Chair of the Association of Financiers of Kazakhstan (AFK), Elena Bakhmutova, commented on the proposed provisions in the new draft law on banks regarding disclosure of banking secrecy and repossession of housing from debtors.
– Elena Leonidovna, what provisions regarding banks’ work with individual debtors are included in the new draft law on banks?
– The procedure for handling debts owed by individuals hasn’t changed significantly. Overdue debts can still be transferred to collection agencies, but only after two years from the start of the delinquency. Before that, banks are required to go through a formal debt settlement procedure.
Debts may be transferred to collectors earlier than the two-year mark, for the purpose of collection activities, but the borrower still owes the bank. If the bank transfers the claim to a collector, then the collector becomes the creditor and is solely responsible for handling the settlement and recovery process.
The draft also retains the provision for transferring claims to a servicing company under trust management—typically used in cases of debt securitization and bundled sales. If these bundled claims to individuals are transferred to non-regulated entities, they must be managed by licensed servicing companies (such as distressed asset management subsidiaries or certified debt collection agencies).
– The draft law also preserves the rule that banks cannot evict a debtor from their only residence. Furthermore, a socially vulnerable debtor can rent their home with an option to buy it back from the lending bank. From a social justice perspective, this may seem fair, but how does the banking sector view this?
– Yes, this provision still exists and has carried over into the new draft. The idea is that the bank must lease the foreclosed property—formerly owned by the debtor—back to the debtor, effectively making them a tenant with an option to buy.
– So the bank cannot repossess the property entirely but must lease it back with a buyout option. Is this a reasonable setup? After all, property must be maintained, and taxes must be paid. Is this really the bank’s job?
– There are many nuances here. But in my view, this mechanism is fundamentally irrational—for both the bank and the individual. Social protection issues should be addressed by public institutions.
If the state wants to protect a socially vulnerable yet insolvent borrower from being evicted from housing that no longer belongs to them, there must be a reasonable buyout mechanism at fair market value. The new property owner could be a quasi-governmental organization under the “Baiterek” holding or a specialized entity affiliated with local governments.
These entities would then handle the problems of insolvent debtors—offering social rental housing, preferential loans for purchasing a new or former apartment, employment assistance, or state social aid, in coordination with social services.
The state has a broad array of effective tools for addressing the housing issues of vulnerable citizens, and significant budgetary resources are allocated to this annually. Unfortunately, the new banking law, which was supposed to address these inconsistencies, has preserved outdated and ineffective norms.
– There are now initiatives to develop a market-based mortgage system. In that case, does the issue of foreclosing on debtor property become even more relevant?
– It’s already extremely relevant. If you look at the existing bans on evicting insolvent debtors, you’d conclude that residential real estate is hardly a liquid asset.
– What prospects do you see for the development of a market-driven mortgage system?
– As soon as inflation reaches the target level of about 5%, a functioning market-based mortgage system will become possible. At today’s interest rates, market mortgages are stagnating. But lowering borrowing costs alone isn’t enough.
We also need to restore the debt capital market and implement securitization programs—where issued mortgage loans are packaged and sold to investors. This would allow banks to reuse the same resources multiple times to issue new mortgages. For the borrower, nothing changes, but the bank can greatly expand its loan offerings by recouping funds from the sold mortgage pool.
This only works if there’s a liquid debt capital market, where bond trading occurs regularly and helps determine fair pricing and capital cost benchmarks. It’s a complex task requiring comprehensive action from regulators and the government—including a reassessment of how state financial support for business is structured.
photo by Katerina Malama
– Let’s talk about banking secrecy. You’ve said that too much personal data being shared with state agencies could damage the banking sector. In limiting personal data sharing, isn’t it the customers who lose out most? Could we see capital flight into foreign banks, crypto, or gold?
– Let’s not dramatize. Banks already have to provide access to banking information under current laws. What we’re arguing is that any such access should be governed strictly and solely by the banking law.
That is, rules around access to banking secrecy should be clearly defined only in Article 69 of the new banking law—not scattered across other laws. This is something the National Bank also supports. From there, we need a rational discussion about who needs access, for what reasons, and under what conditions.
Another key issue is the transmission of this sensitive data between state agencies. Government bodies should access this information strictly within their legal remit and bear full responsibility. They must not share it with other agencies unless the law explicitly permits such transfer.
Unfortunately, data sharing between agencies is common practice now. For example, the National Bank may receive banking information for its own use—but then that same information is shared across different agencies upon request, making it hard to ensure proper oversight and accountability.
In this age of digital integration, there's a trend toward merging databases without fully considering the consequences—especially when it comes to storing and processing personal data and banking secrets without adequate protection. These risks are usually only acknowledged after a data breach has occurred—and even then, finding the responsible party is often difficult.
– Most information requests to banks come from tax authorities, to identify tax delinquents…
– Yes, but it's worth noting that tax data is also protected under the Tax Code. Tax officials tend to be cautious about disclosing such data, though in some cases banks are legally entitled to access it. Likewise, tax authorities are permitted access to banking data.
It’s important this access isn’t abused and that data disclosure doesn’t have negative consequences. To ease the burden on citizens, most information for tax declarations is now pulled automatically from relevant databases—particularly balances and account activity.
Recently, tax authorities submitted a sweeping request to all banks for data on two million clients, based on an attached list. Technically, they have the right. But from a practical standpoint, it’s neither safe nor efficient to transfer and store such vast quantities of sensitive data.
If we prioritize the interests of law-abiding citizens, we can usually find mechanisms that minimize the risks of excessive disclosure while still enabling state agencies to fulfill their mandates effectively.
