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How development indicators of AIFC financial market changed during pandemic?

Tuesday, 07 July 2020, 18:20:17

During the pandemic, the Astana Financial Services Authority (AFSA) has simplified licensing for certain regulated activities. AFSA also developed guidance to assist firms intending to conduct regulated activities at the AIFC in the development of necessary policies and procedures. Acting General Director of the AIFC Financial Services Authority Mukhtar Bubeyev told about this in an interview for PrimeMinister.kz.

The coronavirus pandemic has made adjustments to the work of financial markets around the world. How did the AIFC regulator, represented by the Astana Financial Services Authority, respond to the challenges?

The financial services market is operating in a new, more complex environment, uncertainty has grown, risks are rising and work models are being rebuilt. In our opinion, the consequences of the pandemic significantly reduced the business activity of the real sector and the attractiveness of the financial markets of developing countries.

Since the introduction of the quarantine regime, the Committee has continuously and fully performed the functions of registration, licensing, supervision and enforcement. The Committee employees work remotely and have all the necessary digital solutions for timely and effective consideration of requests from AIFC participants and consumers of financial services and holding meetings with them. This allows the Committee to focus on its regulatory tasks to promote financial stability, ensure market integrity, protect consumers and support financial markets in AIFC.

The COVID-19 pandemic did not affect the timing of processing applications for registration and issuing licenses. For registration, companies still need 5 working days, provided that the application meets all the requirements, while the issuance of licenses is on average 15 working days for support service providers and 50 working days for financial companies.

We understand that the current business environment has changed significantly and would like to allow the AIFC business to focus on its current activities and solving operational problems. In this regard, the financial regulator acts as a key link with its mechanisms of checks and balances. The essence of our common approach is the constant development of the regulatory environment, taking into account business-friendly principles and risk-based supervision.

First, as a measure of support by the Committee, the procedures for obtaining a license for certain types of regulated activities were greatly simplified. This applies to six regulated activities: (1) investment advisory services, (2) organization of investment transactions, (3) credit advisory services, (4) credit organization, (5) insurance intermediation (without client funds) and (6) insurance management. In particular, the requirements to provide certain documentation in response to requests from potential participants to simplify the processes and requirements of AFSA are excluded.

Secondly, we have developed guidelines to assist firms intending to carry out regulated activities in the AIFC in developing the necessary policies and procedures (compliance, risk management, combating money laundering and terrorist financing, internal control and procedures, continuity business, conflicts of interest).

These steps are intended to assist firms in deciding to establish an AIFC, to help create their own systems and controls, and in the licensing process.

Thirdly, the Committee developed a package of support measures, including postponing the deadlines for submission of reports by licensees and fulfilling a number of requirements, extending the time for disclosure of information by reporting organizations regarding their annual financial report no later than Sep. 1, 2020.

Such support measures are in line with international practice. We are in constant contact with international organizations such as the International Organization of the Securities Commission (IOSCO), the International Association of Insurance Supervisory Authorities (IAIS), the Basel Committee on Banking Supervision, the International Organization for the Protection of Consumers of Financial Services (FinCoNet), as well as with foreign and national regulators and monitor the support measures they recommend in response to the aftermath of the COVID-19 pandemic. Their measures and recommendations include postponing the deadlines for reporting, fulfilling regulatory requirements, giving additional instructions on consumer protection, and the Basel Committee has postponed the deadline for introducing changes to the Basel III reform package, etc.

What are the indicators for the development of the AIFC financial markets in the pandemic?

The development of the AIFC jurisdiction and the AIFC financial markets has a positive trend. Since the beginning of the year, AIFC registered 122 new participants, of which about 70 companies were registered during the quarantine period. We are pleased that the business is making decisions on the establishment of the AIFC, despite the pandemic.

To date, 500 companies are registered under the AIFC jurisdiction. These companies represent more than 40 countries, among which the majority of companies from Kazakhstan, Russia, China, Great Britain, the USA, India, Finland, Singapore, the United Arab Emirates, the Netherlands, Turkey, Switzerland, Germany, Italy. Market infrastructure institutes, banks, asset management companies, brokers, investment advisers, and ancillary services providers are coming.

In addition, 22 companies work in the Committee's fintech laboratories, developing innovative financial services in areas such as cash / banking, digital assets, robo consulting, Islamic finance, crowdfunding and factoring.

AIFC banking sector assets reached $365 million, capital markets also showed growth, and equity capital raised through the AIFC exchange amounted to $291 million.

Does the Committee plan to take further measures to support the development of financial markets?

Yes, of course. First of all, we continue to work closely with the financial community to assess the economic impact of the pandemic on the activities of financial companies. Based on the feedback we receive, we regularly consider the possibility of providing regulated companies with support measures in a number of areas to allow them to focus on their priorities in this difficult period for economic activity.

In addition, we plan to implement a number of legislative initiatives aimed at further developing financial markets, including green financing instruments, venture financing, and providing medium-sized companies with the opportunity to raise capital on the AIFC exchange in the segment of the regional stock market. As new measures and initiatives are taken, we will talk in more detail about them.

Thank you for the interview!

It is worth noting that SWISSFE CENTRAL ASIA LTD became the 500th company in the AIFC jurisdiction. SWISSFE LTD is a privately held global real estate and asset management investment company with a unique portfolio in Germany, Holland, Australia, USA, India, Malaysia, Great Britain, Serbia, Czech Republic, China, South Korea, Spain and Denmark.

By 2020, the company manages assets worth 1.8 billion Swiss francs. SWISSFE LTD invests in high-quality innovative assets, focusing on industrial and infrastructure assets.

AIFC Governor Kairat Kelimbetov noted that two years after the official opening in July 2018, the AIFC is moving to a new stage of development, in which we are gradually moving from creating infrastructure to focusing on promoting business activity and investment in the region.

“The role of AIFC Business Connect is to support the commercial goals of our participating organizations by promoting the benefits of registering with the AIFC and ensuring the ease of doing business after the establishment of the company within the Center. I am glad that the company with a global reach SWISSFE CENTRAL ASIA LTD decided to develop its business in Kazakhstan and the region as a member of the AIFC and became the 500th company to register with the AIFC,” said James Martin, Director General of AIFC Business Connect.

According to Chair of the Board of SWISSFE CENTRAL ASIA LTD Gokan Yesilgoz, AIFC offers an excellent platform for international investment companies, including English law and tax incentives, as well as the protection of foreign investors.

“As SWISSFE CENTRAL ASIA LTD, we see the opening of new opportunities for our investment portfolio in Kazakhstan,” he emphasized.

AIFC participants carry out their activities in such areas as banking, insurance, the stock market, asset management, private banking, Islamic finance, credit ratings, legal advice, accounting, holding companies and many others. At the moment, the assets of the AIFC banking sector have reached $365 million, capital markets have also shown growth, and attracted equity capital amounted to $291 million.

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