The of a central issuing bank was

The role of the National Bank in
the process of macroeconomic stabilization

The main link in the banking system of any state is the central bank of the
country. The creation of a central issuing bank was due to the processes of
concentration and centralization of capital, the transition to unified national
monetary systems. The Republic of Kazakhstan has a two-level banking
system. The National Bank of the Republic of Kazakhstan is the central bank of
the Republic of Kazakhstan and represents the upper (first) level of the
banking system of the Republic of Kazakhstan. The National Bank of Kazakhstan
represents, within its competence, the interests of the Republic of Kazakhstan
in relations with central banks and banks of other countries, in international
banks and other financial and credit organizations. The National Bank of
Kazakhstan is accountable to the President of the Republic of Kazakhstan. The
National Bank of Kazakhstan is a legal entity in the organizational and legal
form of a state institution, has an independent balance and, together with its branches,
representative offices and organizations, constitutes a single structure.
The main goal of the National Bank of Kazakhstan is to ensure price stability
in the Republic of Kazakhstan. To fulfill the main goal, the National Bank of
Kazakhstan is entrusted with the following tasks: 1) development and
implementation of the monetary and credit policy of the state; 2)
maintenance of the functioning of payment systems, 3) implementation of
currency regulation and currency control, 4) assistance in ensuring the stability
of the financial system. The list of functions of the National Bank of
Kazakhstan is presented in the Law “On the National Bank of the Republic
of Kazakhstan”. The
National Bank of Kazakhstan participates in the regulation and supervision of
the activities of banks and organizations carrying out certain types of banking
operations in accordance with this Law and banking legislation of the Republic
of Kazakhstan. The regulatory functions of the National Bank of Kazakhstan are
aimed at maintaining the stability of the monetary system of the Republic of
Kazakhstan, protecting the interests of bank creditors, depositors and
customers. The National Bank of Kazakhstan does not interfere in the
operational activities of banks and organizations that carry out certain types
of banking operations, except as provided for by legislative acts. The National
Bank of Kazakhstan is the only body that determines and implements the state
monetary and credit policy of the Republic of Kazakhstan. Monetary
policy is implemented by the National Bank of Kazakhstan in order to ensure a
low level of inflation and the stability of the national currency.
So, the monetary policy is an integral part of the Kazakhstan economy
functioning. The growth of the Kazakhstan
economy was  greatly facilitated by the
investment activity of domestic and foreign capital. There was a favorable pricing
environment for the position of domestic exports (oil, gold, zinc, copper, lead
and grain) against the backdrop of  domestic
macroeconomic stability. Since 2004, the National Bank has started to define
the basic guidelines of monetary policy for three years ahead with the annual
specification of the parameters.

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Instruments of
Monetary Policy

Official refinancing rates. The National Bank of Kazakhstan sets an
official refinancing rate depending on the overall state of the money market,
the demand and supply of loans, inflation and inflation expectations. The
official refinancing rate is a benchmark for remuneration rates for major
monetary policy operations. The official refinancing rate for the 16
January 2018 is 9,75%. The official refinancing rate was decreased (compared to
the year 2017). As the level of inflation rate became lower to the end of 2017,
the National Bank decided to reduce the official refinancing rate.

Minimum reserve requirements. To ensure the
balance of the money market and regulate the liquidity of banks, the norm of
banks’ mandatory reserves was reduced from 10 to 8% of the total deposit
liabilities of the bank to non-bank legal and natural persons. Reducing the
minimum reserve requirements did not lead to a weakening of the protection of
the interests of depositors and creditors of banks, but, on the contrary,
allowed banks to more effectively manage the funds raised and increase lending
to the real sector of the economy.

Open market operations. In order to regulate
liquidity in the banking system and sterilize the money supply in 2015, the
National Bank carried out the transactions in the open market for the purchase
and sale of securities, to repurchase and reverse repurchase transactions.

Loans of the National Bank. In 2015, the National
Bank provided loans for KZT 1401 million, of which KZT 1311.2 million to
second-tier banks, and KZT 89.8 million to organizations. To finance the gold
mining industry – the “ABS Balkhash” enterprise, a consortium of
banks has been established on the principles of syndicated bank lending. The
National Bank assumed partial financing of this consortium (KZT 699.2 million or
$ 4.9 million). In connection with the repayment by the National Bank of the
debt to the EBRD, the loan was repaid by the National Bank of Kazkommertsbank
OJSC as part of the EBRD loan for the SME development program. Based on the
Consortium Agreement, this loan was reissued into a bank loan for $ 4.3 million.
The granting of a special-purpose loan for building the reserve center of the
KISC payment system was continued. The National Bank carried out work on the
practical implementation of a system for the recalculation of bills.
First-class issuers of promissory notes – CJSC NAK Kazatomprom and
Kazakhtelecom OJSC were determined, General agreements on rediscounting
promissory notes with 12 banks were concluded. As early as December 2015, 6
promissory notes of ZAO NAC Kazatomprom were redeemed for a maturity of up to 6
months at KZT7.1 million. The National Bank concluded an overnight loan
agreement with 17 second-tier banks. The limits for obtaining overnight loans
at the National Bank were reported to banks on a monthly basis, however, due to
sufficient liquidity of the banking system in 2015, banks did not apply for an
overnight loan. The return of credits was 238.2 million tenge. Monthly
classification of the loan portfolio was carried out and provisions were
created. More than 80% of borrowers who have overdue debts on bank loans of the
National Bank are currently in liquidation procedure, or bankruptcy procedure
was applied to them. Overdue debts on them totaled 4.7 billion tenge, the
amount of debt on the main debt – 2.2 billion tenge. The borrowers returned
unprofitable bank loans by 2.1 million tenge. In connection with the completion
of the liquidation process, the overdue debt on 9 banks (KZT0.8 billion), which
has a debt on bank loans of the National Bank, was canceled. In addition, the
debts of the institutions of the Ministry of Internal Affairs were canceled by
KZT 71.9 million. For all borrowers, the National Bank carried out claims and
lawsuits.