Regulation on the Procedure for Conducting Repo Operations by the National Bank of the Kyrgyz Republic with Securities of the Kyrgyz Republic

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Date created: 2023-07-19

APPROVED by the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 10\10 dated March 28, 2013

Regulation on the Procedure for Conducting Repo Operations by the National Bank of the Kyrgyz Republic with Securities of the Kyrgyz Republic

(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated April 26, 2017 No. 17/3, August 30, 2017 No. 2017-P-09/39-7-(DCP), October 25, 2017 No. 2017-P-09/45-9-(NPA), and December 14, 2022 No. 2022-P-09/78-14-(NPA))

General Provisions

This Regulation on the procedure for conducting repo operations with securities of the Kyrgyz Republic (hereinafter - Regulation) defines the procedure for conducting repo operations with securities by the National Bank of the Kyrgyz Republic (hereinafter - National Bank) with commercial banks of the Kyrgyz Republic (hereinafter - Participants) through the Automated Trading System of the National Bank (hereinafter - ATS).

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

The National Bank conducts repo operations in accordance with the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic".

(As amended by Resolution No. 2022-P-09/78-14-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated December 14, 2022)

The conditions and rules established by the Regulation on the Operation of the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - Regulation on ATS Operation) apply to this Regulation.

The National Bank conducts the following types of repo operations: § direct repo; § reverse repo.

The National Bank conducts repo operations on an auction basis. By decision of the Monetary and Credit Policy Committee of the National Bank (hereinafter - MCPC), repo operations may also be conducted at a fixed interest rate.

Repo operations are conducted to ensure liquidity in the national currency (direct repo) or to withdraw excess liquidity from the banking system (reverse repo).

Participants in repo operations are commercial banks meeting the requirements of paragraph 16 of this Regulation. Also, by decision of the Board of the National Bank, other participants of the financial market of the republic may be admitted to repo operations.

The relationship between a Participant and the National Bank regarding repo operations is governed by this Regulation and the corresponding bilateral Agreement on the Procedure for Conducting Repo Operations between the National Bank and a Participant, according to Appendix 1 to this Regulation (hereinafter - Agreement).

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

Date of conducting a repo operation – the day announced by the National Bank in the parameters of the repo operation, on which acceptance, processing, and announcement of results occur.

Date of execution of a repo operation – the day announced by the National Bank in the parameters of the repo operation, on which the actual purchase/sale of securities (hereinafter initial part of the repo operation) occurs, through corresponding debit/credit of funds and transfer of ownership rights to securities.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

Date of completion of a repo operation – the day announced by the National Bank in the parameters of the repo operation, on which the reverse purchase/sale of securities (hereinafter final part of the repo operation) occurs, through corresponding debit/credit of a predetermined sum of funds and transfer of ownership rights to securities.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

Reverse repo – an operation for the sale of securities by the National Bank to a Participant with the obligation of reverse purchase at a specified future date and at a predetermined price.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

Direct repo – an operation for the purchase of securities by the National Bank from a Participant with the obligation of reverse sale at a specified future date and at a predetermined price.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

Term of a repo operation – the time interval calculated in calendar days starting from the day following the date of execution, including the date of completion.

General Conditions for Conducting Repo Operations

The relationship of repo operation Participants regarding depository accounting of securities is governed by the corresponding bilateral contract.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

To gain access to repo operations, a Participant must submit a letter of intent for access to the National Bank and meet the following requirements: § hold a license from the National Bank for conducting banking operations in national and/or foreign currency and have no restrictions on issuing, purchasing, selling, servicing securities, as well as depository services;

(As amended by Resolution No. 2017-P-09/39-7-(DCP) of the Board of the National Bank of the Kyrgyz Republic dated August 30, 2017) § hold a correspondent account in national currency at the National Bank; § hold a "depot" (depository) account at the Depository; § have a concluded Agreement with the National Bank; § not be in processes and/or procedures stipulated by the Law of the Kyrgyz Republic "On Banks and Banking Activity" (Temporary Administration, bank liquidation).

(As amended by Resolution No. 2022-P-09/78-14-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated December 14, 2022) By a separate decision of the Board of the National Bank, Participants undergoing processes and/or procedures stipulated by the Law "On Banks and Banking Activity" may also be admitted to repo operations.

(As amended by Resolution No. 2022-P-09/78-14-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated December 14, 2022)

The basis for participation in a repo operation is the presence of a concluded Agreement and an application for participation, properly formatted and submitted via ATS.

Ownership rights to securities subject to purchase/sale under a repo operation transfer:

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017) § upon execution of the initial part – from the original seller to the original buyer; § upon execution of the final part – from the original buyer to the original seller.

The MCPC of the National Bank determines the following conditions: § type of repo operation:

• direct or reverse; § parameters:
• type of securities;

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

• term of repo operation;
• total amount of funds for the repo operation;
• maturity period of securities (for direct repo);

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

• minimum interest rate for direct repo operations;
• maximum interest rate for reverse repo operations;
• fixed interest rate for direct/reverse repo operations.

The conditions for conducting repo operations specified in paragraph 19 of this Regulation are announced by the National Bank via ATS and by posting an informational message on the National Bank's website.

Results of conducted repo operations are available in ATS, and also announced by the National Bank by posting statistical information on its website.

The application must meet the conditions for the repo operation announced by the National Bank.

An application not meeting the conditions announced by the National Bank is rejected by ATS.

A Participant may modify or withdraw an application in the interval between the start time and end time for accepting applications in ATS.

After the end time for accepting applications for a repo operation in ATS, Participants can no longer submit/modify applications, and applications are considered irrevocable.

The National Bank ensures confidentiality of information specified in the application.

Securities purchased under repo conditions may be sold under repo conditions to another Participant. The completion date of the new repo operation must be earlier than the completion date of the previously concluded repo operation. In this case, the seller of securities must notify the buyer in writing about existing obligations regarding these securities.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

If a Participant who concluded a repo operation with the National Bank fails to return securities on the completion date, the National Bank has the right to effect a reverse purchase of securities from the holder at a price agreed upon by the National Bank and the Participant at the time of concluding the repo operation.

(As amended by Resolution No. 2017-P-09/45-9-(NPA) of the Board of the National Bank of the Kyrgyz Republic dated October 25, 2017)

Early completion and extension of a repo operation are not permitted.

A repo operation may be recognized by the National Bank as unsuccessful if fewer than two Participants participate in it.

The procedure for conducting a repo operation is established in accordance with the Regulation on ATS Operation.

The procedure for settlement of a repo operation is established in accordance with this Regulation and the Regulation on ATS Operation.

4. Procedure for Conducting Repo Operations

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