Parliament to submit draft law on financial stability

Astana, June 30

Kazakhstan's government in Astana on Saturday announced plans to submit the daft law on financial stability to the parliament.

"The key objectives of the bill: to improve risk preventive mechanisms in financial system, introduce criminal responsibility for top financial executives and also expand the scope of duties of the authorized body in case of the failure of shareholders to maintained stability of the financial organization," Elena Bakhmutova, chairman of the National Financial Supervision Agency (FSA) said while presenting the draft law.

According to Bakhmutova, a criminal responsibility is applicable to "a major participant of a financial organization, a chief executive (a major participant acting as a regulatory body) for a deliberate act or failure to act that led to insolvency or compulsory winding-up of an insurance company, pension fund or a bank."

"The penalty may entail 3,000-6,000 of monthly-specified rates (MSR - 1,168 tenge) or a monthly salary, or any other income of the convicted offender for the period from six months to one year, or personal restraint up to one year, or arrest for the period of six months to one year, or imprisonment from one to three years with penalty," she said.

The draft law also vests the government with the right "to decide on acquisition of no less than 10% of bank's authorized shares by a national company in case of financial organization default on prudential standards and other minimal requirements." "It also includes the default on capital adequacy, liquidity ratio, and a double default on other norms," Bakhmutova said.

"The mechanism is intended to prevent any aggravation of systemic crises. There might appear such cases when the bank's stability is deteriorating, but its shareholders are unable or unwilling to respond to it. In that case an injection of fresh capital is required to support the bank and maintain credibility of the system," she said.

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