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THE RESOLUTION OF BOARD OF THE AGENCY OF THE REPUBLIC OF KAZAKHSTAN ON REGULATION AND SUPERVISION OF THE FINANCIAL MARKET AND THE FINANCIAL ORGANIZATIONS

of July 16, 2007 No. 210

About establishment of the list and procedure for acquisition of underlying assets of derivative securities and derivative financial instruments with which banks of the second level, branches of nonresident banks of the Republic of Kazakhstan can perform broker and (or) dealer activities in the security market, cases of the conclusion of transactions with government securities and non-state securities in the secondary market, derivative financial instruments in the unorganized market of securities, and also criteria according to which banks of the second level can perform broker activities

(as amended on 25-01-2021)

According to the Law of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan the Board of the Agency of the Republic of Kazakhstan on regulation and supervision of the financial market and the financial organizations (further - the Agency) DECIDES:

1. Determine that banks of the second level, branches of nonresident banks of the Republic of Kazakhstan (further – banks of the second level) perform broker and/or dealer activities with derivative securities and derivative financial instruments which underlying asset is:

foreign and national currency;

currency indexes;

the affined precious metals;

remuneration rate: the coupon, discount, profitability, rate on interest rate swaps, spread, percentage change and volatility;

securities, including the derivative securities, derivative financial instruments permitted to acquisition of the second level by banks according to the Law of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan";

settlement indicators (indexes) which list is determined by appendix 1 to this resolution;

credit risk (credit risk);

commodity assets which list is determined by appendix 2 to this resolution, without implementation of physical delivery of the specified commodity assets, and also indexes on commodity assets.

2. Transactions with derivative financial instruments which underlying assets are determined by Item 1 of this resolution consist in the organized market of securities of the Republic of Kazakhstan and (or) in system of organizers of the biddings recognized by the international stock exchanges, specified in the List of organizers of the biddings recognized by the international stock exchanges, according to appendix 8 to the Normative values and techniques of calculations of prudential standard rates and other regulations and limits, obligatory to observance, the size of the capital of bank approved by the resolution of Board of National Bank of the Republic of Kazakhstan of September 13, 2017 No. 170, registered in the Register of state registration of regulatory legal acts at No. 15886 (further - Standard rates No. 170), except as specified the conclusions of transactions in the unorganized market in case of observance of one of the following conditions:

1) counterpartner - the nonresident of the Republic of Kazakhstan is the organization having rating "VVV-" on the international scale of the Standard & Poor agency "s or rating of similar level of the Moody agencies" of s Investors Service and Fitch is not lower, or counterpartner - the resident of the Republic of Kazakhstan is the organization having rating on the international scale not below "VV-" on classification of Standard & Poor rating agencies "s and Fitch or not below "Va3" on classification of Moody rating agency" s Investors Service, or rating assessment not below "kzBBB" on national scale of the above-stated rating agencies;

2) there are quotations on purchase and (or) sale in information analytical systems of Bloomberg or Reuters, or in case of lack of such quotations there are at least three quotations from three various counterpartners having rating "VVV-" on the international scale of the Standard & Poor agency "s or rating of similar level of the Moody agencies" of s Investors Service and Fitch is not lower;

3) the underlying asset of derivative financial instruments is allowed to the address in the organized market of securities of the Republic of Kazakhstan and (or) in system of organizers of the biddings recognized by the international stock exchanges, specified in the List of organizers of the biddings recognized by the international stock exchanges according to appendix 8 to Standard rates No. 170;

4) by provision by the auditing organization performing audit of bank of the second level, the report providing expression of positive opinion of auditing organization about:

assessment techniques bank of the second level of the derivative financial instrument;

the assumptions used in case of cost determination of the derivative financial instrument including information on the assumptions made concerning assessment of credit losses, interest rates or discount rates;

results of stress testing, the sensitivity analysis which is carried out by bank of the second level.

Banks of the second level perform broker and (or) dealer activities with derivative securities and derivative financial instruments which underlying asset is the credit risk of the organizations:

1) the residents of the Republic of Kazakhstan having rating on the international scale not below "BB-" on classification of Standard & Poor rating agencies "s and Fitch or not below "Va3" on classification of Moody rating agency" s Investors Service, or rating assessment not below "kzBBB" on national scale of the above-stated rating agencies;

2) the nonresidents of the Republic of Kazakhstan having rating on the international scale not below "BBB-" on classification of Standard & Poor rating agencies "s and Fitch or not below "Vva3" on classification of Moody rating agency" s Investors Service;

3) the organizations - residents of the Republic of Kazakhstan on the loans issued by it, and also applicants - residents of the Republic of Kazakhstan on the issued guarantees and letters of credit.

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