The two major objectives of the National Bank of Kazakhstan (NBK) are to maintain macroeconomic stability (including stability of national currency and low and predictable inflation) and to serve as the main regulatory authority in the banking sector.

According to the Constitution, the Chairman of the NBK is appointed by the President and is subject to Parliament approval.

As of 14 January 1998, a total of 77 banks met the requirements set out in the NBK’s regulation "On Transformation of Second-Tier Banks to International Standards ".

The aggregate of second-tier bank capital totalled US$ 437.1million as of December 1997. While on January 1 of the same year, this figure estimated in accordance with the Provisions on prudential standards as approved by the NBK Board on 29.02.96, was US$ 178.8 million. This reflects a significant trend towards increased capitalisation of Kazakhstan’s second-tier banks.

Since 1997, the Government finances the budget deficit exclusively through the issuance of Government debt securities (T-bills of different maturity). The Ministry of Finance issues T-bills of 3, 6, and 12 months’ maturity.

All activities related to securities (both government or corporate) are regulated by the National Securities Commission (NSC). This is an independent organisation, not part of the government, but reporting directly to the President of the Republic. The NSC was set up in 1995 and acts as a unique licensing body in the securities market, controlling the activities of its professional participants, stock exchanges and issuers and protecting their rights. Occasionally, the NSC checks the activities of issuers and other security market participants. If any breaches or violations are detected, the NSC has the authority to suspend the issue or revoke the license.

The Kazakhstan Stock Exchange (KASE) is a non-commercial self-controlled organisation in the form of a closed joint-stock company. The KASE registered in this form in July 1997.

To properly organise security trading, in 1996 the NSC chose a model stock exchange. At the end of the year the tender was won by the Kazakhstan Stock Exchange (a part of Kazakhstan Stock Exchange and International Kazakhstan Stock Exchange). Some 23 banks and financial institutions became the founders of the KASE. At present, the number of shareholders stands at 31. The KASE was established to trade corporate and government securities. Trading is conducted by continuous auction on an electronic system. At the end of 1997, companies participating in the KASE had the opportunity to begin trading by remote access. The first trading of corporate shares began in September 1997. The first company to be listed on the KASE was the joint-stock bank Neftechimbank. At first, trading took place twice a week, but since February 1998 has been organised on a daily basis. These are important initial steps towards the establishment of steady trading.

Following Naftechimbank, shares of other enterprises were included in different listings of the KASE.

Trading of Government securities on the KASE were suspended in 1996. For a year, T-bills and National Bank notes were traded on the OTC market only, the trade being registered and controlled by the Central Depository. Since early 1998 trading has been renewed.

The Kazakhstan Stock Exchange has established requirements for companies to be traded on the Exchange. The listing of KASE comprises 5 categories: A-listing, B-listing, Additional listing (pre-listing), State Blocks of Shares and non-listed companies.

To be included on the A-list, a company must have a background of at least three years of operation, to have been profitable for the last two years, to have over 500 shareholders and to have a registered issue equivalent to at least US $1 million. At present, the only company on the A-list is Kazkommertsbank.

Companies included on the B-list of KASE must have operated for at least one year, have over 100 shareholders and an issue of at least 10,000 shares. The issued volume must exceed US $500,000 equivalent. As of February 1998, the B-listing of KASE includes the shares of four companies: common shares of Lariba Bank, common and preferred shares of Shymkent Oil Refinery (SOR), common and preferred shares Kazakhtelecom, common and preferred shares of Ust-Kamenogorsk Titanium and Magnesium Plant (UKTK).

The documentation for A and B listings must comply with new accounting standards. Besides, the companies are to be audited by an authoritative and widely recognised auditing company.

The pre-listing floor trades common and preferred shares of 8 companies: Aidabulsky Distillery, Altyn Den (granary), Aluminium of Kazakhstan, JSC Borly (coal producer), Kazchrome, MangystauMunaiGas (Kazakhstan's largest oil and gas producer), Neftechimbank, AktobeMunaiGas (the third largest oil producer in Kazakhstan).

For various reasons, some companies cannot be included in either listing and are therefore traded on the non-listing floor of the Kazakhstan Stock Exchange. These companies are: KazZinc (metallic zinc, refined lead, refined copper, gold and silver producer), EmbaMunaiGas (the oldest oil-producing enterprise), Atyrau Refinery.

Any listed company (except those on the A-list) can be upgraded upon submission of appropriate documentation.

KASE also trades state packages of shares (sold in lots) in 6 companies.

As at the beginning of 1998, the most popular corporate securities on the market are common shares of Kazchrome, common and preferred shares of AktobeMunaiGas, common and preferred shares of MangystauMunaiGas, common shares of JSC Merei (on the OTC market) and preferred shares of Kazakhtelekom. The securities with maximum turnover are the preferred shares of AktobeMunaiGas.

In April 1997, the shareholders’ AGM of the Kazakhstan Stock Exchange resolved to separate currency and security trading into different Exchanges. Thus, the Almaty Financial Instruments Exchange (AFINEX) was formed. This took over the trading in foreign currencies, futures, and other financial instruments, with the exception of securities.

The AFINEX accumulates and circulates the majority of free capital available on the market. In 1996 it sterilised US $1.3 bln and DM 15 mln. By end 1997, its traded volumes had decreased slightly to US $1.1 bln and DM 11.2 mln. Trading in the Russian Rouble was considerable in 1996, equivalent to US $11.4 mln (RR 152.5 mln), but in 1997 no Rouble trading occurred at all.

In 1997, 257 trades were held at AFINEX. The US Dollar accounted for 99.4% of total traded volumes and the Deutsche Mark for 0.6%.

However, most trades still occur on the inter-bank currency exchange market. Total traded volumes in 1997 exceeded US $ 2.3 bln while trading in the DM amounted to DM 46 mln and transactions with the Russian Rouble totalled RR 490 bln.