Major international banks are preparing to make their mark on the Kazakhstan market, signaling new opportunities for competition and investment. Reports from Bizmedia.kz cite the Agency for Regulation and Development of the Financial Market (ARRF) indicating significant players like BNK Financial Group from South Korea, Abu Dhabi Commercial Bank from the UAE, and Lesha Bank from Qatar will soon commence operations in the country.
On June 12, 2024, BNK Financial Group received the go-ahead to transform its microfinance organization (MFO) BNK, paving its way to become a second-tier bank. This pivotal change aims to increase the operational scale of BNK within Kazakhstan. The ARRF affirmed, "On June 12, 2024, the international financial organization BNK was granted permission for voluntary reorganization of the MFO BNK with subsequent conversion to a second-level bank." This move indicates the bank's strategic alignment to tap the growing Kazakh market and offer more comprehensive banking services.
Shortly after, the Abu Dhabi Commercial Bank concluded its acquisition of JSC Islamic Bank “Al Hilal” on October 9, 2024, which was swiftly followed by its rebranding to JSC Islamic Bank “ADCB” on October 21, 2024. ARRF reported, "On October 9, 2024, Abu Dhabi Commercial Bank completed the deal to acquire shares of JSC Islamic Bank 'Al Hilal', after which on October 21, the bank was renamed JSC Islamic Bank 'ADCB'." This acquisition not only enhances ADCB's footprint but also enriches Kazakhstan's diverse banking offerings.
Similarly, Lesha Bank from Qatar successfully negotiated the purchase of 100% of Bereke Bank's shares on October 8, 2024. Currently, Bereke Bank (now operating under DB Lesha Bank LLC) is undergoing the process of reissuing its banking license due to the name change. The ARRF highlighted this shift by stating, "Currently, Bereke Bank (DB Lesha Bank LLC) is undergoing the process of reissuing its banking license due to the name change." This acquisition marks another significant entry of international capital, aimed at fostering competition and providing innovative financial solutions.
ARRF officials have noted the importance of these international players entering the market, envisioning it will result in heightened competition among existing second-tier banks. "The incoming international investor will increase competition among second-tier banks and contribute to the increase of lending volumes to the real economy," they commented. Such developments are welcomed by local banks and investors, who are optimistic about the potential for growth and improved service offerings.
To facilitate the integration of these banks, the ARRF has been pivotal by initiating amendments to legislation. These changes are intended to simplify the process for foreign banks to establish branches and subsidiaries within Kazakhstan. Specific plans include reducing the number of required documents and broadening the range of services these institutions can offer. These efforts aim to create a more accessible environment for international financial firms seeking to expand in Kazakhstan.
Despite these proactive measures, the ARRF has indicated there are currently no new applications from foreign banks for establishing branches or subsidiaries as of now. This pause may reflect existing market conditions or the time necessary for these institutions to adapt to the regulatory environment. Nonetheless, the appetite for international banking presence remains strong as Kazakhstan continues to develop as an attractive destination for global capital.
The entry of these international banks marks a transformative period for Kazakhstan's financial ecosystem. With increasing globalization and financial integration, the country stands at the crossroads of enhanced economic collaboration and investment. The stakeholders involved are committed to making Kazakhstan not just a hub for local finance but also an appealing destination for global banking giants.
Looking ahead, the adjustments by the ARRF and the competitive thrust provided by these new entrants are poised to usher Kazakhstan's banking sector to new heights. The gradual easing of restrictions is expected to catalyze more significant investments, benefiting the economy at large and driving innovation within the financial services industry.