Who will pay for banks’ problems — Kazakhstan changes the rules

Kazakhstan is set to introduce a new model for resolving bank insolvency beginning January 2026, a move designed to align with international standards and ensure financial stability. The Agency for Regulation and Development of Financial Markets (ARDFM) has adopted the necessary bylaws to implement these changes, which fundamentally alter the approach to dealing with troubled financial institutions.

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If a bank faces serious financial problems, the first to bear losses should be its shareholders and investors who have invested funds in the bank’s capital and special debt instruments. The state should not replace the responsibility of private owners.

A cornerstone of the reform is the strict distribution of financial responsibility. Deputy Chair Dauren Salimbayev emphasized that the state will no longer act as a substitute for private owners. "If a bank faces serious financial problems, the first to bear losses should be its shareholders and investors who have invested funds in the bank’s capital and special debt instruments," Salimbayev stated. "The state should not replace the responsibility of private owners."

Under the new mechanism, the use of public funds is relegated to a last resort, applicable only to systemically important banks. Even in such emergency situations, state intervention will be strictly regulated. The government will temporarily enter the bank's capital to stabilize the institution before it is sold to a new investor through a competitive process.

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If, after the bank is sold to a new investor, the state cannot fully compensate the costs incurred, a special mechanism is activated to reimburse them at the expense of the banking sector itself. All banks make mandatory cash contributions, the amount of which is calculated in proportion to the volume of their liabilities.

If the state cannot fully recover its costs after a troubled bank is sold, the losses will be covered by other participants in the banking sector through a mandatory contribution system. "All banks make mandatory cash contributions, the amount of which is calculated in proportion to the volume of their liabilities," explained the deputy chair. "The costs associated with resolving a systemic banking crisis are ultimately borne by the banking sector itself, not taxpayers." The ARDFM stressed that the primary objective of this reform is to ensure that any banking crisis remains unnoticeable to ordinary citizens.

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The costs associated with resolving a systemic banking crisis are ultimately borne by the banking sector itself, not taxpayers.