1. by Saule Shenol Deputy Chair Reimbursing depositors via agent bank JSC K AZAKHSTAN D EPOSIT I NSURANCE F UND

2. - paying out reimbursement to depositors of a forcibly liquidated member bank IN EFFICIENT AND TIMELY MANNER The core function of KDIF

3. Applicable laws and regulations Law On banks and banking activity in the Republic of Kazakhstan Law On mandatory insurance of deposits placed with the second-tier banks of the Republic of Kazakhstan Rules for selecting an agent bank and establishing qualifying standards for an agent bank (approved by the Central Bank of Kazakhstan) Rules for making payouts to the depositors of a forcibly liquidated bank (approved by the KDIF’s Board of Directors)

4. The commitment of KDIF to reimburse depositors - Unconditional and irrevocable, and commences from the date of enactment of the court’s ruling on the member- bank’s forced liquidation - Terminate 1 year after the entry record is made to the National register of business identification numbers about the forced liquidation of a member bank, but no earlier than 5 years after the date of enactment of the court decision on the forced liquidation of a member bank

5. Payout schedule File depositor’s register Temporary admin / Liquidation commission ensures availability of funds and assigns an agent bank KDIF ensures preparedness for payouts Agent bank / JSC “Kazpost” request reimbursement of funds through an agent bank/ “Kazpost” JSC Depositors 123 4

6. Payout schedule (2) 1.As early as within 5 or 7 business days from the date of enactment of the court’s decision on liquidation, the depositor’s register and calculation of reimbursement commitment thereof (hereinafter -- the depositors’ register) must be submitted by the failed bank’s temporary administration or liquidation commission, respectively, to the KDIF. 2.Within 14 business days from the above date, KDIF must publish information on: commencement of and the schedule for payout processes name of an agent bank (or JSC “Kazpost”) assigned, the list of supporting documents and filings for the reimbursement request The information is published online and in print media in Kazakh (state official) and Russian languages.

7. The depositors request reimbursement of funds with the agent bank. The agent bank must pay out (or otherwise decline to do so) within 5 business days upon receipt of the application and filings. When the above period expires, and the agency service agreement terminates, the depositors are entitled to request reimbursement from KDIF (funds are transferred to a bank account placed with any member-bank or by post). Payout schedule (3)

8. In the event of forced liquidation of a member bank KDIF will reimburse depositors in the amount of deposit balance (accrued interest excluded) limited to 5 million Kazakhstan tenge (32.2 thousand USD) in consideration of setting off the claims by, and liabilities of depositor to the bank (e.g. bank guarantees issued, loans extended), as instructed by the failed bank’s liquidation commission Coverage To claim the excess amount of the deposit balance over the deposit coverage limit, the depositors file claim to the liquidation commission for reimbursement of the remainder in accordance with the statutory creditors’ hierarchy

9. The specific features of payouts payout of a cumulative amount of deposit coverage for all insured deposits in various currencies and other terms placed with one single member bank to one depositor payout of a separate deposit coverage for deposits placed with several different banks per each member-bank all deposits will be reimbursed in Kazakhstani tenge, including those in foreign currency, at market exchange rate as of the date of enactment of the court’s decision on the bank’s forced liquidation payout of deposit coverage by the power of attorney to another person is allowed payout of deposit coverage to heirs in case of death of depositor is allowed provided the appropriate documents are filed payout of deposit coverage to the legal representatives of a minor

10. Payouts through an agent bank The agent bank is assigned on a competition basis from among the member banks. If none of the applicants conforms to the requirements, National postal operator “Kazpost” JSC will be assigned to provide these services. KDIF awards the winning member bank (or JSC “Kazpost”) with an agency service agreement. No fee for services of an agent bank will be paid.

11. Requirements for obtaining the member-bank’s status 1) member of the deposit insurance system 2) continuously (over 6 latest months) compliant with prudential regulations and the minimum reserve requirements 3) licensed for cash operations 4) no valid sanctions by the Central bank

12. The basic criteria for selecting an agent bank The basic criteria for selecting an agent bank complies with the application for an agent bank requirements financially stable having extensive network of offices and branches experienced in making payouts to the depositors ready to provide services on adequate commercial terms, etc.

13. Throughout the history of KDIF’s operations it has faced 3 bank failures, namely: “Komirbank” JSC (2002) “Nauryz Bank” JSC (2005) 163 thousand insured depositors, KDIF’s commitment of 800 mln. tenge (5 mln. USD) “Valyut-Transit Bank” JSC (2007) 270 thousand insured deposits, KDIF’s commitment of 14 billion tenge (91 mln. USD)

14. Specific features of the failed banks’ cases JSC “Nauryz Bank Kazakhstan” 1. Large number of “dormant accounts”. 2. 20,000 depositors reimbursed in the amount of 700 million tenge. JSC “Valyut-Transit Bank” 1. unacceptably low quality of the depositors’ register delivered by the liquidation commission 2. 68,000 depositors reimbursed in the amount of 14 billion tenge 3. a slight deficit of special reserve fund was covered largely with the help of preventive organizational measures taken by KDIF

15. Operational risks associated with reimbursement procedures Pimary role of the KDIF: - to ensure effective and timely reimbursement processes (i.e. timely commencement, immediacy, accuracy and completeness of payouts, and awareness of interested parties) Major challenges: the depositors’ register of low or unacceptable quality provided by the liquidation commission to the KDIF omissions by the agent bank ‘s staff in the reimbursement process. Solution methods: - Establishing requirements to member-banks’ accounting processes and maintenance of automated banks’ information systems on insured deposits and verification of their compliance; - Developing effective automation of the following procedures: 1) the depositors’ register provided by the liquidation commission of the failed banks; 2) payouts of the deposit coverage by the agent bank - Employment of alternative reimbursement methods (upon research and study of IADI members’ relevant experience)

16. Preparatory measures taken by the KDIF In 2007 the requirements for banks on the generation and export of the depositors’ register from the automated bank information system were established Since 2009 KDIF has been conducting inspections at member banks to ensure the depositors’ registers can be generated in accurate manner and in the prescribed timeframe To automate procedures performed by the KDIF’s staff during onsite inspections at member-banks and in case of bank failure, KDIF developed “SALT” Information System

17. “SALT” Information system’s functions - prior to the bank’s forced liquidation: + validation of the depositors’ records against the KDIF’s requirements and their cross- checking against general ledger of a member bank (complete analysis of data, detection of errors, generating reporting data) - after the bank’s liquidation of a member bank: 1. upload and validation of the depositors records against the requirements and their cross-checking against general ledger of a member bank (complete analysis of data, detection of errors, 2. validation of the depositors register’s corrective calculations by the liquidation commission ; their accepting/rejecting on a case-by-case basis, 3. upload of payouts reports prepared by an agent bank and their reconciliation with the depositors’ register on an automated basis; 4. cross-checking of the reimbursed depositors’ files with the payouts’ reports prepared by an agent bank and the depositors’ register via the special System’s interface (manual reconciliation); 5. generating reports on the automatic and manual reconciliation of the payouts’ report against the depositors’ register; 6. tracking of the per-customer payouts and aggregate depositor payouts ; 7. automatic generating of reports required under the legislation as well as customized reports with the goal of analyzing data loaded into the System.

18. Structure of the depositors’ register Depositor’s dataBank account detailsAccount balances Depositor’s indexHeadline, number and date of the bank service agreement (on the current or savings, card account or other), or credit / bank guarantee agreement, date of agreement Deposit’s initial account balance and the amount of accrued interest Full nameCurrency of deposit and counter-claims of the bank to depositor Amount of the counter-claims of the bank to depositor Number, date and issuing authority of identification document General ledger accountBalance of liability of a depositor to a bank resulting from set-off Taxpayer numberAccount identification number for a deposit, current account, card account, loan, accrued interest on deposits and accruals on liabilities Balance of liability of a bank to depositor resulting from set-off Individual identification number Reference agreementCoverage amount owed to depositor Address and phone numberBalance of liability (including interest accrued) to a depositor after making payouts

19. Structure of the report on payouts  Depositor’s data Depositor’s index Full name Identification document Individual identification number  Bank account details Currency Number and date of the bank service agreement Account identification number for savings, current or card account  Payouts data Amount of reimbursement made Date of the depositor’s application for reimbursement Settlement date  Agent bank details Branch of agent bank

20. Generating (incl. exporting) of the depositors’ register (within 5 business days from launching its generation) L oading the depositors’ register into the information system (in XML format), its verification for accuracy and reconciliation against general ledger 1.Loading the depositors’ register into the information system of an agent bank 2.Payouts 3.Generating reports on payouts and their submission along with the reimbursed depositors’ complete files to the KDIF 1.Loading report on payouts into the “SALT” Information system 2.Automatic reconciliation of the payouts’ report against the register 3.Cross-checking of the reimbursed depositors’ files with the payouts’ reports prepared by an agent bank and the depositors’ register via the special System’s interface (manual reconciliation) 4.Generating reports on the automatic and manual reconciliation of the payouts’ report against the depositors’ register The register Liquidation commission The KDIF Agent bank Report on payouts Cumulative report on payouts 14 business days Automated reimbursement process scheme

21. Thank you for attention!