Macro-prudential regulation of the financial stability of the banking system of the Republic of Kazakhstan : the practical application and the ways of improvement

The thesis discusses issues of improving the existing practices of macroprudential regulation of systemic stability of the banking sector of Kazakhstan. Author was the first one to introduce theoretical definitions such economic categories as "stability of the banking system", “systemically important bank” and "systemic risk" in the system of relations between the banking system and its supervisory body. The paper provides a comparative set of experiences of different countries in provision of the financial stability of the banking system. The dissertation contains an analysis of international experience in the field of financial regulators to ensure the financial stability of the banking system. Author also studied the experience of domestic regulators in conducting stabilization regime for banking system and in using macro-prudential measures to maintain systemic stability of the banking sector of the Republic of Kazakhstan. Author has defined the organizational role of the National Bank of the Republic of Kazakhstan and its committee in the system of macro-prudential regulation on banking system. Compared with previous research of Kazakh scientists in the field of banking regulation, this paper is the first to introduce nonlinear econometric model of binary type to identify the main factors of systemic vulnerability of the banking system of Kazakhstan. The paper concludes that the main factors are (i) poor quality of bank management, (ii) the growth of rates on deposits of individuals (which reflects the presence of liquidity problems in the banking sector), and (iii) low quality of assets (which is described as a sharp increase in the amount of provisions created). Conducting such econometric estimates is useful for the regulatory bodies to receive at least statistically probabilistic basis to choose the right and specific regulatory instruments. This econometric model helps to make a reasonable selection of the right tools to prevent future problems of the banking system threatening its financial stability. In this thesis, the author developed a new practical guidance concerning the tools which determine systemically important banks and that helps to improve the early warning mechanism of systemic risk within the banking system. This approach has not yet been used nor by Kazakhstani scientists, neither by regulatory bodies, as this scientific approach is a relatively new in the field of financial research at global level. The approach was developed by studying the recommendations of the relevant studies of western scholars. Implementation of such approach would provide the scientists with the ability to use it for identification of systemic important institutions of the non-bank sector. Author has made a complete and extensive scientific research, performed at a high scientific and theoretical level. The author’s recommendations are sufficiently scientifically sound. The developed guidelines and suggestions can and should be used and considered by government authorities. Author published several research papers on the basis of her findings presented in the thesis. The results are extremely relevant and are of great importance for the development of the organization of the macro-prudential regulation of the banking system in Kazakhstan