A. Republic of Kazakhstan Law No. 2444 of August 31, 1995 (стр. 2 )

information about the applicant’s representative who has been charged with representing the applicant’s interests;

a list of juridical persons in which it is a principal partner;

in addition, for a natural person:

a brief summary of information about the applicant, including information about employment history, as well as any convictions or administrative charges for legal offenses related to banking, following the form provided for by regulatory legal acts of the authorized agency;

for a juridical person:

charter documents and a brief summary of information about the applicant’s principal partners;

a brief summary of information about the applicant’s managers, including information about their education, employment history, as well as any convictions or administrative charges for legal offenses related to banking, following the form provided for by regulatory legal acts of the authorized agency;

annual financial statements for the past two fiscal years, certified by an auditing firm, as well as financial statements for the last quarter preceding adoption of the decision to grant consent to acquire the status of a principal partner;

a financial projection of the consequences of acquisition of the status of a principal partner, including the applicant’s expected balance sheet following acquisition, the applicant’s plans and proposals, if any, regarding sale of the bank’s assets, merger of the bank with another juridical person or significant changes in the bank’s operations or management (including its business plan and organizational structure).

3. A principal partner of a bank shall be a resident or nonresident natural or juridical person of the Republic of Kazakhstan who directly or indirectly holds 10 percent or more of the bank’s voting shares or is able to:

vote directly or indirectly 10 percent or more of the bank’s voting shares;

influence decisions made by the bank by virtue of an agreement or in some other way.

4. Persons who are jointly a principal partner of a bank shall be persons who hold or who are able to vote directly or indirectly 10 percent or more of the bank’s voting shares and:

1) who jointly influence decisions made by the bank by virtue of an agreement or in some other way;

2) who are separately or mutually principal partners of one another;

3) one of whom is an official or representative of the other person;

4) one of whom has made a loan to the other to purchase bank shares;

5) who are close relatives.

5. Grounds for refusal to grant consent to acquire the status of a principal partner of a bank shall be:

failure to comply with the requirements of subitems b) and c) of item 2 and subitems a) and c) of item 3 of Article 20 of this Law (with regard to a natural person or managers of an applicant that is a juridical person);

the applicant’s unstable financial condition;

failure to submit the documents required by the authorized agency;

violation of the requirements of anti-monopoly legislation as a result of the applicant’s acquisition of the status of a principal partner of the bank;

cases in which one of the parties to a transaction involving acquisition of the status of a principal partner of a bank is a person (or affiliate) registered in an offshore zone, or a person who is a partner (founder, stockholder) of juridical persons registered in offshore zones, a list of which shall be established by the authorized agency;

cases in which the applicant is a foreign bank not subject to supervision on a consolidated basis in its home country;

failure by the applicant to comply with other requirements established by this Law for founders and stockholders of banks.

6. One of the following shall be considered a sign of an applicant’s unstable financial condition:

an applicant that is a juridical person was established less than two years before the date on which the application is filed;

the applicant’s liabilities exceed its assts;

losses have been posted for the past two fiscal years;

the size of the applicant’s liabilities poses a significant risk to the bank’s financial condition;

the applicant has a past-due debt to the bank and (or) a debt to the bank that has been written off;

other grounds that point to the possibility of damage to the bank and (or) its depositors.

7. If a person does not obtain consent for the status of a principal partner, the authorized agency shall have the right to take compulsory measures against the given person as provided for under Article 47-1 of this Law.

8. A bank holding company shall be a resident or nonresident juridical person of the Republic of Kazakhstan that directly or indirectly holds 25 percent or more of the voting stock of a bank or is able to:

vote directly or indirectly 25 percent or more of the bank’s voting shares;

determine decisions made by the bank by virtue of an agreement or in some other way.

Acquisition of the status of a bank holding company shall be effected following the procedure established for a principal partner of a bank.

9. Persons who jointly comprise a bank holding company shall be persons who together hold or are able to vote directly or indirectly 25 percent or more of the bank’s voting stock and:

1) who jointly influence decisions made by the bank by virtue of an agreement between them or in some other way;

2) who are separately or mutually principal partners of one another;

3) one of whom is an official or representative of the other person;

4) one of whom has made a loan to the other to purchase bank shares;

5) who are close relatives.

10. A banking group shall consist of a bank and organizations in which the bank is a partner.

Article 18. Particulars Regarding Establishment of Subsidiary Banks

by Nonresident Banks of the Republic of Kazakhstan

1. Nonresident banks of the Republic of Kazakhstan possessing a certain rating from one of the main rating agencies may be parent banks in relation to subsidiary banks. The list of main rating agencies and the minimum required rating shall be established by the authorized agency.

2. Omitted.

Article 19. Application for a Permit to Open a Bank

1. A juridical or natural person shall have the right to file an application with the authorized agency for a permit to open a bank.

2. The application shall be submitted in Kazakh or in Russian, and it must contain the applicant’s address.

3. The following documents must be appended to the application for a permit to open a bank:

a) the charter documents of the newly established bank: the founding agreement, the charter, and the protocol of adoption of the charter and appointment (election) of the bank's bodies;

b) information on the founders (as per a list determined by the authorized agency), the financial statements of founding juridical persons for the last two reporting dates, and the report of an auditing firm (auditor) regarding the financial condition of the founders;

c) if one or more of the founders are not residents of the Republic of Kazakhstan: a written notice from a government agency or supervisory body of the home country indicating that it allows participation in the authorized capital of a resident bank of the Republic of Kazakhstan, or a statement from a government agency or supervisory body of the home country indicating that such permission is not required under the legislation of the founder’s home country;

d) in the case of conversion of an institution performing certain types of banking operations into a bank:

the founding agreement, the charter, and financial statements for the last reporting date;

the report of an auditing firm (auditor) regarding the financial condition of the institution performing certain types of banking operations;

e) information on persons nominated for appointment (election) to the top executive positions of banks pursuant to the requirements set forth in this Law;

f) the detailed organizational structure of the newly established bank;

g) a statute on the internal auditing service of the newly established bank;

h) a statute on the credit committee of the newly established bank;

i) the business plan of the newly established bank explaining its business strategy, the areas and scope of operations, the financial prospects (the budget, the balance sheet, the profit and loss statement for the first three fiscal (operating) years), a marketing plan (a plan for building up the bank’s clientele), and a hiring plan;

j) a report on preparations made by the founders in accordance with the submitted business plan;

k) a notarized or otherwise legally certified document confirming the applicant’s authority to submit the application in the name of the founders.

The documents referred to in subitems g), h), i) of this item must be approved by an authorized body of the bank.

4. The report of an auditing firm (auditor) shall be recognized as valid on the condition that documents are presented confirming that it (he) is:

independent of the founders of the examined banks and their officials;

authorized to conduct banking audits in accordance with a license from the authorized agency or from a competent body of its (his) home country.

5. The authorized body shall have the right to request additional information or documents necessary for a decision regarding the issuance of a permit to open a bank.

6. An application for a permit to open a bank may be revoked by the applicant at any time during its consideration by the authorized agency.

Article 20. Requirements of Executive Officers of a Bank or an Institution

Performing Certain Types of Banking Operations

1. The chairman and members of the board of directors, the chairman and members of the supervisory board, and other managers of a bank or institution performing certain types of banking operations who are engaged in coordination and (or) control of the operations of structural subdivisions of the bank or institution performing certain types of banking operations, and who have signing authority for documents on the basis of which banking operations are performed, the chief accountant of the bank or institution performing certain types of banking operations and his deputies, and the senior manager and chief accountant of a bank branch or institution performing certain types of banking operations, shall be recognized as executive officers of a bank or institution performing certain types of banking operations.

2. Executive officers of a bank or institution performing certain types of banking operations and candidates recommended for appointment or election to executive positions must meet the minimum requirements established by this article. Executive officers of a bank or institution performing certain types of banking operations shall be appointed and elected to their positions with the consent of the authorized pliance with said requirements shall be determined by a qualification commission of the authorized agency.

The authorized agency shall have the right to reconsider its consent to the appointment (election) of an executive officer of a bank or institution performing certain types of banking operations on the following grounds:

a) information on the basis of which consent had been given is found to be incorrect;

b) it is determined that the person in question has faced administrative charges two or more times in one year for legal offenses associated with banking;

c) the person in question has been relieved of his official duties on grounds set forth in subitem f), item 2, Article 47 of this Law;

d) it is determined that the requirements set forth in item 3 of this article have not been met.

3. The following shall be recognized as persons unqualified for their position or as persons who may not be appointed to the position of an executive officer of a bank or institution performing certain types of banking operations:

a) a person with an outstanding conviction or a conviction that has not been dismissed according to the procedure established by law;

b) a person without sufficient knowledge of banking legislation;

c) a person who served in the past as chairman of the board of directors, senior manager (chairman of the supervisory board), assistant manager, or chief accountant of a bank or other juridical person for not more than one year prior to adoption of a decision on involuntary liquidation, compulsory purchase of stocks, or temporary closure of the bank or other juridical person determined to be bankrupt following the established procedure. This requirement shall apply for five years after the date of the decision on involuntary liquidation, compulsory purchase of stocks, or temporary closure of the bank or other juridical person determined to be bankrupt following the established procedure.

4. A higher education shall be a mandatory requirement for appointment to the position of chairman and member of the board of directors, chairman and deputy chairman of the supervisory board of a bank or institution performing certain types of banking operations, and also for appointment to the position of manager of a bank or institution performing certain types of banking operations with the authority to sign documents on behalf of the bank or institution performing certain types of banking operations, or to alienate assets of the bank or institution performing certain types of banking operations on their behalf. The chief accountant of a bank or institution performing certain types of banking operations and the senior manager and chief accountant of a branch must have a higher or secondary special education corresponding to the given area of specialization.

5. As a rule the chairman and deputy chairmen of the supervisory board of a bank or institution performing certain types of banking operations, the chief accountant and deputy chief accountants of a bank or institution performing certain types of banking operations, and the senior manager and chief accountant of a branch of a bank or institution performing certain types of banking operations must have the following amount of job experience in the banking system: chairman and chief accountant – not less than three years, deputy chairman of the supervisory board and deputy chief accountant – not less than two years, senior manager and chief accountant of a branch of a bank or institution performing certain types of banking operations – not less than one year.

Executive officers may not carry out their duties for more than three months before obtaining the consent of the authorized agency.

Notwithstanding the actual performance of official duties by a person whose candidacy for an executive position with a bank or institution performing certain types of banking operations has been brought up for approval, in the event that the authorized agency denies consent to his appointment or election, this employee shall be subject to dismissal from his position within not more than 30 days from the moment the bank receives the decision of the authorized agency. A candidate’s name may be submitted again for approval no sooner than three months from the day the decision is made to deny consent. During the period of approval of the candidacy of an employee of a bank or institution performing certain types of banking operations pursuant to the requirements of this article, newly hired employees shall perform their duties on the basis of a fixed-term labor agreement.

6. The requirements provided for under this article shall be binding upon banks and institutions performing certain types of banking operations throughout the entire period of their operation.

7. The procedure for the approval of candidates to serve as executive officers of banks, as well as the list and procedure for the approval of executive officers of institutions performing certain types of banking operations, shall be established by regulatory legal acts of the authorized agency.

Article 21. Additional Requirements for the Establishment and Operation of a Bank

with the Participation of Nonresidents of the Republic of Kazakhstan

1. In addition to the documents indicated in Article 19 of this Law, a nonresident juridical or natural person of the Republic of Kazakhstan acting as a bank founder shall be required to attach, to the application for a permit to open a bank, information on participation of other banks and financial institutions in its authorized capital, and written confirmation from the home country’s authorized body (the banking supervision body in the case of nonresident banks) that the given person is permitted to participate in the authorized capital of a resident bank of the Republic of Kazakhstan, or a statement from the home country’s authorized body (the banking supervision body in the case of nonresident banks) that such permission is not required by the legislation of said founder’s home country.

1-1. With the aim of monitoring compliance by a bank’s partners (founders, stockholders) with the requirements established under this article, the authorized body shall have the right to require the presentation of charter documents and financial statements by juridical persons that are affiliated with the bank, and also to request the necessary information from government agencies.

2. A nonresident juridical person that is petitioning for the right to acquire the status of a principal partner or a bank holding company shall be required to submit the following documents in addition to those specified in Article 19 and in item 1 of this article:

a) a decision of the appropriate body of the founding juridical person regarding its participation in a resident bank of the Republic of Kazakhstan;

b) duly drafted annual reports of the juridical person (including the consolidated balance sheet and the profit and loss statement) for the last three fiscal (operating) years, certified by an auditing firm (auditor) meeting the requirements of item 4, Article 19 of this Law;

c) other documents concerning the establishment and operation of a bank with the participation of nonresidents of the Republic of Kazakhstan necessary for determining principal partners of the bank and bank holding companies as provided for by regulatory legal acts of the authorized agency.

3. A nonresident bank of the Republic of Kazakhstan that is a founder or partner of a bank shall be required to submit the following documents in addition to those specified in Article 19 and in items 1–2 of this article:

a) written confirmation from the home country’s banking supervision body that the bank has a valid banking license;

b) written confirmation from the home country’s banking supervision body that the bank is subject to supervision on a consolidated basis.

4. The authorized agency shall have the right to request information on the financial position of banks or financial institutions in whose authorized capital a nonresident juridical or natural person that is a founder of the bank has an interest. Should the financial position of these banks or financial institutions be unsatisfactory, the authorized agency shall have the right to refuse to allow this nonresident juridical or natural person to participate in a resident bank’s authorized capital.

5. Nonresident natural persons of the Republic of Kazakhstan who hold or intend to acquire 10 percent or more of the voting stock in a bank shall furnish a relevant notice from the home country’s authorized agency indicating that such participation in the authorized capital of a resident bank of the Republic of Kazakhstan is not in conflict with the legislation of the home country.

Article 22. Additional Requirements for the Establishment and Operation of

Banks With Foreign Participation

1. The following requirements must be observed in the establishment and operation of banks with foreign participation on the territory of the Republic of Kazakhstan:

a) the authorized capital of banks with foreign participation may not exceed 50 percent of the aggregate authorized capital of all banks of the Republic of Kazakhstan, except in those cases permitted by the authorized agency;

b) at least one member of the supervisory board of a bank with foreign participation must be a citizen of the Republic of Kazakhstan and must furnish documents attesting to management experience of not less than three years in a bank operating on the territory of the Republic of Kazakhstan, and to knowledge of banking and business legislation of the Republic of Kazakhstan;

c) a bank with foreign participation shall be required to invest resources in internal assets in an amount and according to the procedure established by the authorized agency.

d) at least 70 percent of the total number of employees of a bank with foreign participation must be citizens of the Republic of Kazakhstan.

The list of internal assets shall be established by the authorized agency.

2. The authorized agency shall have the right to impose additional requirements on banks with foreign participation regarding the make-up of their bodies, the list of permitted banking operations, prudential standards, other binding norms and limits, and reporting procedures.

Article 23. Procedure for Considering an Application for a Permit to Open a Bank

1. An application for a permit to open a bank must be considered by the authorized agency within three months of the day the applicant presents the last additional information or document requested by the authorized agency, but not more than six months from the date the application is received.

2. The authorized agency shall notify the applicant of its decision in writing. The notice shall be sent to the address indicated on the application for a permit to open a bank.

3. The authorized agency shall maintain a record of issued permits to open a bank.

Article 24. Denial of a Permit to Open a Bank

1. A permit to open a bank may be denied on any of the following grounds:

a) The bank’s charter documents are not in compliance with current legislation;

b) the bank’s name does not meet the requirements of items 2–4, Article 15 of this Law;

c) the amount, composition, and structure of the bank’s authorized capital do not meet requirements of Article 16 of this Law;

d) the financial position of the bank’s founders is unstable;

e) restrictions established by Article 17 of this Law are not observed;

f) candidates for executive positions with the bank do not meet the minimum requirements set by items 3–5, Article 20 of this Law;

g) the charter documents of a bank with foreign participation are inconsistent with the requirements set by item 1, Article 22 of this Law;

h) the business plan of the bank to be established and other documents presented by the applicant fail to show that:

the bank will be profitable after the first three fiscal (operating) years of operation;

the bank intends to observe requirements on limiting risk, and to establish an appropriate management structure;

the bank possesses an organizational structure corresponding to the plans for its operation;

the bank possesses an accounting and control structure corresponding to the plans for its operation.

2. The authorized agency shall be required to notify the applicant of the grounds for denial in writing.

3. Issuance of a permit to open a bank shall not be allowed if the conditions of Articles 18–22 of this Law are not observed.

Article 25. State Registration of a Bank

State registration of a bank shall be effected by judicial authorities on the basis of a permit from the authorized agency to open a bank and information confirming approval of its founding documents by the authorized agency.

The founders shall be required to apply to judicial authorities for state registration of the bank within one month of the day a permit to open a bank is received from the authorized agency.

Following state registration of a bank with judicial authorities, the bank shall be required within 14 calendar days to present to the authorized agency notarized copies of the founding agreement and charter bearing a notation and seal of the judicial authority that registered them and a certificate of the bank’s state registration.

Article 26. Licensing of Banking Operations

1. Licenses to perform banking operations as well as other operations established by this Law shall be issued by the authorized agency or the National Bank within the scope of their authority and following the procedure established by the authorized agency and the National Bank in accordance with the requirements of this Law.

The National Bank or the authorized agency shall have the right when issuing a license to make changes in the description of the operations banks are allowed to perform in accordance with the legislation of the Republic of Kazakhstan.

A fee shall be charged for issuing a license, and the amount and procedure for payment of the fee shall be determined by legislation of the Republic of Kazakhstan.

2. In order to obtain a banking license the applicant must do the following within one year of the day of state registration:

a) carry out all organizational and technical measures, including preparation of premises and equipment meeting the requirements of regulatory legal acts of the authorized agency or the National Bank, and hire personnel with the appropriate qualifications;

b) pay in the authorized capital.

2-1. In order to obtain a license to perform additional banking operations, an existing bank must provide for compliance with:

1) prudential requirements and other binding standards and limits for three successive months preceding the filing of the application for a license to perform banking operations;

2) requirements established by the authorized agency with regard to risk management and internal control systems.

3. Concurrently with the application for a banking license, the licensee shall be required to present documents confirming fulfillment of requirements of item 2 of this article.

4. A banking license application must be considered by the authorized agency or National Bank within one month of the day of its receipt.

5. A license to perform banking operations in the national currency and (or) foreign currency shall be issued for an indefinite term.

6. A banking license shall be issued in the name of the licensee and shall not be transferable to third parties.

7. All types of banking operations may be carried out only if the right to do so is explicitly stated on the license.

8. The decision to grant a banking license shall be published in official publications of the authorized agency or the National Bank.

9. A duly certified copy of the banking license shall be kept in a place where it is accessible for inspection by the bank’s customers.

Article 27. Grounds for Denying a Banking License

A banking license shall be denied if:

a) any requirements established under items 2 and 2-1, Article 26 of this Law are not met;

b) the bank fails to apply for a license within one year from the day of its state registration.

Article 28. Amendments and Additions to a Bank’s Charter Documents

1. Amendments and additions to a bank’s charter documents, including those requiring reregistration with judicial authorities, shall be subject to mandatory prior approval by the authorized agency.

2. The issue of consenting to amendments and additions to a bank’s charter documents must be considered by the authorized agency within one month.

2-1. Following state registration of amendments and additions to charter documents, including those requiring reregistration with judicial authorities, a bank shall be required within 14 calendar days to submit to the authorized agency a notarized copy of the amendments and additions to its charter documents, bearing a notation and seal of the judicial authority that registered them.

3. The conditions, grounds, and procedure for voluntary conversion of a bank into an institution performing certain types of banking operations shall be prescribed by regulatory legal acts of the authorized agency.

Article 29. Establishment and Closure of Bank Branches, Representative Offices,

and Cash Settlement Departments (Savings Banks)

1. A bank branch shall mean a bank subdivision that is not a juridical person, is located at a site other than the bank’s location, carries out banking operations in the name of the bank, and acts within the limits of powers granted to it by the bank.

A bank branch shall have the same balance sheet as the bank, and its name shall be the same as the bank’s name.

2. A bank shall be required to obtain the authorized agency’s consent to open a branch, following the procedure and in accordance with the requirements established by a regulatory legal act of the authorized agency.

The issue of consenting to the opening of a bank branch must be considered by the authorized agency within three months.

3. The documents below must be attached to an application for consent to open a bank branch:

1) the decision by the bank’s management regarding the opening of a branch;

2) a statute on the bank branch which includes a list of banking operations that the branch will be authorized to perform, in triplicate;

3) information on candidates for the position of senior manager and chief accountant of the bank branch, prepared in accordance with requirements of item 3, Article 19 and items 3–5, Article 20 of this Law.