Regulation on Commercial Bank Operations with Precious Metals Conducted in Accordance with Islamic Banking and Finance Principles

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Creation date: 2026-04-09

Approved

by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic of November 15, 2019 No. 2019-P-12/56-3-(NPA)

REGULATION

"On Operations of Commercial Banks with Precious Metals Conducted in Accordance with Islamic Principles of Banking and Finance"

(As amended by the Resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic of November 16, 2022 No. 2022-P-12/70-1-(NPA), December 20, 2023 No. 2023-P-12/80-3-(NPA), April 2, 2026 No. 2026-P-12/20-5-(NPA))

Chapter 1. General Provisions

1. This Regulation establishes the requirements of the National Bank of the Kyrgyz Republic (hereinafter referred to as the National Bank) for the conduct by commercial banks of the Kyrgyz Republic of operations with precious metals in accordance with Islamic principles of banking and finance.

2. Terms used within the framework of this Regulation:

1. precious metals are:

• gold in refined standard and measured ingots;
• silver in refined standard and measured ingots;

2. refined standard ingots of precious metals – manufactured and marked ingots of precious metals corresponding to International Quality Standards accepted by the London Bullion Market Association (Appendix 1);

3. refined measured ingots – manufactured and marked ingots of precious metals issued (released) by the National Bank or a refining enterprise certified by the London Bullion Market Association / an enterprise certified by the authorized body for regulating operations with precious metals and gemstones in the Kyrgyz Republic, with a mass of 1000 grams or less, with a content of chemically pure base metal of not less than 99.95-99.99 percent of the alloy mass of the ingot for gold and not less than 99.90 percent of the alloy mass of the ingot for silver;

4. gross (alloy) mass – the actual total mass of the alloy containing the precious metal;

5. one troy ounce – a unit of mass equal to 31.1035 g;

6. fineness – the content of a specific precious metal, measured in parts per thousand units of the mass of the alloy;

7. metal accounts – accounts opened by the bank for clients for the purpose of accounting for and conducting operations with precious metals;

8. safekeeping metal accounts – client accounts intended for accounting for precious metals transferred to the bank while preserving their individual characteristics (name, quantity of valuables, fineness, manufacturer, serial number, etc.).

(As amended by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic of December 20, 2023 No. 2023-P-12/80-3-(NPA))

3. The requirements of this Regulation apply only to refined standard and measured ingots of precious metals.

4. Commercial banks may purchase and sell gold and silver coins that are legal tender without obtaining permission from the National Bank for the right to conduct banking operations with precious metals.

5. Operations where the preservation of individual characteristics of precious metals is a mandatory condition of the concluded contracts are conducted through safekeeping metal accounts.

6. The operations specified in sub-items 2 and 3 of item 11 of this Regulation are conducted through metal accounts.

7. Banks are prohibited from conducting operations through anonymous metal accounts opened by the bank for accounting for precious metals and conducting operations to attract and place them.

8. Banks are prohibited from:

• conducting operations with gemstones and other forms of precious metals, except for those listed in item 11 of this Regulation;
• conducting operations to accept collateral in the form of precious metals that do not fall under the definition of sub-item 1 of item 2 of this Regulation.

9. In accordance with international practice for conducting operations with precious metals, gold operations are carried out in units of pure metal mass (in troy ounces or grams), and silver operations – in units of alloy mass of the metal.

To account for precious metals in grams, rounding to the nearest tenth must be performed as follows:

• if the hundredth digit is greater than or equal to 5, the tenth digit is increased by 1, and all following digits are excluded;
• if the hundredth digit is less than 5, the tenth digit remains unchanged, and all following digits are excluded.

10. Monetary assets and liabilities denominated in precious metals are subject to revaluation on a daily basis based on the evening fixing of the London Bullion Market Association, established on the day preceding the day of revaluation.

In this regard, revaluation of refined measured ingots issued by the National Bank is carried out in accordance with the bank's accounting policy.

Chapter 2. Operations of Commercial Banks with Precious Metal Ingots

11. If the bank has operations with precious metals in the list of permitted banking operations in the bank's license for the right to conduct banking operations, it may conduct the following operations with precious metals:

1. Operations under a Wa'diyah Amanah (Safekeeping) contract:

• maintenance of safekeeping metal accounts and attraction of precious metals for agreed terms in its own name from other commercial banks, legal entities, and individuals.

In this case, the bank is not entitled to dispose of the entrusted precious metals or derive profit from their placement.

The bank is permitted to charge a storage fee, regardless of whether the fee is a fixed amount or a share of the value of the precious metal.

In the event that the precious metal deposited for storage serves as a guarantee for the return of a debt by the party depositing it, the fee must not exceed the actual costs of storing the precious metal.

2. Operations under a Murabaha (Cost-Plus Financing) contract:

• purchase and sale of precious metals on spot settlement terms in its own name on behalf of the client, with payment under the contract made immediately;
• purchase and sale of precious metals on spot settlement terms in its own name for its own account, with payment under the contract made immediately.

3. Operations under a Qard (Loan) contract in cash and non-cash forms:

• attraction of precious metals as a loan on terms of guaranteed repayment upon the client's first request;
• placement (financing) of precious metals as a loan on terms of guaranteed repayment upon the bank's first request.

(As amended by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic of November 16, 2022 No. 2022-P-12/70-1-(NPA))

12. Precious metals with which banks conduct operations under this Regulation must meet the following requirements:

• correspond to the International Quality Standards of London good delivery and be manufactured by refining enterprises listed in the London Bullion Market Association;
• be manufactured in the form of measured ingots used as weights to standard ingots, to express (achieve) weights corresponding to contract conditions;
• be manufactured in the form of measured ingots in accordance with the National Standard of the Kyrgyz Republic (Kyrgyz State Standard (KGS) 1281:2015).

Enterprises manufacturing measured ingots in accordance with the National Standard of the Kyrgyz Republic (Kyrgyz State Standard (KGS) 1281:2015) must be certified by the authorized body for regulating operations with precious metals and gemstones in the Kyrgyz Republic.

(As amended by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic of December 20, 2023 No. 2023-P-12/80-3-(NPA))

13. Commercial banks conducting operations with precious metals in the form of standard and measured ingots (except for refined measured ingots of precious metals issued (released) by the National Bank) are obliged to:

• possess weighing instruments and weights certified in accordance with the requirements of the legislation of the Kyrgyz Republic for weighing precious metals, the weighing error of which does not exceed the limits specified in Appendix 2;
• and/or, in the absence thereof, use the services of third-party organizations whose weighing instruments and weights meet the requirements specified in Appendix 2;
• possess special equipment specified in Appendix 3 for conducting rapid analysis of the composition of measured ingots of precious metals to determine the percentage content of precious metal and impurities;
• conduct storage and transportation of precious metals in compliance with established safety requirements of the legislation.

14. Banks conducting operations with precious metals in the form of standard and measured ingots must take into account that due to the impact of geophysical and atmospheric factors and due to the design features of weighing instruments, their readings when weighing precious metal ingots may differ from the readings of previous weighings of these valuables recorded in accounting or accompanying documents (Appendix 4).

15. The maximum volume of assets in precious metals and the sum of funds for conducting operations with precious metals on behalf of clients must together constitute no more than 100% of the size of the paid-up charter capital of the bank.

The calculation of the maximum volume of assets in precious metals and the sum of funds for conducting operations with precious metals excludes assets and funds in precious metals within the framework of providing financial services related to the initial placement of virtual assets of the issuer in accordance with the Law of the Kyrgyz Republic "On Virtual Assets".

(As amended by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic of April 2, 2026 No. 2026-P-12/20-5-(NPA))

16. Precious metals accepted from a client for storage are not attracted funds of the bank and cannot be placed by it in its own name and at its own expense.

17. Services for the sale of precious metals may be provided through safekeeping metal accounts, when only the precious metals deposited by the client must be sold upon the client's instruction. Accounting for transfers through safekeeping accounts must be carried out in physical form.

18. Precious metals that have become the property of the bank as a result of the disposal of collateral must be sold in accordance with the legislation.

19. Import and export of precious metals from/to the territory of the Kyrgyz Republic are carried out in accordance with the legislation of the Kyrgyz Republic, with the consent of the authorized state body.

20. Commercial banks, when transporting precious metals at their own expense or at the expense of the client, must ensure the insurance of precious metal transportations properly and in accordance with Shariah standards. In the event that insurance of precious metal transportations in accordance with Shariah standards is impossible, the transportation of precious metals may be insured by traditional methods with the approval of the bank's Shariah board.

The transfer of responsibility and ownership rights during transportation between the bank, its client, accompanying persons, and the carrier are determined by the corresponding contracts.

21. When transporting precious metals, measures must be taken to ensure the preservation of their external appearance so that dents, scratches, and other defects affecting their value do not form on the transported ingots.

Chapter 3. Organization of Internal Control for Operations with Precious Metals

22. To conduct operations with precious metals, banks are obliged to develop a corresponding risk management policy related to operations with precious metals and organize adequate internal control. Appropriate procedures must be developed and approved for each operation conducted.

23. The procedures must reflect at least the following internal control measures:

1. separation of functional duties of bank employees such that one employee cannot perform and/or control any process in full from the initiation of the transaction to its recording in accounting books;

2. application of dual control – for performing certain operations (actions) involving a high degree of risk, at least two employees are required;

3. implementation of a clear system of authorization for the entire volume of operations conducted by the bank by corresponding authorized bank employees;

4. conducting periodic planned and unexpected inventories of precious metals to determine the correspondence of accounting data to actual availability;

5. restricting access to assets or information for personnel who do not have the authority to do so. Protection against unauthorized access or unauthorized operations is ensured by security devices such as locked safes, vaults, special doors, video surveillance cameras, dual control, management awareness, electronic protection, etc.;

6. establishment by the bank of internal limits for open positions in precious metals for each type of precious metal and in total for all types;

7. establishment of minimum requirements for information on the reliability of counterparties, depending on the nature and degree of risk of the operations conducted and the category of the counterparty;

8. establishment of requirements for internal audit when conducting inspections of operations with precious metals;

9. establishment of requirements for accounting and reporting on operations with precious metals for the bank and its branches.

Chapter 4. Limits for Operations with Precious Metals and Reporting

24. The calculation of limits for positions in precious metals is carried out similarly to the calculation of limits for positions in foreign currency.

25. The National Bank, for the purpose of regulating buy-sell operations with precious metals, establishes limits for open positions in precious metals (for gold and silver separately) for commercial banks. In this case, the currency position is calculated separately for each type of precious metal (gold and silver).

26. Commercial banks must submit to the National Bank on a daily basis a balance for each type of precious metal and information on compliance with position limits for precious metals as part of the report on compliance with open currency position limits, in accordance with the normative legal acts of the National Bank.

27. The form and frequency of reporting by commercial banks to the authorized state body are established by the latter, and banks are obliged to strictly follow the requirements of the authorized body within the framework of current legislation.

28. For violations by a commercial bank of established limits, the National Bank has the right to apply impact measures, in accordance with the normative legal acts of the National Bank.

29. The National Bank has the right to exclude operations with precious metals from the list of operations permitted to the bank if the bank:

• conducts operations with precious metals not listed in the list of permitted banking operations;
• systematically (more than twice within consecutive 30 calendar days) violated the position limit for precious metals;
• if the bank's activity in operations with precious metals has been unprofitable for the last two years;
• if the commercial bank violates the capital adequacy ratio.

Appendix 1 to the Regulation "On Operations of Commercial Banks with Precious Metals Conducted in Accordance with Islamic Principles of Banking and Finance"

INTERNATIONAL QUALITY STANDARDS

accepted by the London Bullion Market Association (LBMA)

The quality standards for precious metals accepted by the London Bullion Market Association are designated in the association's documents as the London good delivery standard.

1. Gold ingots of the London good delivery standard must meet the following requirements:

• the mass of pure gold in the ingot must be from 350 to 430 troy ounces (from 10886 g to 13375 g).

• the weight of each ingot must be expressed in troy ounces and be a multiple of 0.025 ounces.

The purity of the metal must be no lower than 995 parts of chemically pure gold per 1000 parts of alloy mass. As mandatory markings on the ingot must be:

• serial number;
• fineness;
• manufacturer's stamp;
• year of manufacture of the ingot.

The ingot must not have pores, depressions, or other defects; it must be convenient for carrying and storage.

2. Silver ingots of the London good delivery standard must meet the following requirements:

The weight of the ingot must be from 750 to 1100 troy ounces (from 23328 g to 34214 g).

The weight of each ingot must be expressed in troy ounces and be a multiple of 0.10 ounces.

The purity of the metal must be no lower than 999 parts of chemically pure silver per 1000 parts of alloy mass.

As mandatory markings on the ingot must be:

• serial number;
• fineness;
• manufacturer's stamp;
• weight in troy ounces or kilograms (the weight of the ingot in kilograms must be converted into troy ounces and correspond to the aforementioned requirements).

The ingot must have a correct shape, convenient for carrying and storage.

There must be no pores, depressions, or other defects on the surface of the ingot. The edges of the ingot must be straight and not sharp.

The refining firm stamping the ingots of gold and silver meeting the London good delivery standards must be included in the special LBMA list (List of Acceptable Melters and Assayers).

Appendix 2 to the Regulation "On Operations of Commercial Banks with Precious Metals Conducted in Accordance with Islamic Principles of Banking and Finance"

ALLOWABLE ERRORS

of weighing using applied scales

The allowable weighing errors of applied scales must not exceed the following values (mg) (GOST 24104-88):

No. Largest weighing limit For Class 2 accuracy scales For Class 3 accuracy scales

Up to 200 mg inclusive 0.015

Over 200 mg up to 1 g inclusive 0.025

Over 1 g up to 2 g inclusive 0.030

Over 2 g up to 20 g inclusive 0.100 0.25

Over 20 g up to 50 g inclusive 0.300 0.50

Over 50 g up to 200 g inclusive 0.750 2.00

Over 200 g up to 500 g inclusive 1.500 5.00

Over 500 g up to 1 kg inclusive 3.000 10.00

Over 1 kg up to 2 kg inclusive 7.500 20.00

Over 2 kg up to 5 kg inclusive 15.000 50.00

Over 5 kg up to 10 kg inclusive 30.000 100.00

Over 10 kg up to 20 kg inclusive 75.000 200.00

Over 20 kg up to 50 kg inclusive 150.000 500.00

Weighing of gold is carried out using scales of at least Class 2 accuracy, and silver using scales of at least Class 3 accuracy.

Appendix 3 to the Regulation "On Operations of Commercial Banks with Precious Metals Conducted in Accordance with Islamic Principles of Banking and Finance"

TECHNICAL REQUIREMENTS to equipment for rapid analysis of refined measured ingots of precious metals

Name Purpose Note

X-ray fluorescence analyzer Rapid analysis of the composition of measured ingots and coins (determination of the percentage content of precious metal and impurities) Confirmation of the composition of a gold ingot with a gold content of 99.99% with measurement to the nearest hundredth of a %

Specialized electronic scales Determination of the exact weight of precious metals (measured ingots and coins) Class II (high) accuracy according to GOST 24104 with a measurement range from 0.02 g to 120 g

Appendix 4 to the Regulation "On Operations of Commercial Banks with Precious Metals Conducted in Accordance with Islamic Principles of Banking and Finance"

1. Due to the impact of geophysical and atmospheric factors and due to the design features of weighing instruments, their readings when weighing precious metal ingots may differ from the readings of previous weighings of these valuables recorded in accounting or accompanying documents. The limits of weight discrepancies that may arise when weighing valuables are as follows:

Name of precious metal Mass, g Largest weighing limit, g Allowable weight discrepancies, g

Gold ingots Up to 5500 5500 0.1

Gold ingots 5500-30000 30000 0.2

Silver ingots 20000-32000 32000 1.0

Silver ingots 32000-60000 60000 1.0

2. Weight discrepancies identified when weighing ingots, within allowable norms between the readings of weighing instruments and the data of accompanying or accounting documents, are reflected in (cash) journals without being reflected in accounting books.

3. Weight discrepancies identified when weighing ingots that exceed the limits of allowable norms between the readings of weighing instruments and the data of accompanying or accounting documents must be documented by an act of weight discrepancies and reflected in accounting books.

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