Resolution of the Board of the National Bank of the Kyrgyz Republic No. 32/8 of August 28, 2013 on Amendments to Certain Regulatory Legal Acts

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of August 28, 2013 No. 32/8

On Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic

In accordance with Articles 7 and 43 of the Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic resolves:

1. Approve the attached amendments and additions to the following regulatory legal acts of the National Bank of the Kyrgyz Republic:

• Regulation "On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of a Pilot Project", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 32/2 dated October 30, 2006;

• Regulation "On Operations Performed in Accordance with Islamic Banking and Financing Principles", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 38/8 dated September 23, 2009;

• Interim Regulation "On Requirements for Standard Contracts Concluded in Accordance with Islamic Banking and Financing Principles", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 39/4 dated September 30, 2009.

2. This resolution shall enter into force upon the expiration of fifteen days after its official publication.

3. The Legal Department:

• publish this resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, send this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

4. The Supervision and Licensing Methodology Department shall bring this resolution to the attention of commercial banks.

5. Control over the implementation of this resolution shall be entrusted to the Deputy Chairman of the National Bank of the Kyrgyz Republic Z.L. Chokoev.

Chairman	Z. Asankozhoeva

	Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic of August 28, 2013 No. 32/8

Amendments and Additions to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic

I. Make the following amendments and additions to the Regulation "On the Implementation of Islamic Financing Principles in the Kyrgyz Republic within the Framework of a Pilot Project", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 32/2 dated October 30, 2006:

1. Rephrase the eleventh paragraph of point 6 of Chapter 2.3 of Section 2 as follows:

"The Bank may conclude a sales contract either independently or through an agent. As an agent, the Bank may appoint a client; in this case, the client acts at the expense, in the name, and on the instructions of the Bank, under the terms stipulated in the agency agreement, which must reflect the following: the subject matter of the contract, names of the parties and the goods, payment terms and deadlines, documents confirming the purchase-sale operation, and other conditions."

2. Rephrase subpoint a) of point 6 of Chapter 2.3 of Section 2 as follows:

"a) the Bank itself must pay the Seller for the goods without crediting funds to the account of the client acting as an agent. The Bank may provide funds to the client acting as an agent only in the following cases:

• if the seller of the goods is an individual entrepreneur operating in accordance with the current legislation of the Kyrgyz Republic;

• when the goods are purchased outside the Kyrgyz Republic.

In this case, the total volume of funds provided to clients acting as agents under agency agreements must not exceed 20% of the Bank's financing portfolio for murabaha operations.".

3. Supplement Chapter 2.6 of Section 2 with point 50 of the following content:

"If the Bank's actual costs for completing production or construction, which are the subject of the contract, are significantly lower than the estimated costs, or if the Bank obtains a discount from the party with which it has concluded a Parallel Istisnaa contract to acquire the subject matter and fulfill the contractual obligation, the Bank has the right not to pass the discount to the final buyer, and the latter has no right to the amount or part thereof that the Bank received above the estimated costs. The same rule applies when the actual production costs are significantly higher than the estimated costs. In this case, the difference received by the Bank as income must be reflected in other income from the Bank's operations."

II. Make the following amendments to the Regulation "On Operations Performed in Accordance with Islamic Banking and Financing Principles", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 38/8 dated September 23, 2009:

1. Rephrase the eleventh paragraph of point 2.3.6 of Chapter 2.3 of Section 2 as follows:

"The Bank may conclude a sales contract either independently or through an agent. As an agent, the Bank may appoint a client; in this case, the client acts at the expense, in the name, and on the instructions of the Bank, under the terms stipulated in the agency agreement, which must reflect the following: the subject matter of the contract, names of the parties and the goods, terms, payment deadlines, documents confirming the purchase-sale operation, and other conditions."

2. Rephrase subpoint a) of point 2.3.6 of Chapter 2.3 of Section 2 as follows:

"a) the Bank itself must pay the Seller for the goods without crediting funds to the account of the client acting as an agent. The Bank may provide funds to the client acting as an agent only in the following cases:

• if the seller of the goods is an individual entrepreneur operating in accordance with the current legislation of the Kyrgyz Republic;

• when the goods are purchased outside the Kyrgyz Republic.

In this case, the size of the total volume of funds provided to clients acting as agents under agency agreements is established by the National Bank."

III. Make the following amendments to the Interim Regulation "On Requirements for Standard Contracts Concluded in Accordance with Islamic Banking and Financing Principles", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 39/4 dated September 30, 2009:

1. Rephrase the second sentence of point 2.1.5 of Chapter 2 of Section 2 as follows: "As an agent, the Bank may appoint a client; in this case, the client acts at the expense, in the name, and on the instructions of the Bank, under the terms stipulated in the agency agreement, which must reflect the following: the subject matter of the contract, names of the parties and the goods, terms, payment deadlines, documents confirming the purchase-sale operation, and other conditions."

2. Rephrase subpoint a) of point 2.1.5 of Chapter 2 of Section 2 as follows:

"a) the Bank itself must pay the Seller for the goods without crediting funds to the account of the client acting as an agent. The Bank may provide funds to the client acting as an agent only in the following cases:

• if the seller of the goods is an individual entrepreneur operating in accordance with the current legislation of the Kyrgyz Republic;

• when the goods are purchased outside the Kyrgyz Republic.

In this case, the size of the total volume of funds provided to clients acting as agents under agency agreements is established by the National Bank."