THE IMPACT OF MARKET CONCENTRATION ON THE FINANCIAL STABILITY OF KAZAKHSTAN'S BANKING SECTOR

Abstract

This article examines the impact of internal and external factors on the stability of the banking sector in the Republic of Kazakhstan. These factors include high inflation, funding costs, and external risks.

The aim of the study is to identify factors that support the stability of second-tier banks, on the one hand, and where systemic risks accumulate, on the other. The study utilized empirical data from the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (ARFMR) and the National Bank of the Republic of Kazakhstan (NBRK), information on bank financial indicators as of January 1, 2026, and analytical materials from Halyk Research, the World Bank, the Bank for International Settlements, and the European Central Bank. The article utilizes systems analysis methods, calculation of the CR5 ratio and the Herfindahl-Hirschman index, and comparison of capital, liquidity, asset quality, and retail lending structure. Calculations show that the sector maintains high capital reserves, profitability, and liquidity. However, stability is vulnerable due to asset concentration at the largest banks, a high share of consumer loans, and growing delinquencies in the retail portfolio. The study proposes measures to strengthen risk-based supervision, support competition, and gradually shift bank lending toward productive investment.