Regulation on the Depositary Accounting of State Securities Issued through the National Bank of the Kyrgyz Republic

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Date of creation: 2018-06-19

Approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 28, 2013 No. 10/9

REGULATION on the Depositary Accounting of Securities Issued through the National Bank of the Kyrgyz Republic

(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated October 30, 2014 No. 47/10, June 23, 2017 No. 2017-P-15/26-3, and May 23, 2018 No. 2018-P-15/18-1)

1. General Provisions

2. (Deemed invalid in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated June 23, 2017 No. 2017-P-15/26-3)

3. This Regulation establishes the procedure for maintaining depositary accounting of securities (hereinafter - Securities) issued through the National Bank in the automated trading system of the National Bank (hereinafter - ATS).

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 23, 2018 No. 2018-P-15/18-1)

3. The Depositary has a two-tier structure consisting of the Head Depositary of the National Bank (hereinafter - Head Depositary) and Sub-depositories authorized to perform functions for accounting for the movement of their own securities and securities of their depositors.

4. Accounting for securities in the Depositary is carried out by the quantity of securities (in units).

5. Definitions and Terms

For the purposes of this Regulation, in addition to those specified below, definitions and terms established in the Regulation on the Operation of the ATS of the National Bank shall apply:

5. Intra-position transfers - operations related to the transfer of securities within one sub-account "depo".

6. Head Depositary - a subdivision of the National Bank performing functions for accounting and storage of securities, registration of transfer and confirmation of ownership rights to securities.

7. Securities issued through the National Bank - state securities issued by the Ministry of Finance of the Kyrgyz Republic on behalf of the Government of the Kyrgyz Republic and notes of the National Bank.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 23, 2018 No. 2018-P-15/18-1)

8. Depositary - a legal entity of the Kyrgyz Republic performing depositary accounting and storage of securities, registration of transfer and confirmation of ownership rights to securities.

9. Depositor - a legal or natural person of the Kyrgyz Republic, or another state, that has opened an "depo" account in the Depositary in accordance with a contract and has the right to issue instructions for performing operations on its "depo" account.

10. Depo-account - a record (or set of records) created for each security for the purpose of their accounting and storage.

11. Depositary operations - operations conducted by the Depositary within the framework of depositary activities and related to entries in "depo" accounts and other data stored in depositories.

12. National Bank repo operations - operations for the purchase (direct repo)/sale (reverse repo) of securities with an obligation to resell/purchase them at a specified future date and at a pre-agreed price.

13. Sub-depository - a depositary that has concluded a contract with the National Bank to perform functions for accounting for the movement of securities and which holds an "depo" account in the Head Depositary.

14. Sub-balance - the minimum indivisible structural unit of depositary accounting opened within a sub-account "depo".

15. Forms and Principles of Organization of Depositary Accounting

16. The main principles of organizing the depositary accounting system are as follows:

• completeness and accuracy of depositary accounting for securities operations;
• temporal certainty;
• separate accounting for securities operations;
• structural independence.

Principle of completeness and accuracy. All securities operations are fully and accurately reflected in the depositary accounting system.

Principle of temporal certainty. Accounting entries in the depositary accounting system are made at the moment the Head Depositary receives the primary document confirming the securities operation or an electronic order in the ATS. The mandatory elements of an accounting entry for a completed operation are the time of execution and the time of reflection in the depositary accounting system.

Principle of separate accounting. Securities of different issuances, including those encumbered with obligations, are accounted for separately from each other.

Principle of structural independence. The existence of a two-tier system of registering organizations - the Head Depositary and Sub-depositories.

4. Participants of Depositary Operations

5. For the purposes of this Regulation, participants of depositary operations are understood to be Depositaries and depositors. Depositaries are divided into the Head Depositary and Sub-depositories.

6. The National Bank acts as the Head Depositary, which:

• opens accounts for the corresponding issuance upon issuance of securities;
• stores documents on the issuance and redemption of securities;
• opens "depo" accounts for depositors in the Head Depositary;
• transfers securities during their secondary circulation between Sub-depositories and depositors;
• closes accounts for the corresponding issuance upon maturity of securities;
• collectively accounts for securities in Sub-depositories by the "depo" account of that Sub-depository belonging to depositors;
• controls the activities of Sub-depositories and establishes the procedure for conducting depositary operations with securities;
• has the right to confirm ownership rights to securities belonging to its depositors.

18. Depositors of the Head Depositary are Sub-depositories, the Ministry of Finance of the Kyrgyz Republic, the National Bank, and other legal entities in cases established by the legislation of the Kyrgyz Republic.

19. Sub-depositories include commercial banks, institutional investors, specialized financial-credit organizations, and other securities market participants that have concluded corresponding contracts with the National Bank and which:

• perform depositary accounting for securities belonging to the Sub-depository;
• ensure storage and accounting of rights to securities belonging to their depositors;
• conduct depositary operations in the ATS;
• perform depositary accounting for securities transferred as collateral;
• credit securities to their depositors' accounts upon primary issuance;
• conduct separate accounting for the securities of each depositor;
• have the right to confirm ownership rights to securities of their depositors.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 23, 2018 No. 2018-P-15/18-1)

20. Depositors of a Sub-depository may be holders of securities - legal or natural persons of the Kyrgyz Republic, or another state, to whom securities belong by ownership right, who are trustees of securities, as well as persons to whom securities are transferred for storage in cases provided by the legislation of the Kyrgyz Republic.

21. Types of "Depo" Accounts and List of Conducted Operations

22. Accounting and storage of securities in the Head Depositary are carried out on "depo" accounts opened for Sub-depositories after concluding corresponding contracts with the National Bank.

23. For the purpose of maintaining analytical accounting within a "depo" account, one sub-account "depo" is opened for each Sub-depository to account for its own securities, and sub-accounts "depo" to account for the securities of its depositors.

24. The own sub-account "depo" is opened for accounting and storage of securities belonging by ownership right to the Sub-depository. The depositor's sub-account "depo" of a Sub-depository is intended for accounting for securities belonging to or transferred to the depositor.

25. Types of sub-accounts "depo" for depositors. Accounting for securities of depositors of a Sub-depository is carried out in the Depositary by the following sections of sub-accounts "depo" depending on the type of depositor:

• legal entities-residents financial;
• legal entities-residents non-financial;
• legal entities-non-residents financial;
• legal entities-non-residents non-financial;
• natural persons-residents;
• natural persons-non-residents.

25. Maintaining accounting information about depositors, their operations, and balances is within the responsibility of Sub-depositories.

26. Sub-balances. To account for securities within each sub-account "depo", sub-balances are opened. Accounting within sub-accounts "depo" is carried out by the following sub-balances:

• frozen securities;
• blocked securities;
• available instruments received as collateral;
• investment;
• pledge in favor of the pledgee;
• pledge for National Bank loans;
• reserve. The sub-balance "Frozen securities" is intended for accounting for securities blocked or frozen by order of the Head Depositary or an authorized state body of the Kyrgyz Republic. Securities from this sub-balance cannot be used by depositors for current operations of purchase, sale, pledge, and intra-position transfers. Intra-position transfers for this sub-balance may be carried out only by the Head Depositary. The sub-balance "Blocked securities" is intended for accounting for securities blocked during the execution of "delivery versus payment" transactions. Securities from this sub-balance cannot be used by participants for current operations of purchase, sale, pledge, and intra-position transfers. The sub-balance "Available instruments received as collateral" is intended for accounting for securities purchased under repo operations. Securities obtained from another participant within repo operations may be used for current operations of the participant: purchase/sale on repo terms, pledge, and intra-position transfers without restrictions within the balance. The sub-balance "Investment" accounts for securities belonging to the depositor by ownership right. Securities from this sub-balance may be used for current operations of purchase, sale, pledge, and intra-position transfers without restrictions within the balance. Redemption of securities is carried out only from the "Investment" sub-balance. The sub-balance "Pledge without transfer of ownership rights to Securities" accounts for securities blocked in favor of the pledgee. Securities from this sub-balance cannot be used for current operations of purchase, sale, pledge, and intra-position transfers. The sub-balance "Pledge with transfer of ownership rights" is used for accounting for securities pledged within "intraday" and "overnight" loans, which cannot be used for current operations of purchase, sale, pledge, and intra-position transfers. Securities are transferred to this sub-balance after loans are issued. The sub-balance "Reserve" is intended for reserving securities during the issuance of "overnight" and intraday loans. Securities reserved by a participant for use as collateral for National Bank refinancing operations ("overnight" and intraday loans) are accounted for on this sub-balance.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 23, 2018 No. 2018-P-15/18-1)

27. A Sub-depository maintains separate accounting for securities for each depositor in accordance with the depositors' sub-accounts "depo" outside the ATS.

28. Grounds for Conducting Depositary Operations. Restrictions on Their Conduct

29. All depositary operations are conducted in the ATS in accordance with the established ATS operation regulations. In case of ATS failures or for other reasons, depositary operations are carried out based on paper "depo" orders in accordance with Appendices 1 and 2 to this Regulation.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated October 30, 2014 No. 47/10)

29. The grounds for making an operation to enter records on the parameters of securities issuance in the Depositary are:

• global certificate;
• protocol extract of the Monetary and Credit Policy Committee, formatted in accordance with normative legal acts of the Kyrgyz Republic and a contract.

30. The grounds for making operations on "depo" accounts in the Depositary are electronic "depo" orders created and transmitted to the ATS. An electronic "depo" order is an electronic document formed in a prescribed format in the ATS. To confirm the authenticity of an electronic "depo" order, an electronic digital signature is used.

31. Electronic "depo" orders are recognized as authentic, identical to corresponding paper "depo" orders, and generate similar rights and obligations of the parties when transferring securities.

32. The grounds for making an operation to close "depo" accounts are documents formatted in accordance with corresponding normative legal acts of the Kyrgyz Republic and contracts.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated May 23, 2018 No. 2018-P-15/18-1)

33. The grounds for conducting operations on the "depo" accounts of depositors of Sub-depositories are corresponding original documents (depositor's orders, contracts, directives, and other documents) depending on the type of operation conducted. The storage period for primary documents is determined by corresponding normative legal acts of the Kyrgyz Republic.

34. "Depo" orders for the transfer of securities on "depo" accounts are accepted for execution in case of correct composition and sufficient securities to carry out the operation.

35. Sub-depositories are responsible for the legality and correctness of conducting depositary operations.

36. Reporting

37. Reporting on depositary operations is formed and submitted by the Head Depositary to the ATS.

38. A Sub-depository submits to the Head Depositary information on owners of securities and other types of reporting upon request by the Head Depositary.

39. Final Provisions

40. The procedure for conducting depositary accounting of securities is regulated by this Regulation, contracts, and the Regulation on the Operation of the ATS of the National Bank.

41. Amendments and additions to this Regulation may be made by the National Bank for the purpose of improving the depositary accounting process.

Appendix 1 to the Regulation on the Depositary Accounting of Securities Issued through the National Bank

National Bank of the Kyrgyz Republic

"DEPO" ORDER

"____________________________________" (name of depositor)

(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated June 23, 2017 No. 2017-P-15/26-3, May 23, 2018 No. 2018-P-15/18-1)

Type of operation: Ownership of securities:

1. Own (underline as necessary)

2. Client's (indicate as necessary)

3. Purchase

4. Sale

5. Purchase on repo terms

6. Sale on repo terms

7. Transfer

8. Receipt

Counterparty bank (Own/Client's) ____________________________ (name) (underline as necessary)

Operation No. Securities Issuance No. Quantity of securities (units) Amount (som) Total

For "initial repo" operations: interest rate, maturity date (indicate).

Operation date ______________ Signature __________________________________________________________ (signature), (Full Name)

Executor: _______________ Tel.: ______________________

Appendix 2 to the Regulation on the Depositary Accounting of Securities Issued through the National Bank

National Bank of the Kyrgyz Republic

"DEPO" ORDER

"_________________________________" (name of depositor)

(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated June 23, 2017 No. 2017-P-15/26-3, May 23, 2018 No. 2018-P-15/18-1)

Type of operation: (underline as necessary)

1. Purchase
2. Sale
3. Purchase on repo terms
4. Sale on repo terms
5. Transfer
6. Receipt

I request to transfer from __________________________ (name of sub-balance) to ______________________ (name of sub-balance) in the Head Depositary for holders of securities (*) in the National Bank of the Kyrgyz Republic the following issuances:

Sequential Operation No. Issuance No. Quantity of securities (units) Amount (som) TOTAL

For "initial repo" operations: interest rate, maturity date (indicate).

Operation date ______________ Signature ________________________________________ (signature), (Full Name)

(*) indicate as necessary.

Appendix 3 to the Regulation on the Depositary Accounting of Securities Issued through the National Bank

ORDER of pledgor (Excluded in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated October 30, 2014 No. 47/10)

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