Regulation on Temporary Administration

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Date of creation: 2023-02-09

Appendix
to the decision of the Board of the National Bank of the Kyrgyz Republic

dated June 8, 2017 No. 2017-P-12/23-8-(NPA)

REGULATION

on Temporary Administration

(As amended by decisions of the Board of the National Bank of the Kyrgyz Republic dated April 10, 2019 No. 2019-P-12/19-1, November 1, 2019 No. 2019-P-33/55-3, March 27, 2020 No. 2020-P-14/17-1, December 23, 2020 No. 2020-P-33/73-13, December 28, 2022 No. 2022-P-12/83-6)

Chapter 1. General Provisions

1. This Regulation defines the grounds, procedure, and processes for introducing and implementing Temporary Administration, as well as restructuring commercial banks, deposit-taking microfinance organizations, the State Development Bank, JSC "Financial Company of Credit Unions", deposit-taking credit unions (including those conducting operations in accordance with Islamic banking and financing principles or having an "Islamic window"), housing savings credit companies, and credit bureaus (taking into account the special terminology they use in banking operations; hereinafter - banks), as well as payment organizations/payment system operators (hereinafter - PO/PSO). Restructuring procedures do not apply to credit unions and PO/PSO.

This Regulation applies to credit unions and PO/PSO taking into account the features of their activities in accordance with the legislation of the Kyrgyz Republic.

(As amended by decisions of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1, December 23, 2020 No. 2020-P-33/73-13)

2. This Regulation uses definitions set forth in the laws of the Kyrgyz Republic "On Banks and Banking Activity" and "On the Payment System of the Kyrgyz Republic", as well as the following terms:

Temporary Administration is introduced by the National Bank of the Kyrgyz Republic (hereinafter - National Bank) as a supervisory measure aimed at establishing control over:

• banks to ensure the preservation of assets, documents and information, protect the rights and lawful interests of depositors and other creditors, ensure stability and safety of the banking system of the Kyrgyz Republic, establish the actual state of affairs in the bank and determine its further activities;

• PO/PSO to protect the rights and lawful interests of payment system users, maintain and ensure efficiency, safety and reliability of payment systems, establish the actual state of affairs in PO/PSO and determine their further activities.

Temporary Administrator - a person appointed by the National Bank as a temporary administrator or head of the temporary administration to implement the temporary administration regime in a bank/PO/PSO.

Obstruction of Temporary Administration - action or inaction by management bodies and/or individual officials and employees of the bank/PO/PSO (branch/subsidiary) and other persons associated with the bank/PO/PSO, which hinder or make it impossible for the temporary administrator or head/members of the temporary administration to perform functions defined by the Law of the Kyrgyz Republic "On Banks and Banking Activity" and this Regulation.

Act on Obstruction of Temporary Administration - a document prepared for each fact of obstruction by management bodies and/or individual officials and/or employees of the bank/PO/PSO (branch/subsidiary) and other associated persons in implementing Temporary Administration.

Supervisory Body - structural subdivisions of the National Bank, the Supervision Committee of the National Bank (hereinafter - Supervision Committee), the Payment System Committee of the National Bank (hereinafter - Payment System Committee) provided for in the organizational structure of the National Bank.

Bank Restructuring - a set of measures taken with respect to a bank to protect the interests of depositors and other creditors, preserve continuity of functions systemically important for the banking or payment system, and ensure stability of the banking and financial systems.

(As amended by decisions of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1, December 28, 2022 No. 2022-P-12/83-6)

Chapter 2. Introduction of Temporary Administration

3. Temporary Administration is introduced in a bank/PO/PSO upon the existence of grounds specified in the Law of the Kyrgyz Republic "On Banks and Banking Activity", as well as regulatory legal acts of the National Bank.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated December 28, 2022 No. 2022-P-12/83-6)

4. A decision on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration is made by the Board/Supervision Committee/Payment System Committee of the National Bank upon a petition from the supervisory body.

A decision of the Board/Supervision Committee/Payment System Committee on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration is formalized by a resolution and enters into force from the moment of its adoption, unless otherwise provided in the resolution itself.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

5. A decision on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration may be made by the Board/Supervision Committee/Payment System Committee upon application by the Board, Board of Directors, creditors and shareholders of the bank, members of the executive body and/or shareholders (founders)/participants of PO/PSO, as well as upon appeal by law enforcement, judicial and other authorized state authorities, which must specify the grounds for appointing Temporary Administration.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

6. In case Temporary Administration is initiated by persons specified in paragraph 5 of this Regulation, they must submit to the National Bank upon appeal the following documents:

• a statement regarding non-settlement of the bank's creditor debt within the next 5 (five) working days after the payment due date, or regarding other grounds for introducing Temporary Administration according to Kyrgyz Republic legislation;

• a statement regarding non-fulfillment by PO/PSO of financial obligations to participants and/or users of the payment system and/or inability to settle obligations within the next 5 (five) working days after the settlement due date, or regarding other grounds for introducing Temporary Administration according to Kyrgyz Republic legislation;

• a justification of the necessity of introducing Temporary Administration in a bank/PO/PSO with reference to relevant regulatory legal acts and supporting documents.

The supervisory body considers the specified documents within 20 (twenty) working days and, if justified and necessary for introducing Temporary Administration, submits a petition to the Board/Supervision Committee/Payment System Committee of the National Bank for a decision.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

7. A petition for introducing Temporary Administration in a bank/PO/PSO must contain:

• information on the bank, branches, savings offices, subsidiaries and dependent companies, banking group structure (if applicable), or information on PO/PSO, subsidiaries and dependent companies (if applicable);

• justification for appointing Temporary Administration;

• information on the financial condition of the bank/PO/PSO (including results of recent comprehensive and targeted inspections);

• proposal for the term of Temporary Administration, but not exceeding 6 (six) months;

• proposal for the composition of Temporary Administration (candidates for Temporary Administrator, members of Temporary Administration) with information on compliance of candidates with requirements imposed by the National Bank;

• proposals (if available/necessary) on introducing restrictions in the activities of a bank/PO/PSO with justification;

• list of correspondent banks and/or list of goods/services suppliers, payment organization agents, PSO counterparties;

• other information.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

8. The resolution of the Board/Supervision Committee/Payment System Committee on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration specifies:

• official (full) and abbreviated name of the bank/PO/PSO regarding which the decision on introducing Temporary Administration is made;

• grounds for introducing Temporary Administration (including references to regulatory legal acts);

• date and time of commencement of the Temporary Administration regime;

• term of the Temporary Administration regime;

• operating mode of the bank, including procedure for bank settlements and payments (if necessary), or operating mode of PO/PSO, including rules and procedures for accepting payments on behalf of third parties/payment processing;

• list of activity restrictions (if necessary) imposed on the bank/PO/PSO;

• information on the appointed Temporary Administrator, as well as persons involved in Temporary Administration, including National Bank employees;

• instruction or directive mandatory for execution by Temporary Administration (if necessary);

• deadlines for acceptance of documents, assets and valuables of the bank/PO/PSO by Temporary Administration;

• requirement to notify correspondent banks and/or requirement to notify banks, PO/PSO;

• deadlines and procedure for submitting expense estimates and reports by Temporary Administration to the National Bank.

The resolution of the Board/Supervision Committee/Payment System Committee on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration may contain other provisions necessary for fulfilling tasks and functions assigned to Temporary Administration.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

9. Distribution of duties among persons involved in the composition of Temporary Administration is determined by the Temporary Administrator.

10. The resolution of the Board/Supervision Committee/Payment System Committee on introducing Temporary Administration and appointing a Temporary Administrator/head of Temporary Administration is brought to the attention of management bodies of the bank/PO/PSO by the supervisory body within 1 (one) working day from the moment of adopting the decision on introducing Temporary Administration, unless otherwise provided in the resolution itself.

A copy of the resolution is delivered to the Chairman of the Board of Directors or head of the bank, head of the executive body or head of PO/PSO under signature with date and time of delivery indicated on the second copy, which is kept by the Temporary Administrator until termination of their powers. A copy of the second copy with signature of receipt by the bank/PO/PSO is provided by the Temporary Administrator to the supervisory body.

(As amended by decision of the Board of the National Bank of the Kyrgyz Republic dated March 27, 2020 No. 2020-P-14/17-1)

11. When making a decision on introducing Temporary Administration, the supervisory body within 1 (one) working day from the moment of adopting the decision on introducing Temporary Administration:

• in a bank: sends a notification letter to organizations providing services through interbank settlement and payment systems, all commercial banks, the Deposit Insurance Agency of the Kyrgyz Republic (hereinafter - Deposit Insurance Agency), JSC "Interbank Processing Center", unless otherwise