Kazakhstan weighs establishing its own rating agency

A regulator has proposed a new draft legislation to broaden access to rating agencies for businesses / Photo: Shutterstock, photo editor: Arthur Aleskerov

The Agency for Regulation and Development of the Financial Market (ARDFM) has prepared a draft law on credit rating agencies. The regulator expects that once the law is adopted, a new national rating agency will be established in Kazakhstan.

The draft law is currently available on Legalacts.egov.kz for public consideration, which will last until Feb. 25. The document aims to:

Protect the rights and interests of those subject to ratings, as well as users of credit ratings.
Create conditions necessary for the development of the local rating services market.
Foster favorable conditions for the further development of the capital market and its infrastructure.

«This law will promote fair competition in the rating services market, making these services more accessible to a broader range of businesses, ensuring high-quality ratings and facilitating the further development of the capital market,» reads an explanatory note to the draft law.

The draft law also includes requirements for the ratings themselves, the quality of information in them, as well as for the executives and shareholders of the future rating agency in Kazakhstan.

The new legislation is expected to streamline the:

Development of the market infrastructure for unsecured business financing (with credit risk), including the corporate bond market.
Development of securitized bonds (such as mortgages, business loans and leasing assets).
Reduction of rating service costs for Kazakhstani companies, including small and medium-sized businesses.
Protection of unqualified investors’ rights in the bond market.
Establishment of a national center of competence for credit risk assessment.
Increase in the autonomy of the financial sector (reducing dependence on international and regional rating agencies).
Creation of a Kazakhstani rating agency capable of making comparisons across the Eurasian Economic Union.

The ARDFM expects to achieve these goals within 7 years after the law is adopted.

Moreover, the draft law will regulate the process of accrediting and supervising rating agencies in Kazakhstan. It also grants the ARDFM the authority to oversee these agencies. Currently, there are no representative offices of major international rating agencies — such as Moody’s, S&P, or Fitch — though they provide services to many public companies in Kazakhstan.