Regulation on the Sale and Reverse Repurchase of Gold by the National Bank of the Kyrgyz Republic on the Interbank Domestic Market through the Automated Trading System of the National Bank of the Kyrgyz Republic

Back Print Version Date of creation: 2023-07-19

APPROVED by the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 2017-P-09/39-5-(DKP) dated August 30, 2017

REGULATION on the Sale and Reverse Repurchase by the National Bank of the Kyrgyz Republic of Gold on the Interbank Domestic Market through the Automated Trading System of the National Bank of the Kyrgyz Republic

CHAPTER 1. General Provisions

1. This Regulation "On the Sale and Reverse Repurchase of Gold by the National Bank of the Kyrgyz Republic on the Interbank Domestic Market through the Automated Trading System of the National Bank of the Kyrgyz Republic" (hereinafter - Regulation) defines the procedure for the sale by the National Bank (hereinafter - National Bank) of gold to commercial banks on "swap" terms without physical delivery, with the condition of crediting troy ounces of gold to an anonymous metal account of a commercial bank (hereinafter - Participant) and the reverse repurchase of gold through the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - ATS).

2. The National Bank conducts gold operations on the interbank domestic market by decision of the Monetary and Credit Policy Committee of the National Bank (hereinafter - MKPC).

3. The relationship between the Participant and the National Bank is governed by this Regulation and the corresponding bilateral Agreement between the National Bank of the Kyrgyz Republic and a commercial bank on the sale and reverse repurchase of gold by the National Bank through the Automated Trading System of the National Bank of the Kyrgyz Republic and settlements, according to Appendix 1 to this Regulation (hereinafter - Agreement).

4. The conditions and rules established by the Regulation "On the Operation of the Automated Trading System of the National Bank of the Kyrgyz Republic", approved by the Board Resolution dated March 28, 2013 No. 10/18 (hereinafter - ATS Operation Regulation), apply to this Regulation.

5. When concluding gold operations through the ATS, the Participant shall be guided by this Regulation and the ATS Operation Regulation.

CHAPTER 2. Definitions and Terms

6. For the purposes of this Regulation, in addition to the terms specified in the ATS Operation Regulation, the following terms are applied:

Transaction Date – a working day on which the transaction is concluded in the ATS.

Value Date – a working day on which the crediting/arrival of cash in soms/gold in troy ounces to the accounts of the National Bank/Participant occurs in accordance with the conditions of the concluded transaction in the ATS.

Gold Reverse Repurchase Date – a working day on which the Participant receives back the cash amount and accrued interest, and troy ounces of gold are debited from the Participant's anonymous metal account at the National Bank to the National Bank's account. The Participant, in turn, credits the accrued interest amount for gold to the National Bank's account.

Anonymous Metal Account – an account opened by the National Bank for the Participant to record gold denominated in troy ounces without specifying individual characteristics.

One troy ounce – a unit of gold mass equal to 31.1035 g.

Gold Sale Transaction – an operation whereby the National Bank sells gold to the Participant on "swap" terms with subsequent crediting of troy ounces of gold to the Participant's anonymous metal account at the National Bank, while simultaneously debiting a cash amount in soms from the Participant's correspondent account and crediting it to the National Bank's account.

Participant – a commercial bank of the Kyrgyz Republic meeting the requirements of paragraph 7 of this Regulation.

CHAPTER 3. Conditions for Gold Sale and Reverse Repurchase Transactions

7. To gain access to conducting gold sale transactions, the Participant must submit a letter of intent for access and meet the following requirements:

• hold a license from the National Bank to conduct banking operations in national and/or foreign currency;

• have a correspondent account in national currency at the National Bank;

• have an anonymous metal account at the National Bank;

• submit to the National Bank a power of attorney for dealers authorized to conclude gold sale transactions by the National Bank in the ATS on behalf of the Participant, according to Appendix 2 to this Regulation;

• not be in processes and/or procedures stipulated by the Law of the Kyrgyz Republic "On Banks and Banking Activities" (temporary administration, bank liquidation).

8. The basis for participating in gold sale transactions is the existence of a signed Agreement and an application for participation submitted via the ATS.

9. The MKPC of the National Bank determines the following conditions for gold sale and reverse repurchase transactions:

• transaction date for gold;

• gold reverse repurchase date;

• total volume (gold in troy ounces);

• minimum volume of one application (gold in troy ounces);

• interest rate on gold;

• interest rate on cash in soms.

10. The conditions for gold sale transactions specified in paragraph 9 are announced by the National Bank in the ATS.

11. The application must meet the conditions for gold sale transactions announced by the National Bank.

12. Applications not meeting the announced conditions are rejected by the ATS.

13. The Participant may submit only one application; subsequent applications will be rejected and not accepted.

14. The Participant may modify or withdraw the application between the start and end times for ATS application acceptance.

15. After the end time for application acceptance, the Participant cannot submit or modify applications, and the application becomes irrevocable.

16. The National Bank ensures the confidentiality of information specified in the Participant's application.

17. The Participant's application volume must not exceed the volume announced by the National Bank.

18. The Participant's application volume must not be lower than the minimum single application volume announced by the National Bank.

19. If the total volume of applications exceeds the announced volume, distribution will be proportional to their relative weight. In case of equal volumes in applications, priority is given to the Participant who submitted the application first.

20. Results of completed gold sale transactions are available in the ATS and announced by the National Bank through statistical information posted on the National Bank's website.

21. A Participant who purchased gold from the National Bank may sell it to another Participant. In this case, the reverse repurchase date for the selling Participant must be earlier than the National Bank's gold reverse repurchase date. The selling Participant must notify another Participant in writing of existing obligations regarding this gold to the National Bank. In case of gold sale by a Participant to another Participant outside the ATS, the Participant must submit a payment order (Appendix 3) to the National Bank on the day of sale.

22. If the value date for gold sale by the National Bank / gold reverse repurchase date by the National Bank falls on a non-working day in the Kyrgyz Republic, gold sale / repurchase is executed on the next working day. Upon reverse repurchase, recalculation of cash amounts for accrued interest is not performed.

23. The gold sale price in soms is calculated based on the London PM Fixing gold price value set on the day preceding the transaction date, and the official USD/som exchange rate active on the transaction date, using the following formula: P_XAU = L_fix * K, where P_XAU is gold price; L_fix is London PM Fixing value; K is official USD/som exchange rate.

24. Rounding of gold price in soms is performed to four decimal places.

25. On the gold reverse repurchase date, the National Bank will repurchase gold from the Participant at the original sale price. In turn, the Participant undertakes to sell gold to the National Bank.

26. Interest accrual on cash in soms and gold is calculated using the simple interest formula based on 360 days per year (30 days per month) and is calculated from the day following the crediting of cash in soms/gold to the day of reverse debiting/crediting inclusive.

27. Gold interest is accrued in troy ounces and paid in soms. Payable interest is calculated based on the London PM Fixing gold price value set on the day preceding the gold interest payment date, and the official USD/som exchange rate active on the payment date, using the following formula: Gold interest in soms = accrued gold interest in troy ounces * L_fix * K, where L_fix is London PM Fixing value; K is official USD/som exchange rate.

28. Crediting and debiting of cash in soms to/from Participant/National Bank accounts is conducted via the ATS. Settlements for the Participant's anonymous metal account are performed by the National Bank.

29. The Participant's anonymous metal account at the National Bank is not subject to cashing out in gold and cannot be cashed out upon the Participant's request.

30. Early sale of gold to the National Bank is not permitted.

31. Extension of the term for gold transactions with the National Bank is not permitted.

CHAPTER 4. Rights, Obligations and Liability

32. The Participant, having signed the Agreement, confirms consent with the conditions for concluding gold sale transactions by the National Bank outlined in this Regulation and undertakes not to refuse fulfillment of obligations under concluded transactions.

33. When purchasing gold from the National Bank, the Participant must timely carry out all necessary actions to ensure the availability of the corresponding cash amount in soms on the correspondent account at the National Bank for automatic ATS execution of settlements in soms on the corresponding value date.

34. On the gold reverse repurchase date by the National Bank, the Participant must timely credit to the National Bank's account the amount of interest for gold.

35. When selling gold to the Participant, the National Bank must credit gold to the Participant's anonymous metal account at the corresponding value date.

36. On the gold reverse repurchase date from the Participant, the National Bank must timely carry out all necessary actions to ensure the availability of the corresponding cash amount and accrued interest on its account for automatic ATS execution of settlements.

37. Failure by the Participant to fulfill obligations under a gold sale transaction is the absence of sufficient cash in soms on the corresponding value date on the Participant's correspondent account at the National Bank.

38. In case of the Participant's failure to fulfill obligations under a gold sale transaction, the National Bank's structural unit responsible for gold transaction settlements has the right to unconditionally (without notice) debit a one-time penalty fee of 0.5 percent from the Participant's correspondent account at the National Bank. If full deduction is not possible, the National Bank will debit the penalty fee as funds arrive until fully paid. In this case, the gold sale transaction is considered terminated.

39. Failure by the Participant to fulfill obligations during gold reverse repurchase by the National Bank is untimely crediting and/or non-crediting of gold interest to the National Bank's account.

40. In case of the Participant's failure during gold reverse repurchase, the National Bank's structural unit responsible for settlements has the right to unconditionally debit a one-time penalty fee of 0.5 percent from the Participant's correspondent account at the National Bank. If full deduction is not possible, the National Bank will debit the penalty fee as funds arrive until fully paid. Penalty deduction is made in soms.

41. Failure by the National Bank to fulfill obligations under a gold sale transaction is untimely crediting and/or non-crediting of gold to the Participant's anonymous metal account at the corresponding value date.

42. In case of the National Bank's failure, the National Bank credits a one-time penalty fee of 0.5 percent of the volume of gold sold to the Participant on the Participant's correspondent account at the National Bank. The penalty is credited in soms. In this case, the gold sale transaction is considered terminated.

43. Failure by the National Bank to fulfill obligations during gold reverse repurchase from the Participant is the absence of the corresponding cash amount and accrued interest on the National Bank's account.

44. In case of the National Bank's failure during gold reverse repurchase, the National Bank credits a one-time penalty fee of 0.5 percent of the transaction amount on the Participant's correspondent account at the National Bank.

45. Penalty deduction and/or crediting is conducted via the ATS.

CHAPTER 5. Final Provisions

46. Amendments and additions to this Regulation may be made by the National Bank to improve the transaction conclusion process on the interbank domestic market of the Kyrgyz Republic through the ATS.

Appendix 1 to the Regulation "On the Sale and Reverse Repurchase by the National Bank of the Kyrgyz Republic of Gold on the Interbank Domestic Market through the Automated Trading System of the National Bank of the Kyrgyz Republic"

Standard Format AGREEMENT between the National Bank of the Kyrgyz Republic and commercial bank _________________________________________ on the sale and reverse repurchase by the National Bank of the Kyrgyz Republic of gold through the Automated Trading System of the National Bank of the Kyrgyz Republic and settlements Bishkek No. _________________ dated "_" ______________ 20__

National Bank of the Kyrgyz Republic, hereinafter "National Bank", represented by ________________________________, acting on the basis of ________________________________________, on one hand, and ________________________ ______________________________, hereinafter "Participant", represented by ____________________________________, acting on the basis of __________________________, on the other hand, together hereinafter "Parties", based on the Regulation "On the Sale and Reverse Repurchase of Gold by the National Bank of the Kyrgyz Republic on the Interbank Domestic Market through the Automated Trading System of the National Bank of the Kyrgyz Republic", approved by Board Resolution dated _____________ No. ___ (hereinafter - Gold Sale Regulation) and the Regulation "On the Operation of the Automated Trading System of the National Bank of the Kyrgyz Republic", approved by Board Resolution dated March 28, 2013 No. 10/18 (hereinafter - ATS Operation Regulation), have concluded this Agreement between the National Bank of the Kyrgyz Republic and a commercial bank on the sale and reverse repurchase by the National Bank through the Automated Trading System and settlements (hereinafter - Agreement) on the following:

Subject of the Agreement

1.1. The subject of this Agreement is defining the conditions and procedure for regulating legal relations arising from gold sale and reverse repurchase transactions by the National Bank through the Automated Trading System (hereinafter - ATS) between the National Bank and the Participant.

1.2. Definitions and terms used in this Agreement are analogous to those defined in the Gold Sale Regulation.

1.3. Settlements for gold sale transactions are carried out via the Participant's correspondent/anonymous metal account at the National Bank and the corresponding National Bank account.

CONDITIONS FOR CONDUCTING GOLD SALE AND REVERSE REPURCHASE TRANSACTIONS

2.1. To conduct a gold sale transaction, the Participant must meet the requirements specified in paragraph 7 of the Gold Sale Regulation on the transaction date.

2.2. Conditions for conducting a gold sale transaction specified in paragraph 7 are determined by the MKPC of the National Bank and announced in the ATS.

2.3. The basis for participating in a gold sale transaction is the existence of a signed Agreement and an Application for participation, properly formatted and submitted via the ATS.

2.4. The Participant may submit only one application; subsequent applications will be rejected and not accepted.

2.5. The Participant's application must meet the conditions for gold sale transactions announced by the National Bank.

2.6. The submitted Application means the Participant's consent with the announced conditions.

2.7. Applications not meeting the announced conditions are rejected by the ATS.

2.8. The Participant may modify or withdraw the Application between the start and end times for ATS application acceptance.

2.9. After the end time for application acceptance, the Participant cannot submit or modify applications, and the Application becomes irrevocable.

2.10. The National Bank ensures the confidentiality of information specified in the Participant's application.

2.11. The application volume must not exceed the volume announced by the National Bank.

2.12. The Participant's application volume must not be lower than the minimum single application volume announced by the National Bank.

2.13. If the total volume of applications exceeds the announced volume, distribution will be proportional to their relative weight. In case of equal volumes in applications, priority is given to the Participant who submitted the application first.

2.14. A Participant who purchased gold from the National Bank may sell it to another Participant. In this case, the reverse repurchase date for the selling Participant must be earlier than the National Bank's gold reverse repurchase date. The selling Participant must notify another Participant of existing obligations regarding this gold to the National Bank. In case of gold sale by a Participant to another Participant outside the ATS, the Participant must submit a payment order (Appendix 3) to the National Bank on the day of sale.

2.15. Crediting and debiting of cash in soms to/from the corresponding accounts of the Participant/National Bank is conducted by the ATS. Settlements for the Participant's anonymous metal account are performed by the National Bank.

2.16. Early sale of gold to the National Bank by the Participant is not permitted.

2.17. Extension of the term for gold transactions with the National Bank is not permitted.

2.18. If the value date for gold sale by the National Bank / gold reverse repurchase date falls on a non-working day in the Kyrgyz Republic, gold sale/repurchase is executed on the next working day. Upon reverse repurchase, recalculation of cash amounts for accrued interest is not performed.

3. Rights and Obligations of the Parties

3.1. The Parties have the right to conclude gold sale transactions strictly in accordance with the Gold Sale Regulation and ATS Operation Regulation.

3.2. The Parties agree with the conditions for conducting gold sale transactions outlined in this Agreement and recognize their obligations to each other.

3.3. The Participant undertakes to:

3.3.1. when purchasing gold from the National Bank, timely carry out all necessary actions to ensure the availability of the corresponding cash amount in soms on the correspondent account at the National Bank for automatic ATS execution of settlements in national currency under the concluded transaction on the corresponding value date. In case of insufficient cash in soms on the corresponding value date, the transaction will be considered terminated. A one-time penalty fee will be debited from the Participant's correspondent account at the National Bank.

3.3.2. on the gold reverse repurchase date by the National Bank, timely credit to the National Bank's account the amount of interest for gold.

3.4. The National Bank undertakes to:

3.4.1. when selling gold to the Participant, credit troy ounces of gold to the Participant's anonymous metal account at the corresponding value date;

3.4.2. on the gold reverse repurchase date from the Participant, carry out all necessary actions to ensure the availability of the corresponding cash amount and accrued interest on its account for automatic ATS execution of settlements.

4. Liability of the Parties

4.1. The National Bank and the Participant bear full responsibility for their obligations under concluded gold sale transactions, in accordance with this Agreement, the Gold Sale Regulation, and the ATS Operation Regulation.

4.2. The National Bank and the Participant bear full responsibility for the correctness, timeliness, and confidentiality of actions performed by responsible persons and staff related to gold sale transactions, in accordance with this Agreement, the ATS Operation Regulation, and the Gold Sale Regulation.

4.3. Failure by the Participant to fulfill obligations under a gold sale transaction is the absence of sufficient cash in soms on the Participant's correspondent account at the corresponding value date. In case of the Participant's failure to comply with the first paragraph, the National Bank's structural unit responsible for gold transaction settlements has the right to unconditionally debit a one-time penalty fee of 0.5 percent from the Participant's correspondent account at the National Bank. If full deduction is not possible, the National Bank will debit the penalty fee as funds arrive until fully paid. In this case, the gold sale transaction is considered terminated.

4.4. Failure by the Participant to fulfill obligations during gold reverse repurchase by the National Bank is non-crediting of the gold interest amount.