KAZAKHSTAN: Thomas Murray Re-Affirms Depository Rating of KACD

Thursday February 25 2016

Thomas Murray has re-affirmed the Public Depository Rating for The Central Securities Depository of the Republic of Kazakhstan (KACD) at `A+`, `Low Overall Risk`.

The overall rating of `A+` reflects the weighted average of eight individual risk components and indicates a low risk exposure profile with `On Watch` outlook. Although the overall rating remains stable, improvements in different components have been observed during the last year. Accordingly, there has been an upgrade of the financial risk component (from A+ to AA) and the operational risk component (from A to A+).

Financial risk has improved as KACD now receives the full explicit support of the National Bank of Republic of Kazakhstan (NBK) should the depository face any losses at any point in time. Such backing would guarantee that KACD continues operations, if the entity finds itself under financial stress. In turn, this would ensure the market`s stability. In addition, NBK has opened an unsecured credit facility for KACD to guarantee access to liquid resources if the depository requires. The support is subject to the implementation of a sound risk management framework at KACD. In order to meet this requirement KACD has been strengthening and tightening its risk framework over the last three years.

The operational risk component was upgraded as KACD has enhanced its communications capabilities between the Disaster Recovery (DR) and main sites, guaranteeing permanent connection between both operational locations at optimal capacity. In addition, the depository improved the data protection arrangements between servers at the DR and main sites when recording market information. As a result, data mirroring now takes place on a real-time basis providing a stronger arrangement to protect the market`s records.

The rating outlook has been put `On Watch` as there are a series of developments taking place in the next year that could affect KACD`s rating. However, the full impact of these development projects cannot be determined at this stage. One of those developments is the full implementation of the T+2 settlement cycle for the securities included in Kazakhstan Stock Exchange (KASE)`s index. Additionally, the wider use of ISO 20022 standard SWIFT messages in the local market and the enhancement of the depository`s internal audit arrangements are two areas that continue to be developed.

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