DIFFERENTIAL PREMIUM SYSTEM «BATA» Kazakhstan Deposit Insurance Fund BAKHYTGUL TUYAKOVA HEAD OF METHODOLOGY AND DIFFERENTIAL PREMIUM RATE S CALCULATION DEPARTMENT

According to the Rules on Deposit Insurance System’s functioning and participation of the second-tier banks in it (the Rules are expired). The DIS member-banks paid their calendar premiums to the KDIF at a single/flat premium rate : During first two years of their membership in the DIS - 0,25 % from the total amount of insurable deposits; In subsequent years - 0,16 % from the total insurable deposits; CALENDAR PREMIUMS OF THE MEMBER- BANKS BEFORE JANUARY 1, Kazakhstan Deposit Insurance Fund

STAGES OF DPS DEVELOPMENT  Analysis of the international practice in the development of the Differential Premium System;  Development of certain quantitative and qualitative indicators, reflecting all the banks’ various activities (risks) to the maximum extent;  Statistical testing of the quantitative indicators (T-test, F-test and factor analysis);  Establishment of the threshold values for all the indicators, assignment of score points to all the indicators and their groups;  Calculation of a bank’s final aggregate score on the basis of historical data, establishment of the optimum number of historic periods (for the 7 quarters);  Fixing optimum differential premium rates’ values for each of the member banks’ classification groups; Kazakhstan Deposit Insurance Fund

DIFFERENTIAL PREMIUM SYSTEM  DPS was introduced in 2007  calculation of the differential rates and premium payments are carried out on the quarterly basis.  revision of the DPS is carried out on a regular basis (once every 2 years). The last revision was conducted in Kazakhstan Deposit Insurance Fund A combined criteria approach is used, quantitative and qualitative indicators are allocated in the following proportion: % out of total score Maximum possible score Quantitative indicators (15) 70%115 Qualitative indicators (6) 30%50

QUANTITATIVE INDICATORS: Group of indicators Number of indicators Maximum score CCapital adequacy430 AAssets quality325 A1Assets concentration215 EEarnings429 LLiquidity216 Total15115 Kazakhstan Deposit Insurance Fund

Group of indicators Indicator Indicator’s description Maximum score C Capital adequacy C1К1-1 ratio from prudential requirements 30 C2К2 ratio from prudential requirements C3К1-2 ratio from prudential requirements C4C4 Average of Own Capital (over 4 quarters)/Average of assets (over 4 quarters) A Assets quality A1 Classified assets and contingent liabilities – homogeneous loans+ provisions on hom-s loans / (Classified + standard assets and contingent liabilities + Accrued income on loans and financial leasing+ arrears on interest income on loans and fin-l leasing ) 5 A2 Doubtful debts of 4+ 5 categories+ Bad debts/ Total loan portfolio 10 A3 Doubtful assets of 4+ 5 categories+ Bad assets and contingent liabilities / Assets before provisions + Contingent claims) 10 QUANTITATIVE INDICATORS: Kazakhstan Deposit Insurance Fund

QUANTITATIVE INDICATORS: Group of indicators Indicator Indicator’s description Maximum score A1 Assets concentration A1-1 Total concentrated loans classified depending on the types of economic activity (exceeding 20% of Own Capital)/Total loan portfolio 15 A1-2 ) Mortgage loans/ (Total loan portfolio + securities in the bank’s portfolio + capital investment) EEarnings E1 Net income before provisions (for 4 quarters)/Average risk weighted assets ( for 4 quarters) 5 E2 Average retained earnings (for 5 quarters) – 1 standard deviation of retained earnings 6 E3 (4*interest income for quarter/Average of interest-bearing assets, for quarter) – (4*interest expenses for quarter/average of outside funds, for quarter) 9 E4 (4*(interest income for quarter– interest expenses for quarter))/Average interest –bearing assets, for quarter 9 LLiquidity L1Liquid assets / Total assets9 L2 (Assets – liabilities to 1 year+ Assets – liabilities from 1 to 2 years+ Assets – liabilities from 2 to 3 years+ Assets – liabilities from 3 to 5 years) / Total liabilities 7 Total115 Kazakhstan Deposit Insurance Fund

Indicators Indicator’s description Indicator’s description Maximum score Q-1 Fulfillment or violation of prudential requirements and minimal reserve requirements; 12 Q-2 Fines and sanctions applied to the member banks by the regulatory body and KDIF; 15 Q-3 External long-term credit ratings provided by international rating agencies (Standard & Poor’s, Moody’s and Fitch); 10 Q-4 Compliance with recommended maximum interest rates on deposits; 0 Violation of recommended maximum interest rates on deposits;S Q-5 Increase in the scores of the quantitative indicators by 5 or more points for the quarter compared to the previous period; 5 Absence/presence of the turnover in the Board of Directors and Management of the bank by more than 1/3 over the reporting quarter 3 Q-6Increase of the basic EPS compared to the previous financial year5 Total50 QUALITATIVE INDICATORS: Kazakhstan Deposit Insurance Fund

BANK’S AGGREGATE SCORE CALCULATION Final scores for the last seven historic quarters are taken into account in the calculation of the bank’s “aggregate score” Geometric progression was selected as the way to assign weights to all the seven historic periods in the calculation of the bank’s “aggregate score”, assigning the largest weight (50%) to the final score of the last reporting quarter and so on in descending order: Period (quarter) 1 (reporting quarter) Weight (%) Kazakhstan Deposit Insurance Fund

CLASSIFICATION GROUPS AND PREMIUM RATES Kazakhstan Deposit Insurance Fund Classification group Aggregate score Differential premium rate (% per quarter) ≤< A ,04 B ,08 C ,11 D ,19 E0800,38 S0,50

ALLOCATION OF THE DIS MEMBER-BANKS AMONG CLASSIFICATION GROUPS: Kazakhstan Deposit Insurance Fund

Thank you for your attention! Kazakhstan Deposit Insurance Fund