Regulation on Requirements for a Bank's Financial Rehabilitation Plan

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Creation date: 2026-01-22

Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 26, 2025 No. 2025-P-12/70-5-(NPA)

REGULATION

"On Requirements for a Bank's Financial Rehabilitation Plan"

1. General Provisions

2. This Regulation establishes unified requirements for the content, procedure for development, updating, and submission to the National Bank of the Kyrgyz Republic (hereinafter – the National Bank) of the financial rehabilitation plan of a commercial bank, aimed at enhancing financial stability and protecting the interests of depositors and creditors, as well as requirements for the action plan for financial rehabilitation.

3. The action of this Regulation extends to commercial banks, including those conducting operations in accordance with the principles of Islamic banking and finance (hereinafter – the Bank).

4. The Bank develops a financial rehabilitation plan (hereinafter – the Rehabilitation Plan), containing measures aimed at restoring and/or maintaining capital adequacy, liquidity levels, and financial stability in the event of a significant deterioration in financial condition. The Rehabilitation Plan must take into account the nature, scale, complexity, and features of the Bank's activities.

5. Systemically important banks must submit the Rehabilitation Plan to the National Bank no less than once a year. Banks that are not systemically important must submit the Rehabilitation Plan to the National Bank no less than once every two years.

6. The Rehabilitation Plan is subject to updating and submission to the National Bank also upon the occurrence of a significant change in the legal, financial, or business situation of the Bank or its organizational structure, capable of having a significant impact on the content or feasibility of the Rehabilitation Plan.

7. Regardless of the established frequency, the National Bank has the right to require banks to submit and/or update the Rehabilitation Plan more frequently.

8. Significant changes in the legal, financial, or business situation may include a number of cases, in particular:

1. significant losses at the Bank amounting to more than 10 percent of the Bank's equity capital;

2. reorganization of the Bank (merger, accession) or the Bank's implementation of significant investments in the shares of another legal entity, if the investment amount exceeds 10 percent of the Bank's equity capital, including cases of the formation of a banking group;

3. the Bank's exit from the composition of a banking group;

4. events in the field of risk management and internal control:

a) expression by the external auditor of a qualified opinion, adverse opinion, or disclaimer of opinion on the Bank's financial statements;

b) termination of the powers of the Chairman of the Board of Directors/Management Board, two or more members of the Board of Directors, or three or more key employees of the Bank on grounds related to their business reputation;

c) an operational event threatening the continuity of the Bank's activities.

5. other events that have a significant impact on the Bank's risk profile and require a review of the Rehabilitation Plan, including significant changes in legislation or regulation, the introduction of restrictions/sanctions against the Bank and its major shareholders, the impact of external changes and market conditions, force majeure circumstances, and other events.

2. Content of the Rehabilitation Plan

3. The Rehabilitation Plan must include at least the following information:

1. a summary of the main elements of the Rehabilitation Plan, including a description of significant changes that have occurred in the Bank since the preparation of the previous version of the Rehabilitation Plan (changes in organizational structure, areas of activity, changes in services, products, branch network, as well as financial changes, including losses arising from credit/operational risks);

2. information on the management of the Rehabilitation Plan;

3. strategic analysis;

4. description of recovery indicators;

5. description and analysis of recovery options aimed at restoring the Bank's stability in the event of a significant deterioration in its financial condition;

6. information on scenarios, in particular a brief description of the scenarios used in the Rehabilitation Plan, recovery indicators;

7. communication plan during the implementation of the Rehabilitation Plan.

9. Additionally, it is recommended to include in the Rehabilitation Plan information on the assessment of the Bank's profile or significance, on the legal and operational prerequisites for the implementation of the Rehabilitation Plan measures, information support, and the Bank's technological infrastructure, etc.

10. Management of the Rehabilitation Plan

11. Information on the management of the Rehabilitation Plan must include a detailed description of the following elements:

1. distribution of responsibilities, including the identification of employees and structural subdivisions of the Bank responsible for the preparation, updating, and implementation of the Rehabilitation Plan;

2. description of policies and procedures governing the process of approval and updating of the Rehabilitation Plan;

3. description of the step-by-step consideration procedure of the Rehabilitation Plan, necessary for making a decision on its implementation;

4. description of the crisis management procedure for the Bank applied in the event of the implementation of the Rehabilitation Plan, including the distribution of roles and responsibilities of managers and employees involved from various structural subdivisions of the Bank, as well as management mechanisms to ensure safe and justified decision-making on crisis management;

5. compliance of the Rehabilitation Plan with the Bank's overall risk management structure, in particular the Bank's risk appetite structure, internal procedures for assessing capital adequacy (hereinafter – ICAAP), and business plans;

6. description of the management information systems used by the Bank to obtain current information and necessary for the preparation of the financial rehabilitation plan and ensuring the timely execution of the Rehabilitation Plan in accordance with this Regulation.

4. Strategic Analysis

5. In the "Strategic Analysis" section, the Bank must describe the main areas of activity of the Bank, critically important functions, identify significantly significant legal entities, and disclose key internal and external interconnections affecting the stability of the Bank and the banking system as a whole.

6. The description of the Bank presented in the Rehabilitation Plan must include the following information:

1. a general description of the Bank (i.e., business model, organizational structure, ownership structure, basic financial information, list of Bank officials);

2. definition of main areas of activity and most important economic functions (including in terms of revenue generation, profit, market share, strategic importance, and other similar criteria);

3. description of main areas of activity and critically important functions regarding significantly significant legal entities, if any.

A significantly significant legal entity for the purposes of this Regulation is understood as a legal entity or branch that:

a) makes a significant contribution to the profitability of the Bank, its financing, or owns a significant share in its assets, liabilities, or capital;

b) carries out key commercial activities for the Bank;

c) provides outsourcing services to the Bank in accordance with the requirements of the legislation of the Kyrgyz Republic;

d) bears significant risks that in the worst case could threaten the solvency of the Bank;

e) cannot be sold or liquidated without likely creating a serious risk for the Bank.

4. description of external interconnections, including:

a) interconnections (including financial and operational) with participants/shareholders of the Bank, if the Bank is part of a banking group;

b) significant risks and obligations to major counterparties;

c) important banking products and services that the Bank provides to other participants of the financial market;

d) significant services provided to the Bank by third parties, including participation and membership in payment, clearing, and settlement systems.

13. The Bank has the right to refer to separate parts of information from the business plan, ICAAP, or other relevant documents.

14. Recovery Indicators

15. The Rehabilitation Plan must include a clearly defined structure of indicators established by the Bank for monitoring its financial condition and determining the moments when measures provided for in the Rehabilitation Plan must be taken.

16. Indicators characterizing the financial condition of the Bank may be quantitative or qualitative in nature, while their monitoring must be carried out based on a simple and transparent methodology. The Bank must create appropriate mechanisms ensuring regular monitoring of these indicators.

17. The Rehabilitation Plan must contain at least the following groups of indicators (see Appendix 2 to this Regulation):

a) capital adequacy indicators (Tier 1 core capital, Tier 1 capital, total capital, leverage);

b) liquidity level indicators, including by currency (short-term liquidity ratio, immediate liquidity ratio, and liquidity coverage ratio for systemically important banks);

c) profitability indicators (ROA, ROE, ratio of operating costs to operating income);

d) asset quality indicators (share of classified loans, share of loans classified into the "Stage 3" category in accordance with IFRS 9, share of restructured loans in the total loan portfolio).

17. Systemically important banks must also include two additional categories of recovery indicators:

a) market indicators;

b) macroeconomic indicators.

18. The Rehabilitation Plan must contain a clear description of the assumptions and methodological approaches used to determine and set threshold values for each indicator. Threshold values of indicators must be aligned with the Bank's risk appetite structure and ensure the ability to detect deviations early, requiring corresponding management actions.

19. The Bank must determine the maximum period within which the Board of Directors will make a decision on the implementation of the Rehabilitation Plan in the event that any of the recovery indicators is breached. In such cases, the Bank must immediately notify the National Bank.

20. The Bank is obliged to provide in the Rehabilitation Plan a decision-making procedure for the implementation of recovery measures, including cases where indicator values remain within established thresholds, but the Board of Directors considers it advisable to apply such measures to prevent deterioration of the financial condition.

21. Recovery Options

22. In the section dedicated to recovery options, the Bank must present a set of measures (recovery options) developed to respond to stressful and adverse scenarios. These options must be aimed at maintaining or restoring the financial stability and viability of the Bank.

23. A recovery option represents a set of one or more actions or strategies that the Bank must undertake within the Rehabilitation Plan to maintain or restore financial stability under adverse scenarios.

24. To ensure acceptability, the Rehabilitation Plan must include for each recovery option at least the following information:

1. minimum financial impact, including an assessment of the impact on:

a) capital;

b) liquidity;

c) profit and loss accounts;

2. maximum implementation period for the recovery option;

3. analysis of the feasibility of the proposed recovery option taking into account significant or minor obstacles, including the Bank's own experience, as well as the available experience of other banks;

4. confirmation that the recovery option must be applicable in at least one of the scenarios presented in the Rehabilitation Plan, since the Bank must be able to implement it during a crisis situation;

5. assessment of the impact of the recovery option on the Bank's business model, ensuring its applicability without violating the Bank's viability.

24. The Bank's Rehabilitation Plan must include and analyze at least the following recovery options:

1. increase in share capital, which must include an analysis of the financial capabilities of major participants (shareholders);

2. reduction of lending volumes in various Bank portfolios;

3. reduction or suspension of dividend payments;

4. measures to reduce debt burden;

5. measures to reduce expenses.

In addition to these mandatory recovery options, the Bank may include other recovery options, including the sale of certain assets from the balance sheet (e.g., sale of government securities, etc.), attraction of other forms of capital, reduction of the trading portfolio, restriction of operations in currency markets, reduction of investments in high-risk assets, etc.

25. For each recovery option, the Bank must include at least:

1. description of the recovery option;

2. list of operational steps necessary for the implementation of the recovery option;

3. assessment of expected implementation terms and effectiveness of the recovery option;

4. data on the Bank's previous experience and/or available information on the practice of applying similar measures by other banks;

5. assessment of the applicability of the option in both normal conditions and stress scenarios defined by the Bank;

6. assumptions in the assessment of the effectiveness of the recovery option;

7. analysis of the impact of the option on:

a) participants (shareholders);

b) financial stability of the Bank;

c) business model;

d) critically important functions and main areas of activity;

8. assessment of the feasibility of each recovery option, including potential obstacles to their implementation;

9. description of internal management mechanisms ensuring the implementation of the recovery option.

Recovery options must be logically linked to the stress scenarios set out in the Plan and demonstrate the Bank's ability to recover upon their implementation.

26. Based on the above information, the Bank must assess and describe its overall recovery capacity, that is, the extent to which the provided recovery options allow the Bank to restore stability upon the implementation of various scenarios of serious financial and adverse macroeconomic stress.

27. The Rehabilitation Plan must include preparatory measures adopted by the Bank or measures necessary to ensure the effective implementation of the Rehabilitation Plan, together with a schedule for the implementation of these measures. Such preparatory measures must include any measures necessary to overcome obstacles to the effective implementation of recovery options identified in the Rehabilitation Plan.

28. Recovery options must be described in such a way as to allow the National Bank to assess the impact and feasibility of each recovery option.

29. Recovery Scenarios

30. The number of scenarios for systemically important banks must be no less than 3 (three) and include at least a scenario for a systemic event, an individual event, and a combination of systemic and individual events.

Other banks must define two scenarios: one systemic and one individual.

The description of scenarios is contained in Appendix 1 to this Regulation.

30. When developing scenarios, the Bank is obliged to take into account the following requirements:

a) the scenario must be based on the most important factors for the Bank, taking into account its business model and funding structure, areas of activity and organizational structure, size of the Bank, as well as its interconnection with other banks or the financial sector as a whole, and any identified vulnerabilities or weaknesses of the Bank;

b) the events provided for in the scenario must be such that, in the absence of recovery measures, they could lead to the insolvency or bankruptcy of the Bank;

c) the scenario must be based on extraordinary but probable events. In each scenario, one or more recovery indicators must be breached.

31. Each scenario must include, where appropriate, an assessment of the impact of events on at least each of the following aspects of the Bank:

a) capital;

b) liquidity;

c) asset quality;

d) profitability;

e) other aspects, such as operations and reputation.

32. The Bank may use reverse stress-testing methods as a starting point for developing recovery scenarios. Reverse stress testing allows the Bank to identify individual and systemic events that could lead to the breach of one or more recovery indicators established by the Bank.

When conducting reverse stress tests, the Bank may take into account, in particular, the following events:

• events related to credit risk;

• losses arising from operational risk, including court costs, internal or external fraud;

• events related to reputational risk;

• significant outflow of deposits;

• sharp changes in interest rates or exchange rates;

• other events of significance to the Bank.

The Bank must assess the parameters of such events based on its historical experience, market data, and future expectations.

Reverse stress testing is a procedure that begins with the determination of a predetermined outcome (for example, a solvency indicator at which the Bank's business model becomes unviable, or a level at which the Bank can be considered insolvent or having a probability of insolvency), after which scenarios and circumstances that could lead to such a situation are investigated.

33. The Bank must assess its recovery potential within each developed recovery scenario and determine the measures it can implement for each of the recovery scenarios prepared by it.

34. Communication Plan

35. The Communication Plan must be detailed and reflect the following aspects:

1. internal communication, including the procedure for informing employees, committees, governing bodies, and other responsible employees involved in the implementation of the Rehabilitation Plan;

2. external communication, including the procedure for interaction with participants (shareholders) and other investors, the National Bank and other authorized bodies, counterparties, participants of the banking market, financial market infrastructure organizations, depositors, and, if necessary, the general public;

3. proposals for responding to potential negative market reaction, including actions aimed at reducing reputational and behavioral risks.

35. The Rehabilitation Plan must contain an analysis of how the Communication Plan will be implemented during the execution of one or more measures provided for in the Rehabilitation Plan. In this regard, the Bank must determine the necessary communication actions for each recovery option.

36. The Communication Plan must take into account any specific communication needs arising in connection with the implementation of individual recovery options, including measures to ensure confidentiality, consistency, and coherence of information messages.

37. Rehabilitation Plan of a Banking Group

38. The parent bank of a banking group supplements its Rehabilitation Plan with information relating to the banking group. The Rehabilitation Plan of the parent bank of a banking group must be aimed at improving its consolidated capital, liquidity, asset quality, and financial profile of the group.

39. The parent bank must provide measures ensuring consistency and coherence of actions undertaken by the parent bank and its subsidiary organizations included in the banking group during the implementation of the Rehabilitation Plan.

40. The parent bank supplements its Rehabilitation Plan with the following information:

1. description of management mechanisms and procedures regulating the consideration of issues at the group level, including a description of the decision-making and execution process, as well as information flows between the parent bank and subsidiary organizations;

2. strategic analysis, including an assessment of financial, operational, and legal interconnections between the parent bank and its subsidiary organizations;

3. recovery indicators calculated on a consolidated basis;

4. recovery options, including measures implemented at both the parent company level and the subsidiary organization level. The parent bank must assess the impact of each recovery option on the consolidated level, and if necessary, separately on the parent bank and subsidiary organizations;

5. recovery scenarios, including group-wide scenarios, as well as an assessment of the impact on the consolidated capital, liquidity, and financial position of the banking group.

40. The parent bank has the right to determine the list of significant subsidiary organizations for the purposes of detailing the information specified in paragraphs 38 and 39 of this Regulation. A subsidiary organization is recognized as significant if its assets constitute 5 percent or more of the consolidated assets of the banking group. In the event that a subsidiary organization is not significant and does not perform functions critically important for the group's activities, information about it may be included in the Rehabilitation Plan in a simplified (aggregated) form.

41. Financial Rehabilitation Plan of a Bank

Included in

a Banking Group with Structure No. 2

41. A Bank operating on the territory of the Kyrgyz Republic and included in a banking group with Structure No. 2 must supplement its financial rehabilitation plan with the following information:

1. management mechanisms and procedures for decision-making levels between

the Bank located on the territory of the Kyrgyz Republic and the banking holding company – a non-resident of the Kyrgyz Republic. These mechanisms must cover the procedure for information exchange, communication, coordination of actions, as well as interaction of the parties in the event of the Bank facing financial difficulties requiring the implementation of the Rehabilitation Plan;

2. strategic analysis, including an assessment of financial, operational, and legal interconnections between the Bank and other legal entities included in the banking group with Structure No. 2;

3. recovery options, including support measures from the parent company, including the provision of capital and liquidity by the parent bank to the Bank located on the territory of the Kyrgyz Republic. The Bank must determine the steps it needs to take to request support from the banking holding company – a non-resident of the Kyrgyz Republic, as well as legal, financial, and operational obstacles that may hinder the provision of support by the banking holding company – a non-resident of the Kyrgyz Republic;

4. recovery scenario in which the banking holding company – a non-resident of the Kyrgyz Republic faces financial difficulties affecting the financial position of the Bank.

5. communication plan with its banking holding company – a non-resident of the Kyrgyz Republic.

11. Submission of Rehabilitation Plans

12. A systemically important Bank must submit its Rehabilitation Plan to the National Bank annually by March 15 of each year, as well as within 10 working days after any changes are made.

Other Banks provide the plan taking into account paragraph 4 of this Regulation

by March 15 of the corresponding year, as well as within 10 working days after any changes are made.

In the event of significant changes to the financial rehabilitation plan, the deadline for submitting the updated Rehabilitation Plan may be extended by agreement

with the National Bank.

43. The Board of Directors of the Bank must review and approve the Rehabilitation Plan before its submission to the National Bank. Before approval by the Board of Directors, the Rehabilitation Plan must be reviewed by the Bank's internal audit department.

44. The Bank's internal audit department must include the verification of the execution of the Rehabilitation Plan in its annual audit plan. After the approval of the Rehabilitation Plan