Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations

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Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations Press release as of October 1 28 Banking sector of the Republic of Kazakhstan р.

1 Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations Press release as of October 1 28 Banking sector of the Republic of Kazakhstan р. 2 Insurance market of the Republic of Kazakhstan р. 4 Accumulation pension system р. 6 Securities market р Banking sector Assets Liabilities Own capital* Organizations, engaged in certain types of banking operation р. 9 Protection of interests of financial services consumers р Insurance sector Assets Own capital 12 Correlation between pension assets and APF s nominal income ratio 6 * - Own capital is calculated in accordance with the Prudential Rules Key indicators of financial market of the Republic of Kazakhstan as of October 1, 28 () Non-banking institutions Indicator Banking Accumulation pension sector funds Insurance sector Total assets 12 5,3 41,3 281,7 212,2 Total liabilities 1 98,7 11,6 119,5 16,3 Own capital 1519,6 29,7 162,1 51, Pension assets Nominal income ratio (6 mos.)

2 Press Release BANKING SECTOR (based on preliminary data) As of October 1, 28 the banking sector of the Republic of Kazakhstan comprised 36 tier two banks. As of 1 October 28, total assets of banks equaled KZT12 5,3 bln., having decreased during a month by KZT6,4 bln.(,5%), meanwhile having increased year-to-date by KZT815,7 bln. (7,%). As of 1 October 28 года, total calculated own capital of the banking sector equaled KZT1 983,2 bln., having increased year-to-date by KZT23, bln. (11,4%). As of 1 October 28, the banks loan portfolio (inclusive of interbank loans) equaled KZT9 94, bln., having increased during September by KZT52,6 bln.(,6%), and having increased year-todate, by KZT225,7 bln. (2,5%). As of 1 October 28, the banks loan portfolio breakdown looked as follows: standard loans 44,%, doubtful 52,7%, loss 3,3%. As of January 28, standard loans accounted for 39,7%, doubtful 58,8%, loss 1,5%. A total of loans in doubtful category 5 and loss category (inclusive of provisions against fungible loans) 1 equaled KZT57, bln (6,3% of total loan portfolio). As of 1 October 28, loans which are past due over 9 days amounted to KZT389,1 bln, that is 4,3% of total loan portfolio). As of , loan provisions totaled KZT83,9 bln., i.e. 8,8% of total loan portfolio, having increased, year-to-date by KZT54,1% Assets, liabilities and calculated own capital AssetsBanks' Liabilities Loan portfolio Calculated (KZT. own capital bln.) Loans Provisions As of , loans by sectors of economy Loans category 5 doubtful and loss Past due loans 9 days plus (exclusive of natural persons) equaled KZT6 939,9 Provisions established in loan portfolio bln, having increased for the month by KZT74, bln (1,1%). At the same time, reduction in the following sectors was observed over the reporting month, transport, by 3,9%; entrepreneurship, by 1,7 %; industry, by 1,5%, construction, by,4%, communication, by,2%. Herewith, the increase is observed in the following sectors: trade, by 3,7%; agriculture, by 3,%; non-productive area 1,7%. Year to date, loans by sectors of economy have increased by KZT42,9 bln (6,5%) ,7 283,1 615, 383,2 696,5 459,3 281,8 717,8 53,4 312,6 742,6 519,7 342,2 83,9 57, 389,1 883,8 66,7 447, As to the date of , total liabilities equaled KZT1 98,7 bln, of which amount, liabilities to non-residents equaled KZT4 911,2 bln, i.e. 44,7% of total liabilities. KZT.bln Within fungible loans portfolio, non-performing loans are accounted for as a total of actually established provisions..

3 . Liabilities to non-residents have decreased year-to-date by KZT552,6 bln. i.e. 1,1% (reduction for a month equaled KZT14,3 bln. i.e.2.1%). As of 1 October 28, total corporate and retail deposits attracted by banks from legal entities and natural persons (other than banks and international financial institutions) equaled KZT731,6 bln., having decreased over a month by KZT61,8 bln. (,8%). Corporate deposits totaled KZT5 764,2 bln., having decreased over September by KZT51,2 bln (,9%), of which amount the special purpose deposits of subsidiaries equaled KZT2 348,2 bln, having decreased over a month by KZT65,6 bln (2,7%). Retail deposits totaled KZT1 546,5 bln., having decreased over September 28 года by KZT1,6 bln (,7%), and by KZT98,6 bln. (6,8%) year-todate. As of 1 October current year, capital adequacy ratios equaled: k1 =.12; k2 =.15 (vs. k1 =.11; k2 =.14 as of ). As of 1 October 28, the banks' liquid assets to total assets ratio equals 15.8% ,125,12,115,11,15,1 Tier two banks liabilities % 5% 48% 46% 45% 53% 47% 49% 5% 52% 54% 55% Liabilities to residents Liabilities to non-residents Capital adequacy ratios,152,15,148,146,144,142,14,138,136, к1 (left scale) к2 (right scale) As of 1 October 28, total income of tier two banks equaled KZT27,2 bln., which is 58.% over the same indicator of the last year. Expenses totaled KZT191,1 bln. (exclusive of income tax, which as of reporting date equaled KZT26. bln.); this is 82.1% over the last year's indicator. As of 1 October 28, the banks' retained net earnings equaled KZT71, bln., which is 61.5% below the last year's indicator. In September 28, there were served 3 written warnings on banks for non-compliance with prudential normative requirements. As of 1 October 28, there are 7 banks under forcible liquidation as decided by court: Valyut- Transit, JSC; Nauryz Bank Kazakhstan, JSC; Business Bank, OJSC; Gazprombank, JSC; KazPostBank, OJSC; Komirbank, OJSC; and Chinghiz Bank, OJSC.

4 Press Release INSURANCE MARKET (according to provisional data) As of 1 October 28, there were 44 insurance/reinsurance organizations operating in financial market of Kazakhstan as licensed by the Agency; herewith, 8 organizations are licensed to engage in life insurance activity, while 29 are in mandatory insurance of civil responsibility of car owners. Also operating in the insurance services market are 12 insurance brokers and 49 actuaries.. Total assets of insurance organizations have increased, year-to-date, by 26.% to reach KZT281.7 bln. 1 by October 1, 28. Total equity (own capital) has increased by 28,3% and equaled KZT162.1 bln. Insurance reserves totaled KZT97.1 bln. Key indicators The volume of insurance premiums Assets (lt scale) Own capital (lt scale) taken under direct insurance contracts equaled, Insurance reserves (rt scale) as of October 1, 28, KZT18.8 bln., which is 1.5% below the same indicator in 27. Of this amount, the volume of insurance premiums on mandatory insurance has increased by 5.6% and equaled KZT23.2 bln.; on voluntary personal insurance, insurance premiums equaled KZT15. bln. (a 22.% increase), on voluntary property insurance, KZT7.6 bln. (a 14.7% drop). The volume of insurance premiums in 'life insurance' branch has increased by 18.4% vs. the similar period last year and, as of , equaled KZT4.2 bln.; percentagewise, life insurance accounted for 3.8% of total insurance premiums (vs. 3.2% on October 1, 27). KZT, bln Insurance premiums As of 1 October 28, insurance premiums passed for reinsurance totaled KZT52.6 bln. Premiums (48.3% of total insurance premiums); herewith, 41.9% of total insurance premiums were passed to non-residents for reinsurance (as of , the percentage of insurance premiums passed to non-residents for reinsurance was 31.5%). Insurance premiums passed for reinsurance, % The volume of insurance payments made under direct insurance contracts from January to September, 28, equaled KZT48.6 bln., which is above the last year's indicator by 48.6%. Of this amount, the volume of insurance payments on mandatory insurance equaled KZT6.3 bln. (a 53.7% increase), on voluntary personal insurance, KZT5.9 bln. (2 times increase), and on voluntary property insurance, KZT36.4 bln. 12, 1, 8, 6, 4, 2,, ,7 13,6 13,5 13,4 13,2 88,3 86,4 86,5 86,6 86, Passed for reinsurance residents Passed for reinsurance for non-residents KZT, bln 1 Total assets are reflected here inclusive of re-insurer's interest (the amendments were made per decree of the NBRK's Board #86 of July 2, 27)

5 (a 41.6% increase). Currently, 32 insurance/reinsurance organizations are participating in insurance payments ensuring system. During September 28, 3 written instructions, 1 letter of commitment, 2 written warnings were sent to insurance organizations by the Agency in order to correct the violations of legislation governing the activity of insurance market. KZT, bln Insurance payments Payments In accordance with decree 152 issued on October 2, 28 by the Agency, the validity of the license, issued to Atlanta Policy IC, JSC, to carry out insurance activity, was suspended for the period of 3 months. In accordance with decree 151 issued on October 2, 28 by the Agency, the validity of the license, issued to NASKO Kazakhstan IC, JSC, to carry out insurance activity, was suspended for the period of 6 months. As of 1 October 28, there are 2 insurance/reinsurance organizations under forcible liquidation: Valyut Transit Policy, joint stock insurance company, and Kazagropolicy, open-end joint-stock insurance organization.

6 Press Release ACCUMULATION PENSION SYSTEM As of 1 October 28, there are 14 accumulation pension funds operating in Kazakhstan, with 75 branches and 48 representative offices in regions across the country. 13 legal entities are currently holding licenses for investment management of pension assets, of which number, 9 funds are licensed to independently manage pension assets. No license to independently manage pension assets was issued to any accumulation pension fund in September current year. The number of individual pension accounts (hereinafter - accounts) on mandatory pension contributions reached 9,486,211 by October 1, 28, with pension accumulations on them totaling KZT1, bln. During September current year, the number of accounts owned by contributors of mandatory pension payments has increased by (.42%). The number of accounts of contributors/beneficiaries on voluntary pension payments, having increased over September current year by 68 (.16%), equaled 41,542 as of 1 October 28, with pension accumulations on them totaling KZT941.5 mln. As of October 1, 28, the number of accounts owned by contributors on voluntary professional pension contributions equaled 419, with pension accumulations on them totaling KZT59.1 mln. Contributors/beneficiaries' pension accumulations have decreased over September by KZT1.3 bln. (.9%), to reach KZT1,382. bln. by October 1, 28. From January to September current year, pension accumulations increased by KZT173.9 bln., which is KZT23.9 bln. (12.8%) below the increase in pension accumulations in respective period of 27. Total received pension payments have increased during September by KZT23.2 bln. (2.14%), to reach KZT1,18.6 bln. by October 1, 28. Total net investment income from invested pension assets (less commission fees) distributed among contributors/beneficiaries' individual pension accounts have decreased during September current year by KZT22.9 bln. (6.36%), and as of October 1, 28 equaled KZT338. bln. As of 1 October 28, net investment income accounted for 24.46% of contributors/beneficiaries' total pension accumulations, which is a 1.63 percentage points decrease during September current year. As of 1 October 28, pension payments and transfers to insurance organizations from accumulation pension funds equaled KZT85.2 bln. In September 28, the funds made a total of KZT1.9 bln. (2.3%) pension payments to beneficiaries. Transfers of contributors/beneficiaries' pension accumulations from one fund to another have increased by KZT8.4 bln. (3%) during September, and reached KZT289,4 bln. by October 1, 28. As of 1 October 28, the average weighted ratios of nominal income on pension assets of accumulation pension funds equaled: - over a 5 years period (September 23 to September 28): 42.19%. Adjusted average nominal income ratio was 37.48% (cumulative inflation rate for the same period was 65.73%); - over a 3 years period (September 25 to September 28): 28.41% (cumulative inflation rate for the same period was 42,61%); - over a 12 months period (September 27 to September, 28): 5.1% (inflation rate for the same period was 18.2%).

7 In the third quarter of 28, 2 written instructions, 2 written commitments and 1 written agreement were sent to accumulation pension funds by the Agency in order to correct the violations of legislation of the Republic of Kazakhstan. As of 1 October 28, there was one accumulation pension fund under forcible liquidation as ruled by the court: AP Valyut Transit Fund, JSC.

8 Press Release SECURITIES MARKET As of 1 October 28, there were 2,233 joint-stock companies with current issues operating in corporate securities market. Also operating in the market are 16 brokers/dealers, 15 registrars, 11 custodian banks, 13 IMPAs (investment managers of pension assets, i.e. organizations engaged in investment management of pension assets), 68 investment portfolio managers, and 4 transfer agents. For the third quarter 28, 187 share issues were registered: including those share issues whose prospectuses have been modified and state registration certificates renewed. Also, during the third quarter of the current year, there were registered 14 bond issues within the framework of bond programs (a total of KZT59.5 bln.), as well as a total of KZT124. bln. worth 3 bond and 11 bond issues (a total of KZT9 bln.) were registered within the framework of bond programs. During the reporting period, 4 bond issues were redeemed at KZT 9.5 bln. As of 1 October 28, there were 335 current corporate bond issues in circulation, with total face value of KZT1,91.7 bln Change in the number and volume of current bond issues number of issues (left scale) volume of issues, KZT mln. (right scale) As of 1 October 28, there were 219 mutual funds operating in securities market, of which number 165 were closed-end, 25 open-end and 29 interval ones. Seven joint-stock investment funds have been registered over the reporting period, which brought the number of joint-stock investment funds currently operational in the market up to 5. As of 1 October 28, there was the following number of corporate securities issues by RoK issuers included in official KASE list: 244 issues in category of Debt securities, and 95 issues in category of Shares, 1 in category of Securities of investment funds. In the third quarter of 28, 25 written instructions and 2 commitment letters were sent to professional participants of securities market for non-compliance with certain norms of current RoK legislation on securities market.

9 Press release SECTOR OF INSTITUTIONS ENGAGED IN CERTAIN TYPES OF BANKING OPERATIONS As of 1 October 28, 12 mortgage companies and 23 institutions engaged in certain types of banking operations were operating in financial market of Kazakhstan based on valid licenses. As of 1 October 28, total assets of mortgage companies equaled KZT212.2 bln., a KZT4. bln. (1.8%) decrease year-to-date. Total liabilities have decreased since January 1, 28 by KZT11.3 bln. (6.6%) and equaled KZT16.3 bln. Own capital of mortgage companies equaled KZT51.9 bln., a 16.4% (KZT7.3 bln.) increase year-to-date. As of reporting date, total loan portfolio of mortgage companies equaled KZT17.5 bln., a 5.5% decrease vs. January 1, Key indicators Assets (left scale) Liabilities (left scale) Own capital (right scale) As of 1 October 28, the breakdown of mortgage companies' loan portfolio was as follows: standard loans, 92.2%, doubtful, 7.3%, and loss,.5%. As of 1 January 28, standard loans accounted for 95.5%, doubtful, 3.9%, and loss,.6% of total loan portfolio. In September 28, one written warning and 3 written instructions were sent to mortgage companies by the Agency in order to correct the violations of legislation governing the activity of mortgage companies.

10 Press release PROTECTION OF INTERESTS OF CONSUMERS OF FINANCIAL SERVICES In September 28, the Agency received 129 appeals from natural persons and legal entities as well as from other state agencies. Of total number of incoming appeals, 37.98% of letters concerned the activity of tier two banks, 4.65%, the securities market entities, 17.5% of letters dealt with insurance organizations, 6.98%, with accumulation pension funds,.78% of letters related to activity of organizations carrying out separate types of banking operations, 21.71% of letters contained inquiries from natural persons and legal entities seeking explanations of RoK legislation norms, while 1.85% of letters focused on issues beyond the Agency's control. The table below provides the breakdown of appeals by tier two banks, insurance organizations, accumulation pension funds and institutions operating in securities market, along with the percentage of each of those of total appeals: # Name of financial organization Number of appeals** Weight in respective sector of financial market,% Banking activity 1 Alliance Bank, JSC 8 16,33 2 Halyk Bank, JSC 5 1,2 3 BTA Bank, JSC 3 6,12 4 ATF Bank, JSC 2 4,8 5 Kaspi Bank, JSC 1 2,4 6 Kazkommertsbank, JSC 2 4,1 7 BTA Bank, JSC - Temir Bank, JSC, Subsidiary 3 6,12 8 Nurbank, JSC 1 2,4 9 Bank Center Credit, JSC 1 2,4 1 City Bank of Kazakhstan, JSC 1 2,4 11 TAIB Kazakhstan Bank, JSC, Subsidiary 1 2,4 12 Eximbank of Kazakhstan, JSC 1 2,4 Banks under liquidation/ liquidated: 13 Valyut-Transit Bank, JSC 18 36,73 14 Igilik Bank, OJSC (liquidated bank) 2 4,8 TOTAL: 49 37,98* Nonbanking activity 1 BTA Bank BTA Ipoteka DIO, JSC 1 1 TOTAL: 1,78* Insurance activity 1 Altyn Policy IC, JSC 6 27,27 2 Valyut-Transit Life, Life Insurance Company, JSC 5 22,73 3 Premier Insurance, JSC 2 9,1 4 Atlanta Policy, JSC 2 9,1

11 5 Oil Insurance Company, JSC 2 9,1 6 NASCO Kazakhstan IC, JSC 1 4,54 7 Nurpolicy IC, JSC 1 4,54 8 Kazakhinstrakh Foreign Insurance, JSC 1 4,54 9 Allianz Kazakhstan Insurance Company, JSC 1 4,54 Insurance organizations under liquidation/liquidated 11 Kazagropolicy, OJSC 1 4,54 TOTAL: 22 17,5* Securities market 1 Vostok Mash Zavod, JSC 1 16,6(6) 2 Leninogorsk Polymetal combine, JSC 1 16,6(6) 3 Almaty Real Estate fund 1 16,6(6) 4 Zangar KRTD, JSC 2 33,3(3) 5 HALYK FINANCE, JSC 1 16,6(6) TOTAL: 6 4,65* Accumulation pension system 1 Ular Umit APF, JSC 2 22,2(2) 2 AMANAT KAZAKHSTAN APF, JSC 2 22,2(2) 3 Neftegaz-dem APF, JSC 2 22,2(2) 4 GRANTUM APF, JSC 1 11,1(1) 5 Halyk Bank of Kazakhstan APF, JSC 1 11,1(1) 6 Valyut-Transit Fund NP, JSC (liquidated fund) 1 11,1(1) TOTAL: 9 6,98* * - the weight of the sector in financial market ** - not all appeals are well-grounded In September, the Agency took the following enforcement measures and sanctions for legal non-compliance identified during the consideration of complaints and appeals from consumers of financial services: - against 4 tier-two banks: 1 written warning, 3 banks were brought to administrative responsibility per Article 168-2, part 2 of the Administrative Code of the RoK; - 2 written instructions were sent to 1 organization engaged in separate types of banking operations; - against 3 insurance companies: 2 written instructions and 2 letters of commitment were exacted; - against 1 participant of securities market - 1 written instruction; - against 1 accumulation pension fund 1 written warning, 1 issue concerning applying sanctions against 1 accumulation pension fund for violating legislation of the RoK is under consideration of the Agency.

Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations

Agency of the Republic of Kazakhstan on regulation and supervision of financial market and financial organizations Press release 116 as of November 1 28 14 12 Banking sector Banking sector of the Republic