigned to the state body, authorized by the Government of the Republic of Kazakhstan for disposal of the republican state property.
  2. A decision of the Government of the Republic of Kazakhstan on purchase of a bank’s shares shall contain:
  the number of shares, subject to increase in the total amount of the bank’s authorized shares, in case of absence of the authorized unplaced or repurchased shares of the bank, or at insufficient amount of such shares;
  the price of placement (sale) and the number of forcedly placed (sold) shares.
  3. The price of placement (sale) and the number of forcedly placed (sold) shares shall be defined by the resolution of the Government of the Republic of Kazakhstan on the basis of an opinion of the authorized body in coordination with the national management holding or the state body, authorized by the Government of the Republic of Kazakhstan to dispose the republican state property, at a market price at the date of taking a decision on placement (sale) of shares.
  Upon the initiative of the state body, authorized by the Government of the Republic of Kazakhstan to dispose the republican state property, or the national management holding, the price of share placement may be defined by an appraiser in accordance with the legislation of the Republic of Kazakhstan.
  In case of determination of the share placement price by an appraiser, the expenses associated with assessment shall be paid by the bank.
  4. Within three working days since the date of taking a decision by the Government of the Republic of Kazakhstan on purchase and increase in the bank’s authorized shares, the authorized body shall:
  1) insert amendments to the prospectus of share issue in accordance with the procedure and on the conditions, established by the legislation of the Republic of Kazakhstan;
  2) carry out state registration of changes and amendments to the prospectus;
  3) send the certificate of state registration of shares to the bank and notify the registrar and the central depository on increase in the amount of authorized shares.
  A bank within five calendar days since the date of obtaining a certificate of state registration of shares shall be obliged to return the original certificate of state registration of shares, issued earlier.
  5. After purchase of a bank’s shares the state body, authorized by the Government of the Republic of Kazakhstan to dispose the republican state property, or the national management holding shall appoint members of the executive body and (or) the management body of the bank, but not more than thirty percent from total members, to represent the state or the national management holding’s interests.
  The state body, authorized by the Government of the Republic of Kazakhstan to dispose the republican state property, or the national management holding shall convene the extraordinary general meeting for consideration of the issues on replacement of officers or employees of a bank, optimization of the bank’s assets, increase in the charter capital or any other issues in accordance with the procedure, established by the legislation of the Republic of Kazakhstan.
  6. In case of improvement of a bank’s financial status, which resulted in the compliance with the prudential standards and (or) other compulsory standards and limits, the Government of the Republic of Kazakhstan shall take the measures for sale of the bank’s shares purchased pursuant to this Article through direct targeted sale or trading at the stock exchange.
  The Government of the Republic of Kazakhstan shall sell a bank’s shares, purchased pursuant to this Article, within one year since the date of purchase.
  At absence of the improvement of a bank’s financial status within one year, the Government of the Republic of Kazakhstan shall have a right to prolong the period of sale of the bank’s shares.
  7. Increase in the amount of a bank’s authorized shares, purchase of the bank’s authorized shares by the Government of the Republic of Kazakhstan or the national management holding, as well as appointment of members of the executive body and (or) the management body of the bank pursuant to this Article may be carried out without taking decisions by the bank’s bodies.
  Shareholders shall not have a right of first option to the bank’s authorized shares, placed (sold) pursuant to paragraph 1 of this Article.
  Reference. Chapter 2 is added with Article 17-2 in accordance with the RK Law dated 23.10.2008 N 72-IV (enactment procedure, see art.2).

  Article 18. Peculiarities of Establishment of Subsidiary Banks by Banks, Being Non-Residents of the Republic of Kazakhstan
 
  1. Non-resident banks of the Republic of Kazakhstan, which have the appropriate rating of one of the main rating agencies, may act as a parent bank relating to a subsidiary bank. The list of main rating agencies and the minimum required rating shall be defined by the authorized body.
  2. (Paragraph is excluded by the Law of the Republic of Kazakhstan dated 10th of July 2003 No 483 (effective since 1st of January 2004).
 
  Reference. Article 18 is amended by the RK Laws dated 11th of July 1997 N 154; dated 16th of July 1999 N 436; dated 10th of July 2003 N 483 (effective since 1st of January 2004).

  Article 19. Application for Issue of a Bank Establishment Permit
 
  1. Legal entities and individuals shall have a right to submit the application for a bank establishment permit to the authorized body.
  2. An application shall be submitted in Kazakh and Russian languages and contain an applicant’s address.
  3. The following documents shall be attached to the application for a bank establishment permit:
  а) four copies of the charter documents (charter, foundation agreement), copy of a protocol of the foundation meeting, notarized and compiled in accordance with the procedure, established by the legislation of the Republic of Kazakhstan;
  b) information on the founders (according to the list, defined by the authorized body), financial statements, including the consolidated statements for two last financial years, an auditor’s report on the financial condition of the founders;
  b-1) documents and information set out in Article 17-1 of this Law, if an individual or a legal entity becomes a bank’s large participant or a bank holding;
  b-2) information on the conditions and the procedure for purchase of a bank’s shares, including the description of sources and aids, used for purchase of shares, with attached copies of the confirming documents;
  c)-d) (excluded by the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107);
  e) (excluded by the RK Law dated 23.10.2008 N 72-IV (enactment procedure, see art.2);
  f) detailed organizational chart of a newly established bank;
  g) (excluded by the RK Law dated 23.10.2008 N 72-IV (enactment procedure, see art. 2);
  h) (excluded by the RK Law dated 23.10.2008 N 72-IV (enactment procedure, see art. 2);
  i) business plan of a newly established bank, approved by the person, authorized by the founders for signing documents, disclosing the strategy, the trends and the scopes of activities, a financial prospects (budget, estimated balance sheet, income statement for first financial (operating) years, marketing plan (creation of the bank’s client base), a plan for employment of human resources, risk management organization;
  j) (excluded by the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107);
  k) notarized or otherwise legally certified document, confirming the authorities of an applicant for submission of the application on behalf of the founders.
    4. The report of an auditing company shall be recognized as valid provided for submission of the documents, confirming the following:
 an auditing company is independent from the founders of the audited banks and its officers;
 an auditing company is authorized to conduct an audit of banks under the license of the authorized state body for regulation of audit activities and control of auditing and professional auditing organizations, or the competent state body of the country of residence.
  5. The authorized body shall have a right to request for additional information or documents, required for decision-making on the issue of a bank establishment permit.
  6. An application for a bank establishment permit may be revoked by an applicant at any time of its consideration by the authorized body.
  Reference. Article 19 was amended by the RK Laws dated 11th of July 1997 N 154; dated 2nd of March 2001 N 162 (see art. 2); 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 5th of May 2006 N 139 (enactment procedure, see art.2 of the RK Law N 139); dated 23.10.2008 N 72-IV (enactment procedure, see art.2); dated 20.11.2008 N 88-IV (enactment procedure, see. art.2).

  Article 20. Requirements to Executive Officers of a Bank

   1. Executive officers of a bank shall refer to the chairman and members of the Board of Directors, chairman and members of the Management Board, other chief executive officers of the bank, carrying out coordination and (or) control over the activities of the bank’s structural subdivisions and having a right of signing the documents, which serve as a basis for performance of the bank operations, except for the chief executive officers of separate bank subdivisions and their chief accountants, chief accountant of the bank.
 The persons, who have a right to sign the documents for performance of the bank operations and to carry out control over the only one division of the bank, shall not refer to the executive officers of the bank.
  2. A person may not be appointed (elected) a bank’s executive officer, if he/she:
  1) doesn’t have higher education degree;
  2) doesn’t have working experience in the international financial organizations, which list is established by the authorized body, and (or) working experience in sphere of rendering, and (or) regulation of financial services, and (or) audit of the financial organizations;
  3) doesn’t have fair business reputation;
  4) has worked earlier as a chairman of the Board of Directors, chairman or deputy chairman of the Management Board, chief accountant, large participant being a natural person, chief executive officer of the large participant (bank holding) being a legal entity of a financial organization, but not more than a year prior to the decision taken by the authorized body on temporary closing of this financial organization, forced repurchase of shares, revocation of a license of this financial organization, as well as forced liquidation of the financial organization or its bankruptcy in a manner, prescribed by the legislation of the Republic of Kazakhstan. Such a requirement shall be in force within five years after the effective date of the decision taken by the authorized body on temporary closing of the financial organization, forced repurchase of shares, revocation of a license of the financial organization, as well as forced liquidation of the financial organization or its bankruptcy in a manner, prescribed by the legislation of the Republic of Kazakhstan;
  5) whose approval to appointment (election) as an executive officer has been revoked in the period of his/her taking a position of the executive officer in another financial organization. Such a requirement shall be in force within last twelve consequent months after the effective date of the decision, taken by the authorized body on revocation of the approval for appointment (election) as an executive officer.

  3. Large participant of a bank shall not be appointed (elected) as a chairman of the Management Board in this bank.
 Independent directors shall make not less than thirty percent of the Board of Directors.
 Members of the Management Board shall make not less than three persons.
  4. To comply with the requirements of subparagraph 2) paragraph 2) of this Article the following working experience is required:
  1) not less than three years for the candidates to the positions of chairman of the Management Board, chief accountant of a bank;
  2) not less than two years for the candidates to the positions of chairman of the Board of Directors, members of the Management Board of a bank;
  3) not less than one year for the candidates to the positions of other executive officers of banks, carrying out coordination and (or) control over activity of the structural subdivisions of the bank and having a right to sign the documents, which serve as a basis for performance of the bank operations.
For the candidates to the positions of members of the Board of Directors, as well as members of the Management Board, regulating exclusively the issues of the bank security, administrative and economic issues, no working experience, set out in subparagraph 2) paragraph 2 of this Article is required.
 Working experience, defined by this paragraph, does not include work in the subdivisions of the financial organizations, associated with economic activities.
  5. An executive officer shall have a right to occupy this position without approval of the authorized body, for not more than sixty calendar days after the appointment (election).
 Upon expiry of the period, mentioned in this paragraph, and in the event if the documents for approval of the authorized body have not been submitted, or in case of denial of an approval by the authorized body, a bank shall terminate the individual employment agreement with this person.
  It is prohibited to execute the responsibilities of an executive officer (replacement of temporarily absent) of a bank without the approval of the authorized body for the period, exceeding the term, defined by this paragraph.
 The authorized body shall review the documents, submitted for the approval of appointment (elections) of the bank’s executive officers within thirty calendar days after the submission date.
  6. Procedure for issue of an approval of the authorized body for appointment (election) of a bank’s executive officer and documents for such approval shall be defined by the normative legal acts of the authorized body.
  7. In the case if the authorized body refuses to approve appointment (election) or dismissal or transfer of a bank’s executive officer to another position in this bank, such a person may be repeatedly appointed (elected) as an executive officer of this bank, but not earlier than in ninety calendar days after the refusal of the authorized body to approve appointment (election) or dismissal or transfer of the bank’s executive officer to another position in this bank, but not more than two times within twelve consecutive months.
  8. In the case of two consecutive refusals of the authorized body to approve appointment (election) of a bank’s executive officer, such a person may be appointed (elected) as the bank’s executive officer upon expiry of twelve consequent months after the decision of the authorized body on second refusal to approve appointment (election) of this person in the bank.
  9. The authorized body shall have a right to revoke its approval for appointment (election) of a bank’s executive officer due the following reasons:
  1) discovery of false information, on the basis of which the approval was given;
  2) the authorized body repeatedly imposed sanctions against this executive officer (three times and more within last twelve months);
  3) dismissal of the persons mentioned in this Article from execution of the duties on the basis data sufficient for recognition of actions of the executive officer (executive officers) of the bank as incompliant with the requirements of the legislation of the Republic of Kazakhstan;
  4) unexpunged or unspent conviction.
 In case if the authorized body revokes its approval for appointment (election) of an executive officer, a bank shall terminate the individual employment agreement with this person, or in case of absence of the individual employment agreement the bank shall take measures for termination of the authorities of such a person.
  10. In case if the authorized body takes a decision on temporarily closing of a bank or forced repurchase of its shares in a manner, prescribed by this Law, the bank shall terminate the individual employment agreement with its executive officers, represented by the chairman of Board of Directors, chairman and deputy chairmen of the Management Board, chief accountant, or in the case of absence of the individual employment agreement the bank shall take measures for termination of the authorities of these persons.
  11. A chief executive officer of the organization, which carries out certain types of bank operations, shall comply with the requirements to chairman of the bank’s Management Board, prescribed in this Article, and shall be appointed (elected) to such a position without approval of the authorized body. The organization, which carries out certain types of bank operations, upon request of the authorized body shall dismiss its chief executive officer in case of his/her incompliance with the requirements of this Article.
  Reference. Article 20 is stated in the wording of the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107). Article with amendments, inserted by the RK Laws dated 12th of January 2007 N 222(effective upon expiry of 6 months since the date of official publication); dated 19th of February 2007 N 230 (enactment procedure, see art.2); dated 20.11.2008 N 88-IV (enactment procedure, see art.2); dated 23.10.2008 N 72-IV (effective since 01.01.2009).

Article 21. Additional Requirements to Establishment of Banks with Participation of Non-Residents of the Republic of Kazakhstan

Non-resident individuals or legal entities of the Republic of Kazakhstan, being founders of a bank, in addition to the documents indicated in Article 19 of this Law shall be obliged to attach the application for a bank establishment permit with written notification of the authorized body of respective country (for non-resident banks of the Republic of Kazakhstan a notification issued by the banking supervision agency), confirming that the given entity is allowed to hold shares of the resident bank of the Republic of Kazakhstan, or statement of the authorized body of respective country (for non-resident banks of the Republic of Kazakhstan a statement issued by the banking supervision agency), confirming that such a permit is not required in accordance with the legislation of the state of the mentioned founder.
  Reference. Article 21 is stated in the wording of the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107).
 

Article 22. Additional Requirements to Establishment and Activity of Banks with Foreign Participation
 
  Reference. Article 22 is excluded by the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107).

Article 23. Procedure for Consideration of Application for Issue of a Bank Establishment Permit
 
  1. Applications for a bank establishment permit shall be considered by the National Bank within three months from the date of submission of final additional information by an applicant or a document, required by the authorized body, but not more than in six months from the date of acceptance of the application.
  2. The authorized body shall notify applicants about the taken decision in written form. Notices shall be forwarded to the address, indicated in the application for a bank establishment permit.
  3. The authorized body shall keep recording of the permissions for a bank establishment.
  Reference. Article 23 was amended by the RK Laws dated 11th of July 1997 N 154; dated 10th of July 2003 N 483 (effective since 1st of January 2004).

  Article 24. Denial of Issue of a Bank Establishment Permit
 
  1. Denial of a bank establishment permit shall take place due to any of the following reasons:
  а) submission of the incomplete set of documents, or non-compliance of a bank’s charter documents with the current legislation;
  b) non-compliance of a bank's name with the requirements, set out in paragraphs 2-4 Article 15 of this Law;
  c) non-compliance of the amount, composition and structure of the charter capital of a bank with the requirements of Article 16 of this Law;
  d) instability of the financial position of a bank's founders;
  d-1) in the cases when a founder, being an individual, or a chief executive officer of the executive body or the management body of the founder, being a legal entity:
 has unexpunged or unspent conviction a manner, prescribed by the law, for economic crimes, corruption and other crimes against the interests of the state service or the state management;
 has worked earlier as a chairman of the Board of Directors, chairman or deputy chairman of the Management Board, chief accountant of a financial organization, but not more than a year prior to the decision, taken by the authorized body on temporary closing of this financial organization, on forced repurchase of shares, on revocation of a license of such financial organization, as well as on forced liquidation of the financial organization or its bankruptcy in a manner, prescribed by the legislation of the Republic of Kazakhstan. Such a requirement shall be in force within five years after the effective date of the decision, taken by the authorized body on temporary closing of the financial organization, forced repurchase of shares, revocation of a license of the financial organization, as well as on forced liquidation of the financial organization or its bankruptcy in a manner, prescribed by the legislation of the Republic of Kazakhstan; K010155
  d-2) non-observance of the requirements, established Article 17-1 of this Law;
  e) non-observance of the restrictions, established by Article 17 of this Law;
  e-1) denial of issue of a permit for acquisition of the status of a bank’s large participant, issued by the authorized body;
  f) (excluded by the RK Law dated 23.10.2008 N 72-IV(effective since 01.01.2009).;
  g) (excluded by the RK Law dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107);
  h) a business plan of a newly established bank and any other documents, submitted by an applicant, do not indicate that:
 upon expiry of the first three financial (operational) years the bank’s operation will be profitable;
 the bank intends to comply with the requirements to the risk limitation and to create the proper management structure;
 the bank has an institutional structure, consistent with its action plans;
 the bank has an accounting and control structure, consistent with its action plans.
  2. The authorized body shall be obliged to notify applicants about the reasons of denial in written form.
  3. Issue of a bank establishment permit in case of non-compliance with the provisions of Articles 18-21 of this Law shall not be allowed.
  Reference. Article 24 is amended by the RK Laws dated 11th of July 1997 N 154; dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23rd of December 2005 N 107 (enactment procedure, see art.2 of the Law N 107); dated 12th of January 2007 N 222 (effective upon expiry of 6 months since the date of official publication); dated 23.10.2008 N 72-IV (enactment procedure, see art.2).

Article 25. State Registration of a Bank

State registration of a bank shall be carried out at the bodies of Justice under the bank establishment permit of the authorized body and information, which confirms approval of its charter documents by the authorized body.
 Founders shall apply to the bodies of Justice for state registration of their bank within one month from the date of receipt of a bank establishment permit from the authorized body.
   Reference. Article 25 was amended by the RK Laws dated 11th of July 1997 N 154; dated 16th of July 1999 N 436; dated 2nd of March 2001 N 162 (see art. 2); dated 10th of July 2003 N 483 (effective since 1st of January 2004); dated 23.10.2008 N 72-IV (enactment procedure, see art.2).