Experts from Kazakhstan’s National Bank have criticized the current implementation of minimum reserve requirements (MRR), one of the country’s key monetary policy tools, arguing that it operates too passively.
MRR mandate financial institutions to hold a certain percentage of their deposits in accounts with the central bank. In most countries, MRR serve multiple functions: regulating money market rates and liquidity, establishing liquidity buffers for financial institutions, strengthening the financial system’s resilience to systemic risks and ensuring the effectiveness of monetary policy across different economic conditions. However, the specific objectives of MRR may vary depending on a country’s economic and financial landscape.
Reserve requirement rates in Armenia, Belarus, Russia, Kyrgyzstan and Uzbekistan are generally comparable, while Kazakhstan’s requirements remain relatively low. In these countries, the average reserve requirement for commercial bank liabilities in national currency is approximately 4%, compared to Kazakhstan’s 0% to 2%, depending on deposit maturity. For liabilities in foreign currency, the average is 15%, whereas the rate in Kazakhstan ranges from 1% to 3% based on maturity.
The National Bank also points out that amendments to MRR in Kazakhstan can take up to three months to implement, as they must be coordinated with the National Chamber of Entrepreneurs «Atameken» and expert councils. This process can arguably restrict the National Bank’s independence.
Analysts at the National Bank observe that MRR is the least actively used monetary policy tool in Kazakhstan. In contrast, all other countries examined use it much more frequently.
«The low levels of regulation, especially compared to Armenia, Belarus, Kyrgyzstan, Russia and Uzbekistan, limit the effectiveness of MRR in Kazakhstan,» the analysts stated.
The regulator believes that ongoing issues in Kazakhstan, including a structural liquidity surplus (where banks deposit excess funds with the National Bank) and the high costs of managing this surplus amid an elevated base rate, underscore the urgent need to reform the MRR framework. Key areas for improvement include standardizing maturity requirements and adapting the instrument to current economic conditions.
«Revising these approaches will not only improve liquidity management but also strengthen the national economy’s resilience to internal and external challenges,» the regulator concluded.
