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CONTENTS

MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ....................................................................................3


MESSAGE FROM THE CHAIRMAN OF THE KDIF ..........................................................................................................5
ABOUT KDIF ............................................................................................................................................................8
THE MAJOR DEVELOPMENTS, AND FACILITATING THE DEPOSIT INSURANCE SYSTEM ................................................14
CONSUMER DEPOSIT MARKET OVERVIEW ..............................................................................................................18
DEVELOPMENT STRATEGY 2014 2016 ..................................................................................................................22
CORPORATE GOVERNANCE ....................................................................................................................................28
OPERATING RESULTS .............................................................................................................................................35
DIFFERENTIAL PREMIUM SYSTEM ...................................................................................................................36
SPECIAL RESERVE FOR PAYOUTS .....................................................................................................................38
INVESTMENT MANAGEMENT ...........................................................................................................................40
DEPOSITOR REIMBURSEMENT PROCEDURES ...................................................................................................42
LIQUIDATION COMMISSIONS OPERATIONS .....................................................................................................43
MAINTAINING PUBLIC AWARENESS OF DEPOSIT INSURANCE SYSTEM ..............................................................44
INTERNATIONAL COOPERATION .....................................................................................................................45
FINANCIAL REPORTING AND REPORT OF INDEPENDENT ASSURANCE FIRM ...............................................................48
GLOSSARY OF TERMS ............................................................................................................................................53
ABBREVIATIONS ....................................................................................................................................................54

KUAT KOZHAKHMETOV
Chairman of the Board of Directors, Deputy Governor
of the National Bank of the Republic of Kazakhstan

MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS

Ladies and gentlemen!


This has been a year of complex challenges and threats
to stability of Kazakhstani nancial system. Such external
factors as global economic slowdown, strengthening of US
dollar and falling prices for oil, metals and commodities
have a great impact on economic conditions in our country.
Nonetheless, in 2014 domestic economy grew by 4.3%.
We could also see a positive trend to growth in domestic
consumer bank deposit market. Over the year, consumer
bank deposit market grew by 12.5%. To-date, aggregate
consumer deposit balance in Kazakhstani banks comprises
4.5 trillion tenge.
Reporting these results demonstrates condence
of people with the banking sector. Despite the spillover
in consumer depositor base in three largest Kazakhstani
banks, the long-term trend in aggregate deposit balances
over 2014 remained. The peoples condence is largely a
historical factor. Back in the crisis years, the Government
bailed in the three systemic banks, and the conditions of
restructuring of liabilities and conversion of liabilities into
shareholders capital were agreed with the banks creditors.
As of the end of 2014, all banks successfully continue
operations, the strategic investors for acquiring the share
held by the National Wealth Fund Samruk Kazyna have
been found.
During the next year, the public policy in sustaining
economic stability will be focused on reconciliation of
developments related to negative external factors, and
capacity building of the Kazakhstani economy through
State Programme of Infrastructure Development Nurly
Zhol for 2015 2019, as well as safeguarding nancial
stability through strengthening of the nancial system
and enhancing the banking sector, particularly, in parallel
with the effort to reduce the share of problem debt, new
requirements in capital adequacy according to Basel III will
be introduced in a phased manner.
Another crucial factor in safeguarding nancial stability
for the National Bank is increasing the role of the national
currency in economy. Particularly, in the context of increased
expectations of possible national currency adjustment, by
the end of 2014 the extent of the consumer bank deposit
market dollarization reached 67%. For comparison, the
share of deposits in national currency as of the end of past
year comprised 44%.
Therefore, for giving a rationale for people to make
savings in national currency, the Government of the
Republic of Kazakhstan and the National Bank announced
the perspective plan to increase the government guarantee
coverage for deposits in national currency from 5 to 10

million tenge and increase in the maximum recommended


interest rates for deposits in national currency from 9% up
to 10%, and decreased recommended maximum interest
rate for deposits in foreign currency from 4% to 3%.
One of the major events in 2014 was development and
ratication approval of the public policy document Financial
Sector Development Concept 2030. This policy paper
establishes the grounds for further developing deposit
insurance system, revising the mandates of authorities,
and, in a broader sense, facilitating the bank recovery
processes according to the international standards.
Particularly, in the Financial Sector Development
Concept 2030, this best practice is incorporated to the
initiative to transfer the functions in bank insolvency
resolution to the KDIF and to provide for allocation of
the KDIFs funds in resolution should the KDIF be directly
involved in the bank resolution processes. Apart of that,
further improvement of legislation in part of establishing the
preconditions and criteria for bank insolvency resolution and
bail-in, particularly conducting purchase and assumption
transaction, establishing a bridge bank and restructuring of
liabilities. We plan to commence these tasks in 2016 2018.
In any case, all these provisions shall be aimed
at safeguarding the rights and lawful interests of bank
depositors, providing for prompt access to their deposits
with banks, and, in a general sense, facilitating the bank
insolvency resolution provisions in best interests of all
concerned, which fully complies with the Core Principles for
Effective Deposit Insurance System.
Let me please extend my acknowledgments to the
Government of the Republic of Kazakhstan for the support
in many matters. Let me also extend appreciation for very
productive fulllment of these crucial initiatives to the Board
of Directors and the senior management of Kazakhstan
Deposit Insurance Fund.

Kind regards,
Kuat Kozhakhmetov,
Chairman of the Board of Directors,
Deputy Governor of the National Bank of the Republic
of Kazakhstan

Bakyt Kogulov
Chairman, Kazakhstan Deposit Insurance Fund

MESSAGE FROM THE CHAIRMAN OF THE KDIF

Dear Colleagues and Partners!


Now, in 2014, it has been 15 years of deposit
insurance system operation in the Republic of Kazakhstan.
This is a very important moment for us to take stock of
our continuous work. Particularly, undoubtedly, over
these 15 years we were able to develop an effective
system for protection of rights and lawful interests of bank
depositors in nancial services market, which is advanced
in terms of mandate and powers and which builds upon
implementation of Global best practice. During these years,
we were able to make membership compulsory for all banks
accepting deposits of individuals as a legislation provision,
to implement the practice to regularly reassess the
coverage limit in accordance with Internationally recognized
standards, and to set forth operations related to differential
premium system which is regularly updated with a view
to reect the market conditions and address the systemic
issues which appear to be in ways linked to the banking
sector. It is also to be noted that the key principles of
deposit insurance are clearly simple and comprehensible to
the Kazakhstani nancial services consumers with different
educational background and general awareness of retail
banking products.
Having passed the 15-years threshold, apart from
considering the results, the nancial regulatory authority
and the KDIF also revised the strategic development
objectives and the perspective longer term development
opportunities.
The reporting year might be deemed crucial for further
development of deposit insurance system since quality
institutional developments were launched this year. In
August, 2014 Government of the Republic of Kazakhstan
approved the long-term policy document named Financial
Sector Development Concept till 2030, while the mediumterm objectives for further development were given in detail
in the KDIFs Strategic Development Plan 2014 2016
which covers each of the KDIFs functions.
During 2014, the KDIF was working to elaborate the
strategic initiatives and the perspective objectives aimed at
optimization of KDIFs internal procedures, as well as the
procedures of bank insolvency resolution stipulated in the
legal framework.
First, in the framework of the USAID complex
macroeconomic development project in the Republic of
Kazakhstan, an International advisory rm conducted
assessment and delivered concept suggestions in this eld.
To allow fulllment of these concept suggestions, the KDIF
arranged consultations with the expert staff of Federal
Deposit Insurance Corporation and Deposit Insurance
Agency of Russian Federation. The obtained results were
duly reected in the Financial Sector Development Concept

till 2030 in part of deposit insurance. Therefore, the Concept


2030 establishes grounds for developments in distribution
of mandate and powers in bank insolvency resolution and
ensures that Global best practices are integrated.
Another important event during 2014 was joint
statement of the National Bank and Government of the
Republic of Kazakhstan on increasing the maximum
coverage limit for deposits in national currency from 5 up to
10 million tenge within a comprehensive set of provisions
aimed at reducing dollarization of the Kazakhstani economy.
Whether these amendments to be adopted, 99.7% of bank
deposits and bank accounts of individuals will be fully
covered, in current values.
Furthermore, in the framework of fulllment of the
KDIFs Strategic Development Plan for the years 2014
2016, the KDIF has accomplished a large-scale task
in development of its risk management system in this
reporting year. Particularly, since December, 2014 the Risk
Management Committee was established under the Board
of Directors, a risk manager function and internal audit
ofce were provided for in the KDIF structure, and regular
managerial reporting submission practice was introduced.
Apart from that, the KDIF elaborated and approved a
number of very important internal procedures governing
the risk management and information security issues.
Summarizing the nancial results of the KDIFs
operations, as of the end of 2014 special reserve for
payouts comprised 215.4 billion tenge, out which 145 billion
are represented by the regular member banks premiums.
The KDIF reported investment income of 31.3 billion tenge,
which is for 64.7% higher comparing to the same period of
the past year. Present value of the asset portfolio increased
by 73.7 billion tenge, or 22.5%. The liquidation commissions
of the banks in liquidation settled their liabilities to the KDIF
in the amount of 9.4 billion tenge.
In future, we are planning to utilize the cooperation
opportunities with the National Bank in the eld of
fulllment of the strategic development objectives critical
to deposit insurance system development and to optimizing
and streamlining the procedures and processes.
I believe that fulllment of these objectives along with
continuing accomplishment of the tasks in our daily agenda
will contribute to nancial sector stability and further
development of deposit insurance system in line with Global
best practice.

Kind regards,
Bakyt Kogulov
Chairman, Kazakhstan Deposit Insurance Fund

ABOUT KDIF

After the nancial crisis of 1998 burst in the Russian Federation, establishing legal provisions to ensure protection
of peoples bank deposits became a priority for the Republic of Kazakhstan. At 1 Congress of nanciers of Kazakhstan,
President Nursultan Nazarbayev recommended to elaborate and implement a comprehensive set of system-wide measures,
one being establishment of deposit insurance system.
The KDIF was established by Resolution of the National Bank of the Republic of Kazakhstan Management Board No.
393 dated 15 November, 1999 On incorporation of ZAO Kazakhstan Individuals Deposit Guarantee (Insurance) Fund.

Mission
To contribute to the nancial system stability and protection of rights of the second-tier banks depositors in the
Republic of Kazakhstan.

Vision
The KDIF strives to be:
A highly efcient party in the nancial market which contributes to stability of the domestic nancial system
An organization which adheres the Globally recognized principles for effective deposit insurance systems and
employs Global best practices in its operations
The agent of the Government for the people ensuring protection of their rights and lawful interests

Strategic objectives
To fulll the Financial Sector Development Concept 2030 via advancement of legislation governing deposit
insurance, including assigning the mandate and powers in bank liquidation and insolvency resolution to the KDIF;
To ensure capacity to fulll its critical functions, i.e. to reimburse depositors in a timely and orderly manner in the
event of a member bank failure;
To further develop the provisions for replenishment of the special reserve for payouts, and strengthening nancial
position of the KDIF;
To envisage implementation of integrated protection scheme which extends the Government guarantee to
consumers in certain insurance types;
To extend the deposit insurance coverage to certain types of legal entities (socially meaningful small businesses);
To strengthen the risk assessment practices and controls over the KDIFs operations;
To take intensied effort in maintaining public awareness of deposit insurance and improving general understanding
by people of the deposit insurance system provisions.

The core functions


Reimbursement of depositors in the event of a member bank failure;
Accumulation of special reserve for payouts on ax-ante basis;
Investment management;
Establishing requirements applied to the DIS member banks in part of administration of insured deposit automated
reporting databases, and to conduct on-site compliance verication against the requirements set forth in the Contract
of Adhesion;
Participation in temporary administration during a member bank conservatorship;
Participation in temporary administration during the period of withdrawal of a member banks general banking
license;
Participation in liquidation commission and creditor committee of a member bank in forced liquidation;
Keeping the register of the deposit insurance system member banks;
Assigning the agent bank for processing payouts on the basis of competitive bidding.

The Core Principles of Deposit Insurance System

of

Membership of all banks which are licensed for accepting deposits and opening and maintenance of bank accounts
individuals being compulsory;
Transparency in operations;
Mitigation of operations specic risks;
Ex-ante accumulation of the special reserve for reimbursing depositors.

Coverage
Maximum coverage limit is 5 million tenge
Deposits of individuals placed with second-tier banks of the Republic of Kazakhstan are insured, excluding for
non-interest bearing demand deposits and investment deposits placed with Islamic banks

Relations with the International professional community


Since 2003, the KDIF has been a member organization of the International Association of Deposit Insurers (IADI).
At the moment, the KDIF participates in 2 regional committees (the Eurasian and Asia-Pacic Regional Committees),
and in a number of standing committees, namely Data and Survey Committee, Research and Guidance Committee, RGC
Subcommittee on the Recoveries from Assets of Failed Banks, Subcommittee on Bail-In Implications for Deposit Insurance
and Funding.

THE KDIFS 15 YEARS AT A GLANCE


1999

Upon an order by President Nursultan Nazarbayev that a system-wide deposit insurance system should be
established, Kazakhstan Individuals Deposits Guarantee (Insurance) Fund was incorporated.
16 largest banks attained membership in deposit insurance system. Coverage was limited to the amount
of 400 thousand tenge.

2002

Following the courts ruling on forced liquidation of OJCS Komirbank the KDIF reimbursed 20 banks
depositors at total amount of 1.7 million tenge.

2003

Novelty in legislation provide for compulsory membership in deposit insurance system for the banks
licensed for accepting deposits and opening and maintenance of bank accounts of individuals.
Following amendments to legislation, deposit insurance coverage extended to all bank deposits of
individuals, excluding for term and conditional deposits exceeding 50 000 US dollars, or the applicable
currency equivalent.
The KDIF became a member organization of International Association of Deposit Insurers (IADI).

2005

Following courts ruling on forced liquidation of JSC Nauryz Bank Kazakhstan, the KDIF reimbursed 3.6
thousand depositors at total amount of 680 million tenge.

2006

7 July, 2006 the President signed Law of the Republic of Kazakhstan On compulsory insurance of deposits
placed with second-tier banks of the Republic of Kazakhstan.
The maximum coverage limit was raised up to 700 thousand tenge.

2007

The KDIF implemented differential premium system.


The court ruled that JSC Valut-Tranzit Bank should be forcibly liquidated. As of the end of 2014, the
liquidation is still in progress and so far the banks depositors keep ling orders for reimbursement.
To-date, the KDIF has reimbursed 63 thousand banks depositors at total amount of 13.9 billion tenge.
The liquidation commission of JSC Valut-Tranzit Bank has reimbursed 61.5% of the total KDIFs claim.

2009

The KDIF successfully held 7 Annual Meeting and International Conference of the IADI Asia-Pacic
Regional Committee in Almaty. The event gathered over 70 representatives of the deposit insurance
organizations from 20 countries.
The KDIF commenced the work related to the member banks automated insured deposits reporting
databases compliance verication against the requirements set forth in the Contract of Adhesion.

Since deposit insurance system was established in the Republic of Kazakhstan, 3 member banks have undergone
forced liquidation, namely OJSC Komirbank (2001), JSC Nauryz Bank Kazakhstan (2005), and JSC Valut-Tranzit
Bank.
The KDIF reimbursed depositors of JSC Komirbank at total amount of 1.7 million tenge. Liquidation proceedings and
reimbursement of depositors of JSC Nauryz Bank Kazakhstan and JSC Valut-Tranzit Bank is currently in progress.

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2011

The KDIF successfully held 4 Annual Meeting of the IADI Eurasian Regional Committee in Almaty.
The KDIF accomplished completion and putting in test operation of ad-hoc SalT Inspect Information
System dedicated to streamline the processes related to compliance verication of the member banks
automated insured deposits reporting databases against the requirements set forth in the Contract of
Adhesion.

2012

To ensure maintaining the peoples condence in the banking system, the National Bank provided for a
10% annual increase in the KDIFs authorized capital, what was documented in the Strategic Plan of the
National Bank.

2013

SalT Payout Information System dedicated to streamline the operations in the insured event was put
into test operation.
The KDIF was honored by IADI with award in nomination Deposit Insurance System Improvements

2014

Government of the Republic of Kazakhstan approved the 2030 Financial Sector Development Concept.
The 2030 Concept envisions developing of legislation in part of bank insolvency resolution and liquidation
in a manner that benets all concerned parties in the nancial market and the banks depositors as well,
and also assigning additional mandate and powers to the KDIF and increasing the maximum coverage
limit in compliance with Global best practice.
The Government and the National Bank of the Republic of Kazakhstan made joint statement regarding
increasing the maximum coverage limit up to 10 million tenge within a comprehensive set of provisions
aimed at reducing dollarization of domestic economy. The other related decision was to reduce the
maximum recommended interest rate offered by the member banks on newly accepted deposits in
foreign currency.

JSC "Kazakhstan Deposit Insurance Fund" senior management and staff

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THE MAJOR DEVELOPMENTS, AND


FACILITATING THE DEPOSIT INSURANCE SYSTEM
Major events in the Kazakhstani banking sector
In February, 2014 national currency adjustment for 19% was conducted.
Fraudulent mass SMS dispatch happened, namely fraudulent messages regarding probable failure of three largest
domestic banks being distributed among the WhatsApp subscribers. Following the 1 quarter results, net deposit
withdrawal among the three banks amounted to 160 billion tenge, or 19% of total value of deposits of individuals
placed with these banks. No substantial outow over the banking system was recorded.

Development of the compulsory deposit insurance system and the domestic


banking sector in a broader sense
The KDIF within its mandate was taking part in elaboration of the 2030 Financial Sector Development Concept. The
2030 Concept addresses the issues related to segregation of mandate and powers related to control and supervision
and bank insolvency resolution as going concern, as well as further increase in the maximum coverage limit, facilitation
of procedures and introduction of novelty in institutional mandate related to bank insolvency resolution and liquidation.
In December, 2014 the National Bank and Government of the Republic of Kazakhstan made joint statement that
as a provision to reduce dollarization of domestic economy, the maximum coverage limit would be extended from 5
million tenge up to 10 million tenge for deposits in national currency.
In order to put into practice the concept proposals on bank insolvency resolution and liquidation, which were
produced by the Deloitte North American ofce within the USAID complex macroeconomic task in the Republic of
Kazakhstan, in July 2014 the National Bank of Kazakhstan and the KDIF arranged a series of consultations with
Federal Deposit Insurance System (FDIC).

Strategic planning and fulllment of strategic initiatives


In the forthcoming period, the KDIF is planning to fulll a series of initiatives, including those outlined in the
KDIF Strategic Development Plan 2014 2016 as approved by the KDIF Board of Directors. Among the perspective
development priorities are: 1) to fulll the 2030 Financial Sector Development Concept within the mandate and powers
of the KDIF, 2) to provide for operational capacity to fulll the KDIFs mission-critical function to reimburse depositors
in timely and orderly manner, 3) to facilitate the provisions for replenishment of special reserve for payouts and
strengthen the nancial position, 4) to envisage implementation of integrated protection scheme, 5) to strengthen the
risk assessment practices and controls over the KDIFs operations,6) to intensify the effort in increasing public awareness
of deposit insurance system and understanding of the core principles of deposit insurance in general, 7) to facilitate
the rules, policies and internal procedures specic to the KDIFs key operations, 8) to cooperate with the International
professional community on the IADI platform, (9) to maintain high professional standards, skills and expertise of the
KDIFs employees.

Risk management
The Board of Directors established ad-hoc Risk Management Committee.

Organizational structure was improved in terms of risk management and internal audit function.

Regular managerial reporting practice was set forth.


The Board of Directors elaborated and approved the Risk Management Procedures which establish the risk
management system (i.e. the system to handle the risks related to operations, nance, reputation, and compliance) as
a comprehensive approach to handle the risks being inherent to the KDIFs operations.
Controls over software security was substantially revised.

The KDIF is staffed with specialists holding the academic degrees as candidate of science or master degree in law,
economics and nance, applied mathematics and IT.
The employees adhere to the standards of professional conduct and ethics as generally applied in public service.

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Development of the differential premium system


In September, 2014 the KDIF continued revising the guidelines for determination of differential premium rates.
The KDIF established a joint working group which gathered representatives of the KDIF Advisory Council member
banks, as well as the representatives of the KDIF and the National Bank of Kazakhstan, including the experts from
the Banking Sector Supervision Department, Financial Stability and Risk Management Department, and Research and
Strategic Analysis Department. The objective of this working group is to comprehensively revise the methodology for
determination of differential premium rates.
Under this assignment, in 2014 the KDIF commenced processing of datasets and testing the statistical data. All
quantitative indicators of the BATA DPS were assessed against their economic signicance.

Ensuring capacity to reimburse depositors


The KDIF updated the SalT Inspect Information System and accomplished compliance verication checks of the
insured deposits reporting database to the KDIFs requirements with 1 member bank. The KDIF is planning to put
SalT Inspect Information System into commercial operation during the 1 semester of 2015.
In the end of 2014, the KDIF accomplished operational testing of SalT Inspect Information System in coordination
with the ad-hoc commission dedicated to putting the property and equipment and intangible assets into operation.
The KDIF accomplished compliance verication checks of the banks insured deposits reporting databases to the
requirements set forth in the Contract of Adhesion with 6 banks, 1 being follow-up repeated examination.

Enhancing International relations


During series of bilateral meetings with the representatives of Deposit Insurance Agency of Russian Federation,
the KDIFs senior management and expert staff obtained consultations regarding bank liquidation, particularly
the liquidation procedures administration, legal and judicial claim administration in banks in liquidation, as well as
development of ad-hoc software.
The KDIF signed memoranda on mutual understanding and cooperation with the Deposit Insurance Agency of
Russian Federation, Azerbaijan Deposit Insurance Fund and Savings Deposit Insurance Fund of Turkey.
In the course of sharing best practices and expertise in deposit insurance, the representatives of the KDIF
were taking part in numerous International conferences and seminars covering industry specic issues, including
bank nancial position assessment (supported by Asian Development Bank program for the nancial regulators
staff, in Manila city, Philippines), bail-in implications for bank insolvency resolution (25 26 June, Warsaw, Poland),
investment management applied to reserve assets (12 14 November, in Bogota, Columbia), target fund reserve
ratio and investment management strategies (9 11 December, Tirana, Albania), International capacity building
opportunities for the developing deposit insurance organizations (2 4 December, Seoul, South Korea).
The KDIFs representatives were taking part as speakers or moderators at Technical Seminar concerning
establishment and enhancement of differential premium system hosted by Azerbaijan Deposit Insurance Fund, and at
the Asia Pacic Regional Committee Conference on bail-in implications in bank insolvency resolution.
7 10 December, 2014, senior management and experts of Azerbaijan Deposit Insurance Fund visited Almaty to
participate in Technical Seminar Risk-Based Funding of Deposit Insurance System. In the course of the seminar, senior
management and expert staff of the KDIF and the ADIF discussed practical issues of development and implementation
of differential premium system. In parallel, the participants discussed the issues of development and administration
of ad-hoc information systems and software dedicated to streamlining the calculations.
The representatives of the KDIF were taking part in numerous online seminars hosted by Azerbaijan Deposit
Insurance Fund (the chairing organization of the IADI Eurasia Regional Committee) on various issues in bank
liquidation, development of differential premium system, and maintaining public awareness of deposit insurance.
The senior experts of the KDIF were taking part in Joint Working Group for revision of the IADI Core Principles
for Effective Deposit Insurance Systems. The Joint Working Group gathered the representatives of Basel Committee
on Banking Supervision, the European Commission and European Forum of Deposit Insurers. The revised document
replaced the previous version in the Financial Stability Forum Compendium of Standards.

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CONSUMER DEPOSIT MARKET OVERVIEW

As of 1 January, 2015 aggregate deposit balances increased by 492.3 billion tenge, or 12.5%, compared to the same
period of the previous year, and comprised 4.4 trillion tenge. National currency adjustment of February 2014 played its
role in mass spillover of retail deposits into foreign currency. Aggregate deposit balances in national currency decreased
by 34.7% over the year, while deposit balances in foreign currency increased by 1257.5 billion tenge, or 72.4%. Currently
deposits in national currency take market share of 33%, compared with 56% as at the end of 2013, and, respectively,
deposit balances in foreign currency take market share of 67%, compared with 44% over the previous year.

Deposit balances in national and foreign currency in dynamics

The major increase in customer deposits by 2 times or more was performed by JSC Bank RBK (gain of 67.7 billion
tenge, or 200.6%, being reported), JSC Qazaq Banki (+50.7 billion tenge, or 417.2%), JSC Forte Bank (+4.9 billion
tenge, or 155.1%), JSC Capital Bank Kazakhstan (+0.9 billion tenge, or 108.0%). Total gain in customer deposits
reported by these four banks comprised 25.3% of the total increase in deposit balances over all deposit insurance system
member banks.
Following the results reported over 2014, the top-ve banks by aggregate deposit balances are JSC Halyk Bank of
Kazakhstan (which reported gain in deposit balances by 105.5 billion tenge, or 13.2%), with market share of 20.4% in
customer deposit market), JSC Kazkommertzbank (a 52.03 billion tenge, or 8.1%, gain in customer deposit balances
being reported, 15.7% market share), JSC Kaspi Bank (a 7.2 billion tenge (1.8%) gain being reported, 9.4% market
share), JSC Bank CenterCredit (6.3 billion tenge (1.8%) loss being reported, 7.5% market share), JSC SB Sberbank
(75.8 billion tenge (34.1%) gain being reported, 6.7% market share).

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Distribution of customer deposits by categories


(as of 01 January, 2015)

10,4%

29,5%
Term customer deposits under 5 million tenge

0,4%

Term customer deposits 5 10 million tenge


Term customer deposits 10 15 million tenge
Term customer deposits over 15 million tenge
8,5%
Demand deposits
3,4%

Current and card accounts

47,8%

According to the reporting data of the DIS member banks, as at 1 January, 2015, term deposits take major share in
aggregate customer deposit balances. Term customer deposits comprised 3.9 trillion tenge, or 89.2% share in aggregate
deposit balances, with 512.6 billion tenge, or 15.0%, gain being reported over the year. Deposit balances on current and
card accounts take a lesser share of 10.4%, with 3.8 billion tenge decrease being reported over the year. Customer call
deposits take a share of 0.4% of the aggregate deposit balances, with 16.6 billion decrease being reported over the year.
Gain in aggregate customer deposit balances mainly derives from 841.4 billion tenge (77.0%) increase in large term
deposits in foreign currency over 15 million tenge in equivalent. In the meantime, net increase in large term deposits
over 15 million tenge in equivalent comprised 405.2 billion tenge, or 23.6%, resulting from decrease in these deposits in
national currency by 436.2 billion tenge (-70.4%). Customer term deposits under 5 million tenge increased by 84.0 billion
tenge, or 6.9%, while customer term deposits over 5 million tenge and under 10 million tenge increased by 23.4 billion
tenge (6.6%).

Changes in the deposit insurance system membership


The active legislation of the Republic of Kazakhstan states that all banks which are licensed for accepting deposits
and opening and maintenance of bank accounts of individuals shall attain membership in deposit insurance system on
compulsory basis, excluding for Islamic banks. As of 31 December, 2014 37 banks out of total 38 banks were members of
the deposit insurance system.
During the reporting year, two banks attained membership in deposit insurance system. JSC Eximbank Kazakhstan
and JSC Bank Astana-nance received a Deposit Insurance System Member Bank Certicate No. 43 and 44,dated 26
February and 2 April, 2014, respectively.
Furthermore, after state re-registration following changes in ownership the names of certain banks changed. In
February, 2014, JSC SB TAIB Kazakh Bank was re-named as JSC Capital Bank Kazakhstan, while in November, 2014
JSC SB HSBC Bank Kazakhstan was re-named as JSC Altyn Bank (subsidiary bank of JSC Halyk Bank of Kazakhstan).

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DEVELOPMENT STRATEGY 2014 2016

25 September, 2014 the Board of Directors approved the KDIF Strategic Development Plan 2014 2016. The Strategic
Development Plan is aimed at establishing the goals and objectives of top priority for further development of deposit
insurance system in the Republic of Kazakhstan for the three forthcoming years.
The strategic development objectives are established on the basis of comprehensive approach to strategic planning
which considers major risks attributable to the KDIFs operations as well as the effective risk mitigation measures and
the outlook of further enhancement of the core operations of the KDIF to ensure transition of the Kazakhstani deposit
insurance system to the next quality stage in its development.
Among the major strategic development objectives of the KDIF being provided for in the Strategic Development Plan
are the following:
to implement the provisions of the 2030 Financial Sector Development Concept of the Republic of Kazakhstan
through enhancement of legislation that governs deposit insurance, including assigning the liquidation and insolvency
resolution functions to the KDIF at the legislation level, providing for use of the deposit insurance systems funds
in those operations (provided that the KDIF is directly involved in bank insolvency resolution as going concern, and
cost of insolvency resolution does not exceed the liquidation cost, which is duly documented), further increasing the
maximum coverage limit, considering the issue of extension of deposit insurance coverage to current accounts of legal
entities;
to ensure operational capacity to fulll the KDIFs mission critical responsibilities to reimburse depositors in the
event of a member bank failure in timely and orderly manner;
to develop the provisions for sustainable accumulation of the special reserve for payouts, and ensure solvency;
to consider implementation of integrated protection scheme which extends the Government guarantee to
consumers in certain types of insurance;
to strengthen the risk assessment and analysis practices and controls over the KDIFs operations;
to take intensied effort in maintaining public awareness of deposit insurance and improving general understanding
by people of the deposit insurance principles.
Furthermore, in the forthcoming year the KDIF is planning to continue active cooperation with its foreign partner
organizations on the platform of International Association of Deposit Insurers (IADI) through participating in various
standing and ad-hoc committees, working groups, research studies and technical surveys, as well as seminars and
conferences held by IADI and its member organizations.
Moreover, the KDIF is planning to continue its efforts toward enhancement of rules and procedures, as well as internal
procedures related to the core operations of the KDIF, such as ensuring timely and orderly reimbursement of depositors,
participating in temporary administration, liquidation commission and creditor committee, assessment of banks nancial
position for further processing regular premiums, accumulation of special reserve for payouts via effective investment
management operations.
In the forthcoming period, raising the competence and professionalization of staff is also an important issue for the
KDIFs capacity building being critical for the KDIF in fullling its responsibilities.

Enhancement of risk management system


In view of the need in efcient risk management system, in 2014 the KDIF made revision of, and approved a revised
version of the Risk Management Administration Rules.
The critical objective for the risk management system is to provide for ensuring effective fulllment by the KDIF of
its operations related to reimbursing depositors in the event of a member bank failure, accumulation of special reserve for
payouts, commitments to sustaining the nancial system stability according to the effective legislation via mitigation of
negative developments related to the insured event.
The risk management system is aimed at identifying, assigning the relevance level and managing (mitigating) the
major risks attributable to operations, nance, reputation and compliance.

22

The KDIFs risk management system implies a comprehensive approach to continuous and iterative process of
receiving to-date and unbiased data regarding the potential and occurred risks, as well as the processes of assigning
the level and the extent of effect on KDIFs current operations, regular managerial reporting on risks, development and
implementation of the risk mitigation measures, coordination of risk management operations of the KDIFs units, and
streamlining and improving the risk management processes.
One of the core functions performed by the KDIF according to the effective legislation is to ensure the adequate level
of special reserve for payouts dedicated to reimbursing depositors in the event of a member bank failure, thus assessment
of relevance of risks, particularly the most critical nancial risk, shall be made on the basis of Internationally recognized
principles and implementation of global best practices.
Risk management system implies ongoing monitoring of risks attributable to compliance and reputation on the basis
of external legal and media environment, as well as having in place the relevant action plans, including those ensuring
prompt response.
In 2014, following the resolution of the National Bank, a position of risk manager was provided for in the KDIF stafng.
By the same resolution, Internal Audit Ofce was established. These restructuring and additional stafng is primarily aimed
at ensuring continuity of the KDIFs operations, risk management and risk prevention.
With a view to ensure effective implementation of the risk management provisions, in the end of 2014 the KDIF
Board of Directors established the Risk Management Committee within its structure. This measure will ensure the Board of
Directors being continuously aware of the risk management system developments and the KDIF senior management being
able to take prompt action to address the risk management related issues.
Apart of that, the Risk Management Administration Rules provide for direct participation of the Board of Directors
in decision making regarding the risk management via prompt information delivery and managerial reporting on the
risks inherent to the KDIF operations for the Risk Management Committee, which is supposed to become an effective
communication platform in the risk management areas.

Information security
The ah-hoc KDIF proprietary software, namely the information systems SalT Inspect, SalT Payout, BATA are
used with a view to ensure streamlined and optimized operations. Furthermore, within the forthcoming periods the KDIF
is planning to launch additional information systems to streamline internal operations processes.
In this sense, in order to ensure information security, as well as to allow classication and mitigation of risks
attributable to software development and implementation, the National Bank took the decision to establish the IT Ofce
within the KDIF structure and to develop the respective regulations and guidelines in information security. Following this
resolution, the KDIF introduced, and obtained approval of Information Security Guidelines and Rules for Information
Systems Development, Updating, Completion, Implementation and Administration.
Particularly, the Information Security Guidelines outline the objectives related to ensuring secure information systems
functioning, as well as the core objectives in implementation of the security systems, including organizational and technical
security measures. The Rules also outline general safekeeping and record-keeping requirements applied to software, as
well as the reserve and archive administration procedures, reserving method selection, reserve copying and archiving
administration processes, data recovery, assignment of user rights, anti-virus software requirements. The Rules also
outline the working order for Internet and e-mail users.
In its turn, the Rules for Information Systems Development, Updating, Completion, Implementation and Administration
outline the key areas of work to ensure organizational and technological processes for development of automated
information systems. The Rules provide for the technology and order of record-keeping applied in information systems
development, establish the order for delivery of requests for development, updating, completion and implementation of
information systems (i.e. the life-cycle of information systems), as well as the administration and support operations for
information systems.

23

Development of legislation
Fulllment of goals, objectives and functions of the compulsory deposit insurance system is governed by Constitution
of the Republic of Kazakhstan, the Civil Code, the legal and regulatory provisions, resolutions of the KDIFs Sole Shareholder
or Board of Directors. In this sense, the KDIF remains actively involved in development of legislation governing deposit
insurance.
In August 2014, Government of the Republic of Kazakhstan approved 2030 Financial Sector Development Concept.
The Concept is aimed at building the nancial sector being upmost effective in its nancial intermediation function for
society, State, and nancial organizations. Herewith, in identication areas for improvement, developments that are
currently taking place in the Global context have to be addressed as well. The KDIF, within the limits of its jurisdiction,
took part in elaboration of the Financial Sector Development Concept 2030.
As part of the measures aimed at addressing bank insolvency resolution issues, provisions for bank insolvency
resolution as going concern via conservation and purchase-and-assumption transaction (including transfer of insured
deposits) will be elaborated. Those provisions are supposed to be efcient and sensitive in addressing the needs of the
market participants, and comprehensible enough for depositors. In this framework, as well as a measure of the deposit
insurance system development, the following arrangements will be put into practice:
1) assignment of the bank insolvency functions (after the withdrawal of banks license) to the KDIF,
2) ensuring use of the deposit insurance system funds provided that the KDIF is directly involved in the bank
insolvency resolution processes as going concern, and documentary verication that the resolution costs not exceeding the
liquidation costs being made,
3) considering further increase of the maximum coverage limit according to the Core Principles for Effective Deposit
Insurance Systems (the maximum coverage limit is established in such a way that 90% or more accounts is fully covered,
and under 50% of total deposit balances is covered),
4) considering extension of coverage to current accounts of legal entities.
In line, legislation governing banking businesses will be enhanced in part of establishing grounds and criteria for
implementation of measures aimed at bank insolvency resolution as going or gone concern (purchase and assumption
transaction, establishment of bridge bank, forced obligations restructuring and bail in, etc.), presumably within the period
of 2016 2018.
Enhancement of bank liquidation procedures implies establishment of a revised regimes of institutional mandate and
powers, along with optimization of procedures of writing unrecoverable liabilities off by the receiver.
Novelty in the documents governing deposit insurance system
9 Contract of Adhesion
9 Rules for determining and establishing the order of payment of compulsory regular, additional and
extraordinary premiums
9 Rules for compliance verication of the automated databases for recording insured deposits of the DIS
member banks with the standard requirements by the KDIF as established with the Contract of Adhesion
9 Methodology for establishing the maximum recommended interest rates on the newly accepted bank
deposits of individuals
Newly introduced documents
9 Risk Management Administration Rules
9 Information Security Guidelines
9 Rules for Information Systems Development, Updating, Completion, Implementation and Administration
9 Methodology for determination of the target reserve ratio and amount

24

In 2014, in order to fulll its mission to ensure protection of rights and lawful interests of depositors and increasing
public trust in domestic banking system and, in a broader sense, to contribute to stability of banking system, the KDIF was
taking active part in drafting amendments to the Law of the Republic of Kazakhstan On compulsory insurance of deposits
placed with second-tier banks in the Republic of Kazakhstan in part of increasing the maximum coverage limit from 5
million up to 10 million tenge.
Furthermore, in the framework of general course for deposit insurance system development, the KDIF was actively
involved in assignments under direct supervision of the National Bank, particularly the following:
1) Financial Sector Assessment Program by the International Monetary Fund,
2) Elaboration of Rules for procurement of good and services by the National Bank of the Republic of Kazakhstan
and its subsidiary legal entities,
3) Discussion of problem issues related to JSC Valut-Tranzit Bank in the process of liquidation.

25

26

27

CORPORATE GOVERNANCE

The National Bank is the founder, the sole shareholder, and higher governing body of the KDIF.
According to the KDIFs Corporate Charter, Deputy Governor of the National Bank Mr. Nurlan Kussainov is empowered
to take all decisions falling within the purview of the Sole Shareholders competence.
In 2014, the KDIFs Board of Directors consisted of 8 members, three being Independent Directors and one being
the KDIFs Chairman. Deputy Governor of the National Bank of the Republic of Kazakhstan Mr. Kuat Kozhakhmetov is the
Chairman of the Board of Directors.
As of the end of 2014, three Committees of the Board of Directors were established:
1) Strategic Planning And Internal Audit Committee,
2) Risk Management Committee,
3) Stafng, Remuneration And Social Affairs Committee.
The Risk Management Committee was established in 2014.
During 2014, 6 meetings of the Board of Directors were held, 5 being in-person meetings and 1 being absent vote.

The Board of Directors performance in 2014


9 Strategic Development Plan 2014 2016 was approved.
9 The KDIF was assigned to elaborate suggestions regarding making amendments and addenda to the Law of the
Republic of Kazakhstan On compulsory insurance of deposits placed with second-tier banks in the Republic of Kazakhstan
in part of increasing the maximum coverage limit for deposits in national currency up to 5 million tenge (coverage
provisions for deposits in foreign currency remaining unchanged, i.e. 5 million tenge),
9 Amendments and addenda to the Rules for determining the value and order of payment for the compulsory
regular, additional and extraordinary premiums were approved,
9 The Risk Management Committee was established under the KDIF Board of Directors,
9 Internal Audit Ofce was established within the organizational structure of the KDIF, a risk manager function was
provided for,
9 Amendments and addenda to the Contract of Adhesion were approved,
9 Investment Management Policy and Investment Management Strategy were approved,
9 Risk Management Guidelines were approved,
9 The Methodology for determination of the target reserve ratio and amount was approved,
9 Information Security Guidelines and Rules for Information Systems Development, Updating, Completion,
Implementation and Administration were approved,
9 Amendments to the methodology for establishing the maximum recommended interest rates on the newly
accepted bank deposits of individuals were appoved,
9 The maximum recommended interest rates on newly accepted bank deposits of individuals were approved,
9 The Board approved amendments and addenda to the procedures for compliance verication of the automated
databases for recording insured deposits of the DIS member banks against the standard requirements as established with
the Contract of Adhesion,
9 Amendments and addenda to the Employees Remuneration Guidelines were approved,
9 An internal procedure Staff Travel Guidelines was approved.

28

NURLAN KUSSAINOV - the representative of the Sole Shareholder


Mr. Nurlan Kussainov currently holds the position of the Deputy Governor in the
National Bank of the Republic of Kazakhstan.
Since 2010 to 2011, Mr. Kussainov was holding the position of Senior Executive Vice
Chairman of the Management Board, and since 2011 to 2013 was serving as Chairman of
the Management Board in Development Bank of Kazakhstan. Up to 2010, was serving as
Managing Partner at Al Falah Capital Partners (the 500 million US dollars private equity
fund in Kazakhstan). Since 2003 to 2004 in the capacity of coordinator of the working
group under Ministry of Industry and Trade of the Republic of Kazakhstan was taking part in
coordination of the negotiation processes on the Republic of Kazakhstans WTO accession.
Graduate of Kazakh State Academy of Management majoring in International economic
relations (1997). Holds Master of Science degree in management with Stanford Graduate
School of Business (under Sloan Master Program). Graduate of the Economic Development
Policies Program by Japan International Cooperation Agency.

The KDIF Board of Directors (as of the end of 2014)


KUAT KOZHAKHMETOV Chairman of the Board of Directors
Mr. Kuat Kozhakhmetov currently holds the position of Deputy Governor in the National
Bank of the Republic of Kazakhstan.
Earlier, since 2008 Mr. Kuat Kozhakhmetov was serving as Deputy Chairperson of the
Agency of the Republic of Kazakhstan on regulation and supervision of nancial market
and nancial organizations, and since 2011 was holding the position of Chairman of the
Committee for Control and Supervision of the Financial Market and Financial Organizations
of the National Bank of the Republic of Kazakhstan.
Since 2001 to 2006 was serving as Deputy Chairman of the Management Board, and
later on as Chairman of the Management Board in JSC Tsesnabank.
Graduate of Kazakh State Academy of Management after Turar Ryskulov (diploma with
honors, 1994). Awardee of the Jubilee Medal 20 Years of Independence of the Republic of
Kazakhstan (2011), Breastplate Honored Employee of the National Bank of Kazakhstan
(2011), Order Kurmet (2010).
OLEG SMOLYAKOV
Mr. Oleg Smolyakov currently holds a position of Deputy Governor in the National Bank
of the Republic of Kazakhstan.
Mr. Smolyakov has extensive experience working for the National Bank for over 16
years, and since 2006 Mr. Smolyakov has been serving as the nancial stability department
head. Earlier, Mr. Smolyakov was working at the Balance of Payments and Currency
Regulation Department, particularly since 2002 was serving as a deputy director of the
Balance of Payments Department.
Graduate of Kazakh State Academy of Management majoring in economics (1996).
Holds degree of Master of Science in Government Policy with Graduate Institute of Political
Science (Japan), Master of Science in nance and economics with University of Warwick
(UK).

BAKYT KOGULOV Chairman, Kazakhstan Deposit Insurance Fund


Mr. Bakyt Kogulov was appointed Deputy Chairperson of the KDIF on 2 April, 2014, and
later on, 30 April, 2014. Mr. Kogulov was appointed Chairman of the KDIF.
Mr. Kogulov has earned extensive experience working for various departments of the
National Bank in the eld of banking and insurance regulation and supervision. Over 15
years Mr. Kogulov has been serving at senior managerial positions.
Graduate of Kazakh State Academy of Management majoring in economics (1997).

29

MUKHTAR BUBEYEV
Mr. Mukhtar Bubeyev currently holds the position of Research and Strategic Analysis
Department Director in the National Bank of the Republic of Kazakhstan.
Earlier, since 2011 Mr. Bubeyev was holding the position of Deputy Chairperson of
the Committee of the National Bank for control and supervision of nancial market and
nancial organizations. Later on, in 2014, Mr. Bubeyev was appointed Acting Chairman of
the Committee.
Graduate of London School of Economics and Political Science.

BEISENBEK ZIYABEKOV Independent Director


Mr. Beisenbek Ziyabekov has extensive experience working over 30 years in agriculture
credit, starting with the U.S.S.R. State Bank, and later on holding senior managerial positions
at Kazagroprombank. Since January, 2011 Mr. Ziyabekov has been holding a position of
Vice-President of the Inter-State Association of Agricultural Industrial Banks of the CIS
(headquartered in Moscow). During 1993 1994 was serving as Deputy Governor of the
National Bank of the Republic of Kazakhstan.
Mr. Ziyabekov has over 10 years of academic experience, during 2007 2008 being the
Rector of the Academy of Banking.

SLAVA SIZOVA Independent Director


Ms. Slava Sizova has extensive experience of over 30 years both in industry and in
public service, 17 years serving as Legal Department Deputy Director in the National Bank
of the Republic of Kazakhstan.

SERIK AKHANOV Independent Director


Doctor of Economics, professor.
Mr. Serik Akhanov has been serving as Chairman of the Financial Institutions Association
of Kazakhstan Council since 2004. Member of the Board of Directors of major Kazakhstani
bank JSC Kazkommertzbank (since 2011), Council of Entrepreneurs under the President
of the Republic of Kazakhstan.
Mr. Akhanov has very broad experience in public service and nancial sector. Mr. Akhanov
was serving on various positions at Council of Ministers of Kazakh SSR (1990 to 1991), the
Presidential Administration (1991 1993), in capacity of Deputy Minister of Economy (1993
1994 and 1999 2001), Senior Executive Vice Chairman of the Management Board at JSC
Eximbank Kazakhstan (1994 1997 and 2001), Deputy Governor of the National Bank of
the Republic of Kazakhstan (1997 1999), Vice-Minister of Finance (1999).
In 2002 2003 was serving as a member of the Board of Directors of JSC
Kazkommertzbank, in 2001 2002 and 2003 2004 serving as councilor to the Chairperson
of the Management Board of JSC Kazkommertzbank.

30

The KDIF Advisory Council


The Advisory Council is a collegial advisory authority incorporated in the KDIF governance structure which is established
with a view to representing interests of the deposit insurance system member banks. The Advisory Council consists of
representatives of the DIS member banks.
The core objectives of the Advisory Council are as follows:
1) consideration and delivery of suggestions concerning the key development areas for deposit insurance system in
the Republic of Kazakhstan from the DIS member banks position,
2) interim approval of the drafted amendments and addenda to the Contract of Adhesion, the Rules for determining
and establishing the order of payment of compulsory calendar, additional and extraordinary premiums, and other tentative
documents being submitted to the KDIF Board of Directors for approval,
3) communication of suggestions concerning settling uncertainties, imprecisions and conict arising in fulllment of
their respective obligations by the member banks within the provisions of the Contract of Adhesion,
4) delivery of suggested provisions to prevent possible cases of failure of the member banks to fulll their respective
obligations under the Contract of Adhesion, including payment of premiums and nes.
The Advisory Council members are elected annually at General Meeting of the DIS member banks.
The Advisory Council Chairperson shall be elected annually from among its members. In 2014, a representative of JSC
Halyk Bank of Kazakhstan was elected Chairperson of the Advisory Council.

The Advisory Council performance in 2014


In 2014, 9 meetings of the Advisory Council were held. The agenda items for the meetings were the following:
1) amendments and addenda to the Rules for determining and establishing the order of payment of compulsory
regular, additional and extraordinary premiums,
2) practicability of revising the maximum recommended interest rate on the newly accepted bank deposits of
individuals,
3) the order of calculation of nominal interest rate for insured deposits,
4) member banks suggestions on introducing amendments and (or) addenda to the guidelines for calculation of the
differential premium rates for the compulsory regular premiums,
5) practicability of applying greater accountability of the DIS member banks if higher interest rates on newly accepted
deposits than those recommended by the KDIF are offered,
6) perspectives of joint effort of the KDIF and the DIS member banks in maintaining public awareness of deposit
insurance system via the banks marketing and PR campaigns,
7) enhancement of procedures related to compliance verication checks of the member banks automated insured
deposit recording databases, particularly via installment and use of the SalT Inspect Information System.
In consideration of the agenda issues, the KDIF Board of Directors shall consider the views of the Advisory Council.
In 2014, on the Advisory Council platform two joint working groups were launched, one being dedicated to taking
coordinated action in maintaining public awareness, and another one being dedicated to enhancement of differential
premium rates calculation guidelines.

31

Advisory Council in 2014

MERUERT KARDZHANOVA
JSC Halyk Bank of
Kazakhstan
Chairperson of the Advisory
Council in 2014, Customer and
Agency Services Marketing
Department Director

32

IRINA STEPANOVA
JSC Bank RBK
Managing Director

TATYANA BELOVA
JCS Alliance Bank
Retail Banking Department
Director

ALEXEY SYCHEV
JSC Kazkommertzbank
Retail Banking Department
Director

ANTON LEE
JSC ATF Bank
Managing Director Member of
the Management Board

ANDREY TIMCHENKO
JSC Subsidiary Bank
Sberbank
Deputy Chairman of the Board
Retail Business Development

LARISSA ZDANOVICH
JSC Bank CenterCredit
Planning and Finance
Department Director

AYGERYM ZHAPPAROVA
JSC BTA Bank
Managing Director Member of
the Management Board

BERTRAN GOSSAR
JSC Eurasian Bank
Managing Director Retail
Banking Strategy Department
Director

KAYRAT ALTYNBEKOV
JSC Housing Construction
Savings Bank of Kazakhstan
Deputy Chairman of the Board

Observers
BULAN KOPESHOV

Managing Director, JSC AsiaCredit Bank

PAVEL MIRONOV

Managing Director, JSC Kaspi Bank

DINA KALIYEVA

Retail Banking Department Director, JSC Temirbank

RUSTAM YAKUPBAYEV

First Deputy Chairman of the Board, JSC Tsesnabank

33

34

35

DIFFERENTIAL PREMIUM SYSTEM

The KDIF implemented the differential premium rate system in 2007.


The Differential Premium System as effective builds upon comprehensive approach to risk assessment.
Particularly, 70% of the total cumulative scores are attained via qualitative indicators, while other 30% of the scores
are qualitative indicators.
The advantage of using both quantitative and qualitative indicators is that those indicators combined provide
for the upmost efcient and comprehensive approach to structural assessment of risks inherent to the banking
businesses and process larger scope of available information.
Following the calculation results of these indicators, total cumulative score is calculated for any single member
bank. Depending on the total score, a bank should be assigned a classication group, each being assigned a
particular premium rate. Therefore, the higher the level of nancial soundness and the lesser the level of risk is, the
lower premium rate shall be assigned.
The KDIF revises the differential premium calculation guidelines on ongoing basis, providing for consideration of
the suggestions and professional judgment received from the member banks and the current situation in the domestic
banking sector and the bank reporting being approved by the nancial regulator. The latest comprehensive revision of
the differential premium rates calculation guidelines was conducted in 2013. Since September 2013 up to August 2014
adjustment and update of the BATA Information System were made following the approved amendments and addenda
to the Rules for determining and establishing the order of payment of compulsory regular, additional and extraordinary
premiums.
Globally, as of the end of 2014 the differential premium system was implemented in 22 IADI member organizations,
compared to 58 organizations applying at rate, and 13 organizations applying these two approaches combined.
In September, 2014, the KDIF continued its work towards enhancement of the differential premium rate calculations
guidelines, to fulll this task a joint working group was established. At the KDIF Advisory Council meeting preliminary
discussion of the member banks suggestions on amendments and addenda to the Guidelines was taking place, a tentative
working group membership was agreed. The objective of the joint working group is to complete comprehensive revision
of the differential premium rate calculation guidelines. The joint working group comprised representatives of the Advisory
Council member banks, as well as representatives of the National Bank from the Banking Supervision Department,
Department of Financial Stability and Risk Management. Some 45 various suggestions from the joint working group
members were delivered, including those related to threshold values of the indicators.
In October, 2013 joint working group meeting was conducted to consider in detail all suggestions on this issue, so
that the KDIF was able to deliver all required data and make calculation of the indicators being suggested and to further
complete statistical analysis and testing. As part of this job, the KDIF accumulated the body of data relevant to both
active and proposed indicators over 13 periods given on a monthly basis. In the meantime, the KDIF commenced work
on cross-testing of the accumulated datasets for its further statistical tests. Furthermore, all suggested quality indicators
were tested against their economic relevance for further use in calculation of total accumulative scores and the assigned
classication groups.

Differential premium rates scale


lassication group

Differential premium rate (% of the total insured


deposits balances)

0,04

0,08

0,11

0,19

0,38

0,5

36

The differential premium system BATA builds upon the key nancial indicators and implies 6 classication groups,
each being assigned a respective premium rate. Over the reporting year, 9 member banks strengthened their positions and
moved up to a group with lower premium rates, while 3 member banks settled the breach of the recommended interest
rates offered on new insured bank deposits, and thus left the classication group S, and 23 member banks retained their
positions. Furthermore, in 2014 two banks attained membership in deposit insurance system, which implies being assigned
classication group D for two consecutive years.
Following the results of the 4 quarter, 2014, the deposit insurance system member banks were distributed among the
classication group as follows: Group A taking a share of 5.4% (2 banks being assigned), 18.9% Group B (7 banks), 40.5%
Group C (15 banks), 27.0% Group D (10 banks), 5.4% Group E (2 banks), and 2.7% Group S (1 bank).

Distribution of meber banks among the DPS classication groups


20

18

17

16

15

14
11

Group (0,08%)
10

3
1

10

Group (0,11%)

5
1

Group (0,04%)

12

7
Group D (0,19%)

2 2

1 1

Group D (0,38%)
1
Group S (0,5%)

4 Qr. 2013

1 Qr. 2014

2 Qr. 2014

3 Qr. 2014

4 Qr. 2014

37

SPECIAL RESERVE FOR PAYOUTS

Reimbursement of depositors in the event of a member bank failure will be provided for by the means of the special
reserve for payouts, which is accumulated on ex-ante basis.
According to the legislation, the special reserve for payouts shall be accumulated within the limits of, and by the
means of:
1) compulsory regular premiums paid by member banks,
2) nes applied to the member banks for failure to comply with the Contract of Adhesion provisions, or improper
fulllment of their respective obligations,
3) funds received in claim settlement by a member bank in forced liquidation,
4) investment income arising from allocation of the special reserve assets,
5) other allowances upon resolution of the Sole Shareholder.

The Guidelines for determination of the target reserve ratio and amount
According to the Law of the Republic of Kazakhstan On compulsory insurance of deposits placed with second-tier
banks in the Republic of Kazakhstan, the target reserve ratio must be equal to, or exceed 5% of total insured deposit
balances among the member banks.
In 2014, the KDIF accomplished revision of, and obtained approval by the Board of Directors for the Guidelines for
determination of the target reserve ratio and amount. In accordance with the Global best practices, the target reserve ratio
for the KDIF in 2014 is determined at the rate of 6.9% of the total insured deposit balances in the deposit insurance system
member banks. The actual reserve ratio in 2014 accounted for 4.9% without consideration of 70% of the KDIF authorized
capital, and 7.2% with consideration of 70% of the KDIFs authorized capital.

Structure of the special reserve for payouts


As of 31 December, 2014, 215.4 billion tenge was reported in special reserve balance.
Regular premiums paid by the deposit insurance system member banks take the major share of 67.3% in the special
reserve structure. Compared to the same period of the previous year, the regular premiums balance increased by 30.4
billion tenge, up to 145 billion tenge as of the end of 2014.

Special reserve composition by source (2011 - 2014)


250

200

Regular premiums paid


by member banks

150

The KDIF's claims


settlement by liquidation
commissions

100
Net income
50
The KDIF's expenses by
the means of allocation 70%
of the authorized capital

0
01.01.2011

38

01.01.2012

01.01.2013

01.01.2014

01.01.2015

The KDIF reported increase in net income by 3.2 billion tenge over 2000 2013, the share of the net income in the
special reserve structure comprising 19.7%, compared to 22.8% as of the end of 2013. The amounts payable in settlement
the KDIFs claim to the liquidation commissions of OJSC Komirbank, JSC Nauryz Bank Kazakhstan and JSC Valut-Tranzit
Bank increased by 920 million tenge, and comprised 9.4 billion tenge.
By resolution of the Sole Shareholder, the special reserve for payouts was increased by 8.5 billion tenge by the means
of the KDIFs expenses under the provisions of subparagraph 1, paragraph 1, Article 22 of the Law of the Republic of
Kazakhstan On compulsory insurance of deposits placed with second-tier banks in the Republic of Kazakhstan. In 2014,
the National Bank of the Republic of Kazakhstan increased the KDIFs authorized capital balance by 10%, or by 177.2 billion
tenge.
The maximum amount which could be allocated to reimbursing depositors in the event of a member bank failure
comprises 320.9 billion tenge.

Alternative sources in accumulation of special reserve for payouts


The effective legislation provides for allowance in part of the KDIFs authorized capital as a reserve nancing source
in the event of insufciency in the special reserve funds. According to the National Bank Strategic Development Plan 2011
2015, the National Bank shall increase the KDIF authorized capital by 10% on an annual basis.
5 December, 2013, amendments to the Law of the Republic of Kazakhstan On compulsory insurance of deposits
placed with second-tier banks in the Republic of Kazakhstan were introduced. According to the amendments, the share
of the authorized capital which upon resolution of the Sole Shareholder is allowed in reimbursing depositors in the event
of a member bank failure in case of insufciency of the special reserve funds was increased from 50 up to 70%. This legal
novelty became effective 1 January, 2014.

39

INVESTMENT MANAGEMENT

Implementing conservative investment management strategy


The KDIFs investment management strategy may be assessed as highly conservative. The KDIF shall adhere to three
principles in investment management, namely safeguarding its assets, risk mitigation and mitigation of risks specic to
reporting losses, and increasing yields on investments.
The National Bank of the Republic of Kazakhstan serves as trustee, and delivery of services is governed by investment
management agreement.
The KDIFs Investment Management Policy is approved by resolution of the Board of Directors (minutes No. 5 dated 27
November, 2014) and is deemed to be the document which governs the terms and conditions in investment management
with the view to attain target return on investment, mitigation of risks related to reporting losses and ensuring assets of
high liquidity.
Since 1 January, 2014 the KDIF introduced accounting of special reserve assets and proprietary assets on a segregate
basis:
1) proprietary assets portfolio build up by the means of the KDIF authorized capital,
2) special reserve assets portfolio.
The proprietary assets portfolio is build up by nancial instruments listed in the domestic market and denominated
in national currency. The special reserve assets are allocated in nancial instruments denominated both in national and
foreign currency, within the following limitations:
1) nancial instruments denominated in foreign currency taking share 25% up to 35% of total special reserve assets,
2) nancial instruments denominated in national currency taking share of 65% to 75% of the special reserve assets.
As of the end of the reporting period, the present value of assets comprised 416.9 billion tenge (increase by 78.8
billion tenge, or 23.3%, over the year). In the net income composition structure, investment income reported on nancial
instruments in national currency take the share of 57.9%, net currency revaluation gain taking the share of 41.6%, and
investment income reported on nancial instruments denominated in US dollars taking the share of 0.32%. In the meantime,
the weighted average yield on nancial instruments denominated in national currency comprised 6.09% (duration of 5.21),
the same indicator for nancial instruments denominated in US dollars being 0.47% (1.2 duration).

Approved nancial instruments in national currency for allocation of special reserve assets and
the KDIF proprietary assets:
9 Sovereign bonds of the Republic of Kazakhstan;
9 Repurchase agreements traded on stock exchange and OTC (sovereign bonds of the Republic of Kazakhstan
being solely accepted as collateral);
9 Deposits placed with the National Bank of the Republic of Kazakhstan;
9 Financial instruments issued by National Holding Companies and National Companies (not exceeding 30%
of the proprietary assets portfolio or 10% of the proprietary assets portfolio, respectively).

Approved nancial instruments in foreign currency:


9 US Treasury bonds with maturity under 5 years (70% to 100% of the special reserve assets portfolio);
9 Sovereign bonds and bonds of International Finance Organizations;
9 Corporate bonds with minimum credit rating A/A2 (up to 30% of the special reserve portfolio, up to 10% of
the special reserve portfolio per one issuer organization);
9 Deposits (maturity under 1 year) with non-resident banks provided that the bank is assigned minimum
credit rating A+/A1.

40

The KDIF assets in the dynamics (2005-2014).


450
416,9

400
350

338,1

300

282,3

250

243,9
202,4

200
162,1

150
122,5
100
50
0

10,7

14,3

31
December
2005

31
December
2006

26,6

31
December
2007

31
December
2008

31
December
2009

31
December
2010

31
December
2011

31
December
2012

31
December
2013

31
December
2014

The KDIF assets

As of the end of reporting period, present value of the KDIF assets in investment management comprised 400.9 billion
tenge (96.2% of the total assets). Following the 2014 results, investment income comprised 31.3 billion tenge (increase by
64.7% over the year). Over 2014, present value of the KDIF assets increased by 73.7 billion tenge, or 22.5%.
Following the developments on the currency exchange market, banking sector, shifts in returns of certain nancial
instruments, as well as other factors, the KDIF shall revise its Investment Management Strategy.

Investment portfolio composition as of 31 December, 2014

Since 2008 on, the KDIF in coordination with the Government of the Republic of Kazakhstan and the regulatory
authorities has been engaged in the investment income tax exemption effort. The KDIF repeatedly initiated the discussion
with the authorized units of Ministry of Finance, Ministry of Economy and Budget Planning and the National Bank of the
Republic of Kazakhstan. Furthermore, the KDIF actively participated in the meetings of the special task force for making
amendments to the Tax Code of the Republic of Kazakhstan, and initiated discussion of this issue at the meetings with the
representatives of the Upper and Lower Chambers of Parliament of the Republic of Kazakhstan (Senate and Mazhilis). As a
result of this effort, the respective amendments to the Tax Code of the Republic of Kazakhstan were made. Simultaneously,
amendment to Law On compulsory insurance of deposits placed with second-tier banks in the Republic of Kazakhstan
was introduced setting up the provisions for segregated reporting of proprietary assets and assets of special reserve for
payouts.

41

DEPOSITOR REIMBURSEMENT PROCEDURES

In order to ensure efcient fulllment of obligations associated with reimbursing depositors in the events and in the
order as established in the Law of the Republic of Kazakhstan On compulsory insurance of deposits placed with secondtier banks in the Republic of Kazakhstan and in compliance with the effective legislation, the KDIF shall verify compliance
of the banks automated insured deposit recording databases with the requirements of the KDIF. These actions aim at
ensuring completeness and accuracy of data, as well as at improving the quality of the depositors records in banks.
Since 2009, the KDIF commenced the examinations to verify compliance of the automated insured deposit reporting
databases in the member banks on regular basis. In total, over the period commencing 2009 to 2014, the KDIF have
completed the examinations to verify compliance of the automated insured deposit reporting databases in 32 member
banks, including 6 member banks in 2014, 1 examination being conducted repeatedly to verify elimination of the non
compliant practices which had previously been detected.
The compliance verication examinations are conducted via the SalT Inspect Information System which is the
KDIFs proprietary software developed in 2011. This software allows fast-tracking of the electronic deposit databases
quality, detecting errors in depositor identication data and account details, and keeping statistics records on errors being
detected.
In the beginning of 2014, the SalT Inspect Information System was updated, and testing was processed on the
depositor database of a member bank a part of compliance verication checks. Update and completion was conducted on
a monthly basis as provided for in the agreement with the software development vendor. By the end of 2014, the KDIF
conducted operational testing of SalT Inspect Information System in coordination with ad-hoc commission dedicated to
putting the property and equipment and intangible assets into operation.
During 2014, the KDIF continued delivery of the SalT Inspect Information System to the member banks for
autonomous testing. Furthermore, following the decision of the KDIF Advisory Council, in order to fulll the opportunities
for the banks related to autonomous testing of their proprietary insured deposits reporting databases, the KDIF is planning
to install the SalT Inspect Information System in all member banks.
The SalT Payout Information System is used in operations of the KDIF after forced liquidation of a member bank has
commenced, and automates the processes related to recording and control of quality of data delivered by the liquidation
commission of the bank in forced liquidation, recording and control of quality of the payouts reports delivered by the agent
bank, completeness of the depositors les which are submitted to the KDIF by the agent bank, including the documents
verifying accuracy of the payouts, and report generation for analysis and display of statistics on the uploaded information.
Since 2014, the KDIF has been processing a series of tests to enable completion of the SalT Payout Information System
to ensure completion and improvement of this software.
The KDIF is planning to put the software into commercial operation in 2 semester of 2015.
Since July, 2014 the KDIF has been conducting operations specic to administration of possible additional payouts to
depositors of JSC Valut-Trazit Bank. Action Plan dated 14 November, 2014 was approved among the KDIF, the National
Bank and the liquidation commission.
In order to ensure operational capacity of the KDIF to process additional payouts to depositors of JSC Valut-Tranzit
Bank in timely and orderly manner, in the end of 2014 the respective stress-testing was processed to verify smooth
operation of the KDIF commencing from the date of adoption of the respective provisions in the legislation of the Republic
of Kazakhstan.
Following the results of the stress-testing, the KDIF was able to take action to streamline the payouts processing tools
and provisions, namely:
Action Plan for the KDIF in the event of additional payouts processing by agent bank,
Action Plan for the KDIF in the event of additional payouts processing via its own means.
In stress-testing, special attention was paid to the following key objectives:
Generating depositor register,
Selection of the agent bank for payouts,
Payouts processing.
Following the results of stress-testing, a step-by-step action plan was elaborated with regard to operations conducted
by each unit involved in payouts, and the employees in charge are appointed per each item. The KDIF also drafted public
communication in Kazakh and Russian languages.
In the meantime, during the reporting year, the KDIF was actively involved in negotiation processes with National Post
Service Operator JSC Kazpost to tentatively address the issues in the event if none of the member banks comply with
special requirements to the agent bank in accordance with the Agent Bank Selection Guidelines.

42

LIQUIDATION COMMISSIONS OPERATIONS

As of 31 December, 2014 the total reimbursement amount to the depositors of JSC Nauryz Bank Kazakhstan
comprised 680 million tenge, what accounts for 88% depositors claims against the KDIF.
By year-end 2014, the liquidation commission has settled the KDIFs claim at 88%. Over the last 3 years, in the
liquidation proceedings of JSC Nauryz Bank Kazakhstan no payment to settle the KDIFs claim was made by the liquidation
commission.
The total reimbursement paid out to the depositors of JSC Valut-Tranzit Bank comprised 13.87 billion tenge, or 98%
depositors claims against the KDIF.
The remaining unsettled reimbursement amounts are liabilities on dormant accounts which are 0.01 tenge to 5001000 tenge in value, and which have not been demanded.
By 1 January, 2015, the liquidation commission of JSC Valut-Tranzit Bank has settled the KDIFs claims at the amount
of 8 673 billion tenge, or 61.5%.

Reimbursing depositors of member banks in forced liquidation,


as at 31 Dec., 2012
Member bank in forced
liquidation

Amounts
payable KDIF
to depositors

(million tenge)

Reimbursement paid

Liabilities settled by the


liquidation commissions

(million tenge) (thous. of depositors) (million tenge)

(%)

JSC Nauryz Bank Kazakhstan


(Courts ruling dated 16
November, 2005)

772

680

3,6

679,4

88

JSC Valut-Tranzit Bank (Court


ruling dated 13 February, 2007)

14 103

13 876

63,2

8 673

61,5

In 2014, the KDIF was planning a target claim settlement ratio (arising from reimbursement of insured depositors)
from JSC Nauryz Bank Kazakhstan at the level of 90% of the total claim amount, JSC Valut-Tranzit Bank at the level
of 65% total claim amount. In 2014, the resulting mismatch with the outlook comprised 2% for JSC Nauryz Bank
Kazakhstan, and 3.5% for JSC Valut-Tranzit Bank.
The core issues impeding failure to replenish the special reserve via the means of the liquidation commission liabilities
settlement were certain issues related to accounts receivable recovery and poor performance in enforcement proceedings.
The issues related to accounts payable recovery in enforcement proceedings are:
missing documents in original or in copy, including credit and leasing les,
missing agreements between the bank and its counteragents regarding real estate transactions in original,
denial by the court to take legal action following a request to initiate civil proceedings based on the fact that the
defendant is declared a fraudulent entity,
absence of legal entity at its registered ofce,
exclusion of the State legal entities register of a limited liability partnership that holds registered rights to real
estate,
no access to the case le materials at the stage of preparation of court claims.
The other issues include:
Zero balances on current bank accounts of the accounts payable,
Insufcient or missing liquidation property for full settlement of the claim,
Low market value of collateral and other property owned by the accounts payable,
Lengthy fulllment of the court decisions by the court executors,
Loss of case le materials.
During 2014, the KDIFs claims to the JSC Valut-Tranzit Bank liquidation commission were settled at the amount of
920 million tenge. Resulting from zero cash balances at disposal of JSC Nauryz Bank Kazakhstan liquidation commission,
no KDIFs claims were settled.

43

MAINTAINING PUBLIC AWARENESS OF DEPOSIT


INSURANCE SYSTEM
In compliance with the Law of the Republic of Kazakhstan On compulsory insurance of deposits placed with secondtier banks in the Republic of Kazakhstan, to contribute to the nancial system stability and to safeguard the rights and
lawful interests of depositors in the event of a member bank failure is a mission critical responsibility of the KDIF. In
fulllment of this mission, continuous effort to ensure maintaining public awareness of deposit insurance system shall be
deemed of equivalent status with the other objectives.
Thus, the KDIF shall seek greater awareness of the general public of deposit insurance, as well as positive recognition
of the KDIF as an Government agency for all groups of population.
In 2014, the KDIF was utilizing various media resources, including TV, radio, press (Republic-wide and regional
publications), the KDIFs proprietary Internet resource and social media.
Communication releases in 2014
Press-publications. Articles and communication messages in Kazakh and Russian languages, in Republicwide and regional newspapers, of total volume of 27 000 square centimeter
TV. Videos broadcasted on TV-channels, a total of 489 casts, interview for Tansholpan programme on
TV-channel Kazakhstan
Radio. Information radio spot on air at radio stations of Republic-wide coverage, a total of 74 casts,
interview for Radio NS
Printed materials. Leaets and booklets What do you need to know about deposit insurance are
dispatched among the member banks branches
Consultancy. Over 3 000 calls received by hotline # 8 8000 80 10 20
The KDIF regularly produces special printed materials, namely the Depositors Brochure What Do You Need To
Know About Deposit Insurance, as well as stickers and leaets, which are dispatched to the member banks for further
distribution to depositors.
Bank depositors always have the opportunity to receive consultation by phone. During 2014, the KDIF received over
3 000 calls. Upon the results of a short survey being offered to the depositors who contact the hotline, the KDIF is able to
identify the most efcient communication channels in each region of the country, as well as to comprehend to the most
important questions which must be addressed in mass communication.
In 2014, the representatives of the KDIF hosted series of lectures dedicated to deposit insurance for students majoring
in nance and economics in KIMEP University, Kazakh State University after Al-Farabi, and Masters Degree Program of the
National Bank of the Republic of Kazakhstan. These comprised three presentations covering the general issues of, and
historical record of deposit insurance, development of differential premium system, the processes applied to reimburse
depositors, and expert opinion on Global best practices and International standards.
The KDIF also supports its proprietary Internet-resource www.kdif.kz which is considered to be a communication
platform for the most important matters in deposit insurance, including ever-updated list of the deposit insurance system
member banks, comprehensive scope of applicable legislation, and nancial reporting veried by independent assurance
organization. However, in 2015 the KDIF is planning to launch a new Internet resource with more relevant design and user
interface, optimized structure, a brand-new design and increased functionality.
In Autumn, 2014 in coordination with the popular project in the eld of increasing nancial literacy of people On
nance in simple words the KDIF conducted a contest among the Projects subscribers on Facebook with a view to identify
how well people understand general deposit insurance matters. Furthermore, on the Projects Facebook page and on its
proprietary Internet resource www.onansah.kz numerous articles on deposit insurance were published.
In the end of 2014, following a request of the Financial Services Consumers Rights Protection Department of the
National Bank, the KDIF dispatched the booklets What Do You Need To Know About Deposit Insurance and leaets that
will be available to general public in the Public Assistance Ofce. In 2015 the KDIF is planning to continue developing these
working relations.
In 2014 the KDIF started negotiation process with the deposit insurance system member banks to develop working
relations in the eld of increasing peoples awareness of deposit insurance system. Under this initiative, a joint working
group was established with a view to identify the efcient communication methods via incorporation of information about
deposit insurance in the member banks advertising and marketing campaigns launched to promote deposit banking
products, including those on TV, radio, in press, on Internet. The representatives of the member banks participating in
the joint working group, particularly the heads of PR and marketing ofces, are aware of critical importance of this joint
effort and, therefore, support this initiative. The KDIF and the member banks are going to launch joint initiatives in 2015.
Back in 2014, the KDIF re-assessed its communication concept and its core priorities. The KDIF will elaborate the
Communication Strategy 2015 2016. The revised concept is supposed to be focused on the key points, namely developing
the KDIFs brand book, reassessing efciency of the communication channels being extensively used, identifying the core
efciency assessment indicators, building a more clear strategy and strengthening the KDIFs presence in the social media,
as well as utilizing the opportunities of bilateral partner relations with the member banks with a view to increasing peoples
nancial literacy.

44

INTERNATIONAL COOPERATION

In 2014, the KDIF accomplished work related to strengthening bilateral relations with certain deposit insurance
organizations.
For instance, in June 2014 the KDIF signed memorandum on mutual understanding and cooperation with the
Deposit Insurance Agency of Russian Federation. In series of bilateral meetings with the DIA representatives, the senior
management and expert staff of the KDIF received consultations in the eld of administration of liquidation procedures,
obtained consultations regarding bank liquidation, including the liquidation procedures administration, legal and judicial
claim administration in banks in liquidation, as well as development of the ad-hoc dedicated software.
Apart of that, in 2014, the KDIF signed memoranda of understanding and cooperation with Azerbaijan Deposit
Insurance Fund and Deposit Insurance Fund of Turkey. On the basis of the provisions agreed with the Azerbaijan Deposit
Insurance Fund, the KDIF arranged a bilateral technical seminar and held a number of consultations which covered the
issues related to development of differential premium system and risk assessment.
The KDIFs representatives were taking part as speakers or moderators at Technical Seminar concerning establishment
and enhancement of differential premium system hosted by Azerbaijan Deposit Insurance Fund, and at the Asia Pacic
Regional Committee Conference on bail-in implications in bank insolvency resolution where they discussed the experience
gained in bail-in processes in JSC BTA Bank and JSC Temirbank. Furthermore, the representatives of the KDIF were
taking part in online seminars hosted by Azerbaijan Deposit Insurance Fund which covered the various issues of bank
liquidation, development of differential premium system, and maintaining public awareness of deposit insurance.
During the year, on the IADI platform, the KDIF was actively involved in working processes of the IADI Executive
Council, Eurasia and Asia-Pacic Regional Committees, and a broad range of standing committees and working groups,
including Data and Survey Committee, Research and Guidance Committee, Subcommittee on the Recoveries from Assets
of Failed Banks, Subcommittee on Bail-In Implications for Deposit Insurance and Funding.
During the year, the KDIF was taking part in various IADI research initiatives. Particularly, the KDIF submitted its
responses to the IADI Annual Survey 2013, which is a comprehensive reporting tool of a deposit insurance system, and a
survey on mandate and powers of a deposit insurance organization in bail-in processes. Apart of that, the KDIF initiated
two surveys and distributed those surveys to the IADI member organizations. The initiated surveys focused on mandate
and powers of creditor committee of a bank in forced liquidation and the policies and practices of investment management.
One of the major events for IADI during 2014 was approval of the revised Core Principles for Effective Deposit
Insurance Systems. The senior experts of the KDIF were taking part in this work. Huge collective work was accomplished
by the ad-hoc Joint Working Group for revision of the IADI Core Principles comprising senior management and expert staff
from deposit insurance organizations from around the Globe. In October, 2014, as an agenda item of the IADI General
Meeting, the Revised Core Principles were approved following interim approval by International Monetary Fund and Basel
Committee on Banking Supervision.
In the revised version, new principles Deposit insurers role in contingency planning and crisis management and
Sources and use of funds were introduced. One of the critical novelties in the revised version is a recommendation that
the payouts commencement period should be reduced to 7 working days.
During 2015 2016 the KDIF is planning to accomplish compliance assessment to the revised version of the IADI Core
Principles by its own means or in cooperation with the National Bank following adoption of the assessment methodology.
In 2014, the KDIF was coordinating technical assistance opportunities with the Asian Development Bank in order to
ensure capacity building in bank insolvency resolution, bank liquidation and transferring of mandate and powers related to
liquidation procedures from the National Bank to the KDIF.
The KDIF drafted terms of reference in order to give the technical assistance areas in details which was delivered
to the ADB and considered for further work. Furthermore, the KDIF approved Aide Memoire and information security
agreement draft supposed to be agreed among the parties.
In 2015 2016, the KDIF is planning to strengthen bilateral cooperation opportunities with a broad range of deposit
insurance organizations (via agreeing memoranda of understanding and cooperation, hosting bilateral meetings and
technical seminars etc.), and the ADB.

45

46

47

FINANCIAL REPORTING AND REPORT OF INDEPENDENT


ASSURANCE FIRM
I Approve ________________
General Director Nurgaziyev T..
(state license MF2 #0000069 from 5.10.2010)

Independent Auditors report


To Management of Kazakhstan deposit insurance fund JSC
We have audited the accompanying nancial statements of Kazakhstan deposit insurance fund Joint Stock
Company (further the Company) which comprise the statement of nancial position as of 31 December 2014, statement of
comprehensive income, statement of cash ows, statement of changes in equity for the year then ended, and a summary
of signicant accounting policies, and other explanatory information.

Managements responsibility for the nancial statements


Management of the Company is responsible for the preparation of these nancial statements in accordance with
International Financial Reporting Standards (IFRS), and for such internal control as management of the Company
determines is necessary to enable the preparation of nancial statements that are free from material misstatement,
whether due to fraud or error.

Auditors responsibility
Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the nancial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial
statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material
misstatement of the nancial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the Companys preparation and fair presentation of the nancial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Companys internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management of the Company, as well as evaluating
the overall presentation of the nancial statements.
We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for auditors
opinion.

Opinion
In our opinion the nancial statements represents authentically in all material aspects, nancial position of the
Company as at 31 December 2014, and results of its activity and cash ow for the year ended on specied date is in
accordance with International Reporting Financial Standards.
General Director,
Auditor:
Qualication license 0318
Dated 2 May 1997.
Mamyr - 4, h.14, Almaty,
Republic of Kazakhstan

48

T.E. Nurgaziyev

STATEMENT OF FINANCIAL POSITION

In KZT thousands

2014

2013

ASSETS
Cash and cash equivalents

5 875 525

6 244 345

408 051 433

329 325 104

2 779 554

2 334 226

150 121

115 006

1 707

1 753

Other assets

5 529

11 369

Deferred tax assets

4 870

4 038

Available-for-sale nancial assets


Other nancial assets
Prepayment on Corporate Income Tax
Inventories

Property, Plant and Equipment

10 132

10 571

Intangible assets

25 072

30 402

TOTAL ASSETS

416 903 943

338 076 814

177 156 000

161 051 000

19 142 454

3 316 469

LIABILITIES AND EQUITY


Equity
Charter capital
Retained earnings (uncovered loss)
Valuation reserve

1 258 172

(340 164)

Surplus

1 610 510

1 464 100

Special reimbursement reserve

215 394 855

172 420 488

TOTAL EQUITY

414 561 991

337 911 893

Short term liabilities


Liabilities on taxes and payments, except for CIT

32

975

6 802

Other short term liabilities

2 340 945

158 119

Total short term liabilities

2 341 952

164 921

416 903 943

338 076 814

Other nancial liabilities

TOTAL EQUITY AND LIABILITIES

49

STATEMENT OF COMPREHENSIVE INCOME

In KZT thousands

2014

2013

16 464 104

12 395 670

(105 126)

(38 570)

Net interest income

16 358 978

12 357 100

Net revenue from participating banks contributions and proceeds from


liquidation commission

31 304 307

25 996 961

Gains less losses from revaluation of currency

11 692 442

1 265 683

1 116

1 024

Interest income
Interest expense

Other income
Other expenses
Administrative expenses
(Prot) /loss before taxation
Expense for income tax
Prot for year
Mandatory distribution of net income from contributions of participating banks
and proceeds from liquidation commission in the special reimbursement
reserve
Prot after mandatory distribution

(51)

(405 606)

(308 419)

58 951 186

39 312 349

832

1 081

58 952 018

39 313 430

(31 304 307)

(25 996 961)

27 647 711

13 316 469

Other comprehensive income (loss):


Prot (loss) from revaluation of available-for-sale nancial assets

1 717 546

Total other comprehensive income (loss)

1 717 546

27 647 711

15 034 015

Comprehensive income (loss) for year less corporate income tax


which belongs to shareholder

50

STATEMENT OF CHANGES IN EQUITY

In KZT thousands

Charter
capital

Balance as at
31 December 2012
146 410 000
Prot (loss) for year
Other comprehensive income (loss)
for year
Comprehensive income (loss) for
year
Issue of shares
14 641 000
Reserve capital formation
Formation of special reimbursement
reserve
Mandatory
distribution
of
net
income
from
contributions
of
participating banks and proceeds from
liquidation commission in the special
reimbursement reserve
Balance as at
31 December 2013
161 051 000
Changes in accounting policy,
adjustments of past periods
Balance as at 31 December 2013
after adjustment
161 051 000
Prot (loss) for year
Other comprehensive income (loss)
for year
Comprehensive income (loss) for
year
Issue of shares
16 105 000
Reserve capital formation
Formation of special reimbursement
reserve
Mandatory
distribution
of
net
income
from
contributions
of
participating banks and proceeds from
liquidation commission in the special
reimbursement reserve
Balance as at
31 December 2014
177 156 000

Revaluation
reserve

Special
reimbursement
reserve

Reserve
capital

(2 057 710) 1 331 000


-

Retained
earnings

Total

126 878 024


-

9 678 603
13 316 469

282 239 917


13 316 469

1 717 546

1 717 546

1 717 546
-

133 100

13 316 469
(133 100)

15 034 015
14 641 000
-

19 545 503

(19 545 503)

25 996 961

25 996 961

(340 164) 1 464 100

172 420 488

3 316 469

337 911 893

(5 256)

(5 256)*

(340 164) 1 464 100


-

172 420 488


-

3 311 213
27 647 711

337 906 637


27 647 711

1 598 336

1 598 336

1 598 336
-

146 410

27 647 711
(146 410)

29 246 047
16 105 000
-

11 670 060

(11 670 060)

31 304 307

31 304 307

1 258 172 1 610 510

215 394 855

19 142 454

414 561 991

* Adjustments of past periods have been performed by the Company due to violation of Accounting Policy, and article
71 IFRS 38 Accounting of Accounting of intangible assets.

51

STATEMENT OF CASH FLOW

In KZT thousands
Cash ow from operating activities:
Cash inow, total
Proceeds from mandatory calendar payments
Proceeds from liquidation committee
Receipt of interest on deposits placed with banks
Interest received on available-for-sale nancial assets
Interest received on transaction of reverse repo
Other
Cash outows, total
Payments to suppliers goods and services
Payment of travel expenses
Payroll payment
Corporate income tax paid
Other taxes and other obligatory payments to the budget
Reimbursement on retail deposit of individuals
Other payments
Net cash ow used in operating activity
Cash ow from investment activities:
Cash inow, total
Including:
Proceeds from redemption of available-for-sale nancial assets
Proceeds from transaction of reverse repo
Cash outows, total
Including:
Acquisition of xed assets
Acquisition of intangible assets
Acquisition of available-for-sale nancial assets
Disposal on transaction of reverse repo
Other payments
Net cash ow total from investment activities
Cash ow from nancial activities
Cash inow, total
Including:
Issue of ordinary shares
Cash outows, total
Net cash ow total from nancial activities
Net change in cash
Effect of exchange rate changes on cash balances in foreign currency
Cash and cash equivalents at the beginning of reporting period
Cash and cash equivalents at the end of reporting period

52

2014

2013

48 244 517
32 077 269
920 000
37 895
15 035 282
135 893
38 178
411 605
103 058
8 976
178 812
28 428
63 893
925
27 513
47 832 912

38 973 931
26 225 847
748 000
7 325
11 978 020
3 563
11 176
428 464
104 789
6 377
126 376
117 096
48 023
808
24 995
38 545 467

185 065 261

116 551 901

96 073 210
88 992 051
249 372 862

106 920 896


9 631 005
166 898 263

3
10
173 178
76 180

842
561
419
040
(64 307 601)

4
26
144 424
22 443

584
627
035
017
(50 346 362)

16 105 000

14 641 000

16 105 000
16 105 000
(369 689)
869
6 244 345

14 641 000
14 641 000
2 840 105
(152 186)
3 556 426

5 875 525

6 244 345

GLOSSARY OF TERMS

AGENT BANK

A member bank which is assigned processing payouts to insured depositors on


the basis of agency services agreement with KDIF

MEMBER BANK

A bank being member of deposit insurance system. Membership implies the


obligations of a member bank to reimburse insured depositors are subject to
guarantee in compliance with Law of the Republic of Kazakhstan On mandatory
insurance of deposits placed with the second-tier banks of the Republic of
Kazakhstan

PREMIUMS

Premiums paid by member banks in compliance with Law of the Republic of


Kazakhstan On compulsory insurance of deposits placed with second-tier banks
of the Republic of Kazakhstan

COVERAGE

Funds due to depositors as reimbursement for insured deposits in compliance


with Law of the Republic of Kazakhstan On compulsory insurance of deposits
placed with second-tier banks of the Republic of Kazakhstan

INSURED DEPOSIT

Certain types of deposits subject to mandatory State guarantee in compliance


with Law of the Republic of Kazakhstan On compulsory insurance of deposits
placed with second-tier banks of the Republic of Kazakhstan

CONTRACT OF ADHESION

The contract of adhesion of a bank to the deposit insurance system, the conditions
thereof are determined by KDIF as equal to all member banks entering deposit
insurance system

QUALITY INDICATORS

The indicators to measure quality of corporate governance practices in member


banks

QUALITATIVE INDICATORS

The indicators to measure nancial results of operations of a member bank

MAXIMUM RECOMMENDED
INTEREST RATES ON
DEPOSITS

The maximum interest rates on newly placed deposits of individuals (in tenge
or foreign currency) with the member banks which are established by Board of
Directors and recommended to member banks for consideration

AGGREGATE CUMULATIVE
GRADE

The aggregate cumulative grade assigned to a member bank for the reporting
period (a calendar quarter) which determines the rate for differential premium
which is calculated in consideration of total grades of the member bank for
the last consecutive seven quarters, including the reporting period (a calendar
quarter)

CERTIFICATE OF MEMBER
BANK

The document which is issued by KDIF to a member bank which identies its
membership in deposit insurance system

DEPOSIT INSURANCE SYSTEM

The complex of administration and legal actions which are stipulated by Law of
the Republic of Kazakhstan On compulsory insurance of deposits placed with
second-tier banks of the Republic of Kazakhstan which are aimed to protection
of rights and lawful interests of depositors of the member banks

FINANCIAL REGULATOR

The National Bank of the Republic of Kazakhstan

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ABBREVIATIONS

AFK

Financial Institutions Association of Kazakhstan

APRC

IADI Asia-Pacic Regional Committee

CIS

Commonwealth of Independent States

COMPLIANCE VERIFICATION

The inspections for compliance verication of the member banks insured deposit
reporting database with the Contract of Adhesion

DIS

Deposit insurance system

DPS

Differential premium system

EARC

Eurasia Regional Committee

FSC, FINANCIAL SUPERVISION


COMMITTEE

Committee for the control and supervision of the nancial market and nancial
organizations of the National Bank of the Republic of Kazakhstan

IADI

International Association of Deposit Insurers

IMF

International Monetary Fund

IS

Information system

JSC

Joint Stock Company

MEMBER BANKS

Second-tier banks incorporated in the Republic of Kazakhstan being members of


deposit insurance system

NBK, NBRK

The National Bank of the Republic of Kazakhstan

RF

Russian Federation

THE KDIF

JSC Kazakhstan Deposit Insurance Fund, the deposit insurance organization in


the Republic of Kazakhstan

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MEMO

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MEMO

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