Regulation on Mandatory Reserves of Microfinance Companies Accepting Deposits

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Date of creation: 2017-08-30

ENTERED INTO FORCE in accordance with the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated September 29, 2011 No. 55/15

Approved by resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated January 30, 2010 No. 1/1

Regulation on Mandatory Reserves of Microfinance Companies Accepting Deposits

(As amended by resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated April 25, 2012 No. 18/9, June 15, 2017 No. 2017-P-12/25-12-(NPA), No. 2017-P-07/25-15-(NPA)

1. General Provisions

2. Procedure for Calculating Mandatory Reserves

3. Procedure for Calculating and Collecting Penalties from MFК for Non-Compliance with Mandatory Reserve Requirements Appendix 1. Calculation of Mandatory Reserves for the Period Appendix 2. Example of Penalty Calculation for Non-Compliance with MRR

4. General Provisions

5. This Regulation establishes requirements for microfinance companies accepting deposits (deposits) (hereinafter – MFК) regarding the deposit of mandatory reserves at the National Bank of the Kyrgyz Republic (hereinafter – National Bank), the procedure for complying with mandatory reserve requirements, and the calculation and collection of penalties for non-compliance.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-12/25-12-(NPA), No. 2017-P-07/25-15-(NPA)

2. Mandatory reserves – is the sum of funds that MFК are required to deposit at the National Bank under terms established by the National Bank. Mandatory reserve requirements (hereinafter – MRR) – are the requirements for MFК to deposit mandatory reserves at the National Bank. Calculation base – is the som and foreign currency liabilities of MFК accounted for in its deposit accounts. The list and currency structure of liabilities included in the calculation base are approved by the Board of Directors of the National Bank.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

3. The size of mandatory reserves is established by the Board of Directors of the National Bank as a percentage of the calculation base. Different percentage values may be established for various categories of liabilities included in the calculation base. The size of mandatory reserves may be changed by the Board of Directors of the National Bank for monetary policy purposes.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

4. The deposit of mandatory reserves is carried out by placing MFК funds in the national currency into a deposit account at the National Bank. Funds in the deposit account at the National Bank must be used exclusively for fulfilling MRR; settlement and cash operations on the deposit account are not permitted. 5 . MFК are required to comply with MRR during the validity period of their license for conducting operations on accepting term deposits (deposits), except for cases specified in point 15 of this Regulation.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

2. Procedure for Calculating Mandatory Reserves

3. Mandatory reserves are calculated once per a four-week period, on the first working day of the current base period, and are determined based on the average daily calculation base for the previous base period, and the size of mandatory reserves established by the Board of Directors of the National Bank. The established value of mandatory reserves remains valid for four weeks of the base period. The som equivalent of foreign currency liabilities included in the calculation base is calculated at the official exchange rate of foreign currency against the som established by the National Bank.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

6-1. The calculation of mandatory reserves is performed according to the following formula:

where OR_t – mandatory reserves for the current base period; OB_{t-1} – MFК liabilities included in the calculation base for each day of the previous base period; P – size of mandatory reserves established by the Board of Directors of the National Bank; D_{t-1} – number of calendar days of the previous base period taken into account for mandatory reserves, i.e., 28 days.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

7. The calculation performed in accordance with point 6-1 of this Regulation, certified by the signature of the head of MFК, is submitted in the form according to Appendix 1 to the National Bank on the first working day of the new base period by 12:00. In addition, MFК must submit the "Mandatory Reserves Calculation" in electronic form according to National Bank requirements. In case of late submission of the "Mandatory Reserves Calculation," as well as submission of unreliable information, MFК bears responsibility in accordance with the regulatory legal acts of the National Bank.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

8. Compliance with MRR is controlled upon the completion of the four-week base period. Reserve requirements are considered fulfilled if, over the base period, the difference between the sum of funds in MFК's deposit account at the National Bank and the mandatory reserves value is positive or equal to zero. Otherwise, it is considered that MFК has violated MRR, and a penalty for non-compliance is levied from it, in accordance with the conditions defined in Section 3 of this Regulation.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

9. In case of compliance with mandatory reserve requirements, the National Bank may accrue deposit fees to MFК. The size of the deposit fee at the National Bank for mandatory reserves is established by the Board of Directors of the National Bank.

10. (Expired in accordance with resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA).

11. Procedure for Calculating and Collecting Penalties from MFК for Non-Compliance with Mandatory Reserve Requirements

(section title as amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

11. The penalty amount for non-compliance with MRR is calculated based on the penalty rate for non-compliance with MRR established by the Board of Directors of the National Bank, and the average daily negative deviation of funds in MFК's deposit account at the National Bank from mandatory reserves over the base period.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

11-1. The penalty for non-compliance with MRR is calculated according to the following formula:

where Ш_n – penalty for non-compliance with mandatory reserves; Ос – average daily deviation of the deposit account at the National Bank from mandatory reserves; Рш – penalty rate for non-compliance with MRR established by the Board of Directors of the National Bank; Д – number of calendar days of the base period, i.e., 28 days.

An example of calculating the penalty amount for non-compliance with MRR is provided in Appendix 2.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

12. Collection of the penalty for non-compliance with MRR is carried out in a unilateral (without acceptance) manner, on the second working day after sending the corresponding notification by the National Bank, unless otherwise provided by the Agreement with MFК.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA

13. Non-compliance by MFК with MRR may serve as grounds for conducting a targeted inspection in the respective MFК.

(As amended by resolutions of the Board of Directors of the National Bank dated April 25, 2012 No. 18/9, June 15, 2017 No. 2017-P-07/25-15-(NPA)

14. Repeated (more than once) sequential or non-sequential violations of MRR within three months may serve as grounds for applying enforcement measures provided by the legislation of the Kyrgyz Republic.
15. From the initiation of bankruptcy proceedings, the penalty for non-compliance with MRR is not accrued, unless otherwise provided by a corresponding resolution of the Board of Directors of the National Bank.

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

(As amended by resolution of the Board of Directors of the National Bank dated June 15, 2017 No. 2017-P-07/25-15-(NPA)

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