RESOLUTION OF BOARD OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of December 28, 2018 No. 318

About approval of Rules of forming of risk management system and internal control for the central depositary

According to the laws of the Republic of Kazakhstan of July 2, 2003 "About the security market", of March 19, 2010 "About the state statistics" the Board of National Bank of the Republic of Kazakhstan DECIDES:

1. Approve the enclosed Rules of forming of risk management system and internal control for the central depositary.

2. Recognize invalid resolutions of Board of National Bank of the Republic of Kazakhstan, and also structural elements of some resolutions of Board of National Bank of the Republic of Kazakhstan according to the list according to appendix to this resolution.

3. (Salimbayev D. N.) in the procedure established by the legislation of the Republic of Kazakhstan to provide to department of methodology of the financial market:

1) together with Legal department (Sarsenov N. V.) state registration of this resolution in the Ministry of Justice of the Republic of Kazakhstan;

2) within ten calendar days from the date of state registration of this resolution its direction in the Kazakh and Russian languages in the Republican state company on the right of economic maintaining "The republican center of legal information" for official publication and inclusion in Reference control bank of regulatory legal acts of the Republic of Kazakhstan;

3) placement of this resolution on official Internet resource of National Bank of the Republic of Kazakhstan after its official publication;

4) within ten working days after state registration of this resolution submission to Legal department of data on execution of the actions provided by subitems 2), 3) of this Item and item 4 of this resolution.

4. To management on consumer protection of financial services and external communications (Terentyev A. L.) provide within ten calendar days after state registration of this resolution the direction it to the copy on official publication in periodic printing editions.

5. To impose control of execution of this resolution on the vice-chairman of National Bank of the Republic of Kazakhstan Smolyakov O. A.

6. This resolution becomes effective after ten calendar days after day of its first official publication.

Approved by the Resolution of Board of National Bank of the Republic of Kazakhstan of December 28, 2018 No. 318

Rules of forming of risk management system and internal control for the central depositary

Chapter 1. General provisions

1. These rules of forming of risk management system and internal control (further - Rules) are developed for the central depositary according to the laws of the Republic of Kazakhstan of July 2, 2003 "About the security market", of March 19, 2010 "About the state statistics" and establish procedure for forming of risk management system and internal control for the central depositary.

2. The board of directors of the central depositary provides compliance of risk management system and internal control of the central depositary to Rules and creates conditions for execution by bodies, divisions and employees of the central depositary of the obligations assigned to them in the field of risk management and implementation of internal control.

3. In Rules the following concepts are used:

1) price risk - the risk of emergence of expenses (losses) owing to change in value of financial instruments arising in case of change of conditions of the financial markets influencing market value of the financial instruments acquired at the expense of own assets of the central depositary;

2) reputation risk - risk of emergence of expenses (losses) owing to negative public opinion or decrease in trust to the central depositary;

3) bek-testing - methods of check of efficiency of procedures of risks measurement with use of historical data on the central depositary and comparison of the calculated results with the current (actual) results from making of the specified transactions;

4) currency risk - risk of emergence of expenses (losses) owing to adverse changes of the foreign exchange rates when implementing of the activities by the central depositary;

5) clearing transactions - transactions on collection, reconciliation, sorting and confirmation of calculations, and also carrying out their offset and determination of net line items of participants of clearing;

6) communication system - the software and hardware of the central depositary intended for process management of information transfer between bodies and divisions of the central depositary, issuers, depositors and the central depositary, and also other systems of the central depositary;

7) corporate management - the system of strategic and tactical management of the central depositary representing complex of relations between general shareholder meeting, the board of directors, board, aimed at providing effective functioning of the central depositary, protection of the rights and interests of its shareholders and giving to shareholders opportunity of effective control and monitoring of activities of the central depositary;

8) credit risk - risk of emergence of expenses (losses) owing to non-execution by the issuer or partner of the obligations on the issued financial instruments or the concluded bargains according to resolutive conditions, and also failure to pay or untimely payment by clients of services of the central depositary;

9) legal risk - risk of emergence of expenses (losses) owing to violation of requirements of the legislation of the Republic of Kazakhstan by the central depositary, including discrepancies of internal documents of the central depositary to requirements of regulatory legal acts of authorized body, discrepancy of practice of activities of the central depositary to its internal documents, and in the relations with nonresidents of the Republic of Kazakhstan - violations of requirements of the legislation of other states;

10) policy of investment of own assets - the document determining the list of investment objects, the purposes, strategy, conditions and restrictions of investing activities on own assets of the central depositary, condition of hedging and diversification of own assets of the central depositary;

11) market risk - the risk of emergence of financial losses caused by adverse changes of market interest rates, foreign exchange rates, market value of financial instruments;

12) operational risk - risk of emergence of expenses (losses) as a result of shortcomings or mistakes during implementation of internal processes made from workers, functioning of information systems and technologies, and also owing to external events, including the risks connected with:

uncertain and inefficient organizational structure of the central depositary, including distribution of responsibility, structure of accountability and management;

inefficient strategy, politicians and (or) standards in information technologies, shortcomings of use of the software;

incomplete or unreliable information or inappropriate use of information;

poor control of personnel and (or) unskilled staff of the central depositary;

insufficiently effective creation of processes of implementation of activities of the central depositary or weak control of observance of internal regulations;

unforeseen or uncontrollable factors of external impact on activities of the central depositary;

availability of shortcomings or mistakes of the internal documents regulating activities of the central depositary;

the nonprofessional actions of management and personnel of the central depositary which entailed narrowing of client base, mistrust or negative perception of the central depositary by clients and (or) counterpartners;

13) management of the existing and potential conflicts of interest - creation of mechanisms of non-admission of situations in case of which interests of the official or employee of the central depositary influence objectivity and independence of adoption by them of decisions and fulfillment of duties and also conflict to their obligation to act for the benefit of clients and (or) shareholders of the central depositary;

14) risk of loss of liquidity - the risk connected with possible failure to carry out or untimely accomplishment of the obligations by the central depositary. The risk of loss of securities liquidity as assets is determined by possibility of their quick sale with low costs and for reasonable prices;

15) stress testing - methods of measurement of potential influence on financial position of the central depositary of exclusive, but possible events which exert impact on activities of the central depositary;

16) stressful situations - unforeseen situations of emergence of overloads, failures, mistakes and (or) other malfunctions in work of systems of the central depositary;

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