Instruction No. 176 on the Procedure for Regulating Credit Organizations' Activities

"Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 dated November 19, 2009. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "a" dated May 6, 2010. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "b" dated September 17, 2010. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "c" dated February 3, 2011. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "d" dated November 9, 2012. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "e" dated June 12, 2014. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "f" dated December 21, 2015. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "g" dated December 11, 2017. Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "h" dated January 5, 2018. "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 304 dated October 9, 2009. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 104 dated April 19, 2010. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 208 dated August 30, 2010. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 1 dated January 11, 2011. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 196 dated August 30, 2012. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 65 dated April 15, 2014. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 268 dated December 4, 2015. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 148 dated November 8, 2017. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 1 dated January 4, 2018.

Additional "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "i" dated December 3, 2019. Additional "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 143 dated November 12, 2019. "Registered" by the Ministry of Justice of the Republic of Tajikistan No. 550 "j" dated June 17, 2022. "Approved" by the Resolution of the Board of the National Bank of Tajikistan No. 55 dated May 24, 2022.

Instruction No. 176 "On the Procedure for Regulating Credit Organizations' Activities"

Instruction No. 176 "On the Procedure for Regulating Credit Organizations' Activities" (hereinafter - the Instruction) was developed in accordance with Article 42 of the Law of the Republic of Tajikistan "On the National Bank of Tajikistan", Part 2 of Article 29 of the Law "On Banking Activities" and Article 23 of the Law "On Microfinance Organizations", and regulates the activities of credit organizations, excluding microcredit organizations and microcredit funds, by establishing and calculating prudential norms.

1. GENERAL PROVISIONS
2. In order to protect the interests of depositors and creditors and ensure financial stability of the banking system of the Republic of Tajikistan, the National Bank of Tajikistan establishes the following mandatory prudential norms for regulating credit organizations' activities:

• minimum size of charter capital for newly established credit organizations;
• maximum size of the non-monetary part of charter capital;
• maximum size of risk per one borrower or group of interrelated borrowers;
• capital adequacy ratio;
• current liquidity ratio;
• ratio of the use of credit organizations' own funds for acquiring shares (stakes) of legal entities;
• maximum size of loans, guarantees and sureties provided by credit organizations to their related parties;
• limit on attracted savings and deposits (for non-bank credit organizations, including microcredit deposit organizations).

2. The National Bank of Tajikistan, in accordance with international standards and advanced practice, as well as its normative legal acts, may establish prudential norms and the procedure for their use by credit organizations, and applies them when exercising supervision.

3. The National Bank of Tajikistan establishes requirements defined in accordance with the norms of this chapter, applied to credit organizations and their subsidiaries based on consolidated supervision.

4. The National Bank of Tajikistan may establish other prudential norms applied in international banking regulation practice.

5. The size of a microloan provided by a microcredit deposit organization to individuals must not exceed 250,000 (two hundred fifty thousand) somoni, and to legal entities must not exceed 500,000 (five hundred thousand) somoni. The size of a microloan provided to other credit organizations must not exceed 1,500,000 (one million five hundred thousand) somoni.

6. Financial organizations (for the purposes of this Instruction) include organizations that have the right to conduct banking, insurance, leasing, investment activities, credit bureau activities, brokerage or dealing activities in the securities market, securities trust management activities, pawnshop activities, payment services, processing services, financial agent/consultant/advisor services, or financial-credit information provision services (Resolution of the Board of NBT dated May 24, 2022, No. 55).

7. In case the capital adequacy ratio of a credit organization is equal to or close to the established size, that is, when the indicator falls within a range of 0.25 percentage points from the established norm, the credit organization is prohibited from conducting the following operations:

• increasing its risk-bearing assets (including off-balance sheet items) by more than 5% annually;
• paying interest rates on deposits and savings exceeding the average market rate for deposits and savings (Resolution of the Board of NBT dated May 24, 2022, No. 55);
• repurchasing its own shares;
• accruing and paying dividends to shareholders;
• participating in transactions with parties related to the credit organization.

8. In case the capital adequacy ratio of a credit organization falls below the established norm of the National Bank of Tajikistan, in addition to the restrictions provided for in paragraph 7 of this Instruction, the credit organization is prohibited from conducting the following operations:

• attracting savings and term deposits of individuals (including opening new savings and term deposit accounts and replenishing existing savings and term deposit accounts of individuals);
• by banks and non-bank credit organizations (except microcredit deposit organizations) providing new loans exceeding 500,000 (five hundred thousand) somoni or increasing lending limits above the specified amount for existing clients;
• by microcredit deposit organizations providing new loans exceeding 50,000 (fifty thousand) somoni or increasing lending limits above the specified amount for existing clients;
• investing to purchase shares and other securities, which will lead to an increase in risk-weighted assets (including off-balance sheet accounts);
• increasing salaries and other forms of compensation, paying bonuses to members of the Supervisory Council (or equivalent body), senior management and any person related to the credit organization;
• providing any funds to any person related to the credit organization (including, issuing savings and their interest, paying dividends, providing loans or contingent obligations, including guarantees and letters of credit);
• purchasing fixed assets and all types of major expenses (including repair, construction, etc.);
• opening a branch, other structural subdivision or starting new activities.

2. MINIMUM CAPITAL SIZE FOR CREDIT ORGANIZATIONS
3. The minimum size of charter capital for newly established banks is established as follows:

• until 12/31/2022 at the amount of 50 million somoni;
• from 01/01/2023 at the amount of 60 million somoni;
• from 01/01/2024 at the amount of 70 million somoni;
• from 01/01/2025 at the amount of 80 million somoni;
• from 01/01/2026 at the amount of 90 million somoni;
• from 01/01/2027 at the amount of 100 million somoni (Resolution of the Board of NBT dated May 24, 2022, No. 55).

10. The minimum size of charter capital for newly established non-bank credit organizations is established as follows:

• until 12/31/2022 at the amount of 30 million somoni;
• from 01/01/2023 at the amount of 40 million somoni;
• from 01/01/2024 at the amount of 45 million somoni;
• from 01/01/2025 at the amount of 50 million somoni;
• from 01/01/2026 at the amount of 55 million somoni;
• from 01/01/2027 at the amount of 60 million somoni (Resolution of the Board of NBT dated May 24, 2022, No. 55).

101. The minimum size of charter capital for newly established microcredit deposit organizations is established as follows:

• until 12/31/2022 at the amount of 6 million somoni;
• from 01/01/2023 at the amount of 8 million somoni;
• from 01/01/2024 at the amount of 9 million somoni;
• from 01/01/2025 at the amount of 10 million somoni;
• from 01/01/2026 at the amount of 11 million somoni;
• from 01/01/2027 at the amount of 12 million somoni (Resolution of the Board of NBT dated May 24, 2022, No. 55).

11. The charter capital of a credit organization is formed in the national currency. The maximum size of the non-monetary part of charter capital for newly established credit organizations must not exceed 20 percent of the formed charter capital.

12. The non-monetary part of a credit organization's charter capital is formed but not taken into account when calculating regulatory capital, consisting of material assets, namely: credit organization equipment (computers, office furniture and air conditioners) and buildings (premises) in which the credit organization is located, excluding unfinished construction.

13. A credit organization cannot distribute net income among shareholders as dividends if such action leads to a violation of the capital adequacy ratio, or if the capital adequacy ratio is already violated.

14. A credit organization cannot distribute its net income as dividends to shareholders before covering all expenses related to its establishment.

15. During the first three years of a credit organization's activities, the issuing credit organization is prohibited from acquiring shares from its shareholders.

16. PROCEDURE FOR CALCULATING PRUDENTIAL NORMS

17. Regulatory capital of a credit organization consists of net core and additional capitals.

18. Net core capital of a credit organization consists of actually paid-up charter capital, surplus (the amount formed from the positive difference between the issue price and the nominal value of shares issued by a credit organization (stakes) and additional payments by founders), core capital reserves, undistributed profit, previous year's profit after corporate income tax and confirmation by external audit, minus current and previous years' losses, intangible assets minus accrued depreciation, shares (stakes) of other financial organizations and the unformed part of the possible loss coverage fund (hereinafter - fund)¹ (Resolution of the Board of NBT dated May 24, 2022, No. 55).

19. If reserves and funds for assets calculated in accordance with the established requirements of relevant normative legal acts of the National Bank of Tajikistan are greater than funds created based on International Financial Reporting Standards (based on an audit report), and balance sheet accounts 30315 "General reserve from profit", 30305 "Undistributed profit/previous years' losses" and 30307 "Profit/previous year's loss" lack sufficient funds to cover such difference, the uncovered part of this difference is deducted from net core capital. Net core capital is determined as follows: C_core = balance sheet accounts 30301 + 30303 + 30601 + 30305 + 30307 + 30309 + 30311 + 30313 + 30313 + 30315 + 31701 - (15943 - 15945) - shares (stakes) of other financial organizations - unformed part of reserves and funds for assets (Resolution of the Board of NBT dated May 24, 2022, No. 55).

¹ The unformed part of the fund is equal to the difference between the amount calculated in accordance with normative legal acts of the National Bank of Tajikistan and the actually formed amount of this fund, when this difference exceeds zero.

18. Paragraph 18 is excluded (Resolution of the Board of NBT dated May 24, 2022, No. 55).

19. The debit balance of balance sheet accounts 30307 "Profit or previous years' losses" and 15943 "Intangible assets" reduces capital and, therefore, is deducted from net core capital. Additional capital is determined as follows: C_add = balance sheet accounts 31503+31505+31507+31901+30317+30307 +31701+(part of 26246 + part of 30319)

20. A credit organization may include current year profit at 50% and previous year's profit with corporate income tax not fully paid and not confirmed by external audit in additional capital.

21. "General fund for serviced assets" (account 26246) and "General reserve for serviced assets" (account 30319), created by a credit organization for classified assets of "standard" and "watch" groups in accordance with established requirements of relevant normative legal acts of the National Bank of Tajikistan on the procedure for forming and using such funds and reserves, may be included in additional capital at an amount not exceeding 1.25% of the total sum of risk-weighted assets. The part of the general fund for serviced assets (account 26246) and general reserve for serviced assets (account 30319) that exceeds 1.25% of the total sum of risk-weighted assets and is not included in the additional capital structure is deducted from the total sum of risk-weighted assets when calculating the capital adequacy ratio.

22. A subordinated loan is a loan meeting the following conditions: a) provided to the borrower only in monetary form for a term of not less than 5 years; b) interest on the loan does not exceed the refinancing rate; c) in case of liquidation of a credit organization-borrower, claims of the creditor for the provided loan are satisfied only after full satisfaction of other creditors' claims and before repayment of ordinary shares.

23. Subordinated loans, after coordination with the National Bank of Tajikistan, are included in additional capital calculation and are named established qualified subordinated loans.

24. Upon the due date of payment of an established qualified subordinated loan, if payment of this loan leads to a violation of the capital adequacy ratio, or the capital adequacy ratio is already violated, the credit organization is prohibited from repaying this loan and its interest. In addition, in such case, the National Bank of Tajikistan may require the credit organization to convert the subordinated loan into ordinary shares.

25. A credit organization may, before maturity, convert a subordinated loan into ordinary shares with prior consent of the National Bank of Tajikistan.

26. Within 5 years before the due date of payment of a subordinated loan, 20% of an established qualified subordinated loan is annually excluded from regulatory capital according to the following table:

Payment Term	Part taken into additional capital
More than 5 years	100%
More than 4 and less than 5 years	80%
More than 3 and less than 4 years	60%
More than 2 and less than 3 years	40%
More than 1 year and less than 2 years	20%
Less than 1 year	0%

24. Established qualified subordinated loans are taken into additional capital at an amount not exceeding 50% of the total sum of net core capital (C_core).

25. Regulatory capital is equal to the sum of net core capital and additional capital:

• if net core capital exceeds additional capital, then regulatory capital equals the sum of net core capital and additional capital: C_reg = C_core + C_add;
• if additional capital exceeds net core capital, then regulatory capital is calculated as equal to the sum of double the size of net core capital (Resolution of the Board of NBT dated May 24, 2022, No. 55): C_reg = C_core x 2;

261. Regulatory capital of microcredit deposit organizations must not be less than 6 million somoni.

262. Assets of a credit organization, risk-weighted, are divided into 5 groups:

Asset Name	Risk Weight (%)	Balance Sheet Account Names
Group 1	0%	Funds to be received from correspondent account at the National Bank of Tajikistan (hereinafter - NBT): 10301,10305,10309,10311,10315,10317<br>NBT Securities: 11901,13101,15101<br>State Treasury Bills: 11909,13103,15105<br>State Bonds of Tajikistan: 11905,13105,15103<br>Cash and other cash documents: 10101,10103,10105,10107,10109,10111,10115,10117, 10119,10121<br>Gold bullions: 10131<br>Forward operations and SWAP with NBT (Credit risk size of agreements calculated by "Current Risk" method)
Group 2	10%	Loans guaranteed by the Government of the Republic of Tajikistan: Part of accounts 10701,10703,10705,10707,10709, 10711,10713,10715,10717,10719,10721,10723,10741,1 0743,10745,10747,10749,10751,10752,10753,10754,1 0755,10757,10759,10761,10763,10765,10767,10769,107 71,10772,10773,10774,10775,10777,10779,10901,1090 3,10905,10907,10909,10911,10912,10913,10914,10915 ,10917,10919,10921,10922,10923,10925,10927,10929, 10931,10933,10934,10935,10937,10939,10943,10945,1 0947,10948,10949,10951,10957,10959,10961,10962, 10963,10965,11101,11103,11105,11107,11109,11111, 11112,11113,11114,11115,11117,11119,11121,11122, 11123,11125,11127,11129,11131,11133,11134,11135, 11137 ,11139,11141,11143,11145,11146,11147,11149,11153, 11155,11157,11158,11159,11161,11301,11303,11305, 11307,11309,11311,11313,11315,11317,11319,11321, 11323,11325,11327,11329,11331,11333,11335,11337, 11339,11501,11503,11505,11506,11507,11509,11511, 11513,11515,11516,11517,11519,11521,11523,11525, 11526 ,11527,11529,11531,11533,11535,11536,11537,11539, 11541,11543,11545,11546,11547,11549,11551,11553, 11555,11556,11557,11559,11561,11563,11565,11566, 11567,11569,11571,11573,11575,11576,11577,11579, 11581,11583,11585,11586,11587,11589<br>Loans issued under pledge of State Treasury Bills of Tajikistan: Part of accounts 10701,10703,10705,10707,10709, 10711,10713,10715,10717,10719,10721,10723,10901, 10903,10905,10907,10909,10911,10912,10913,10914, 10915,10917,10919,10921,10922,10923,10925,10927, 10929,10931,10933,10934,10935,10937,10939,10943, 10945,10947,10948,10949,10951,10957,10959,10961, 10962 ,10963,10965,11101,11103,11105,11107,11109,11111, 11112,11113,11114,11115,11117,11119,11121,11122, 11123,11125,11127,11129,11131,11133,11134,11135, 11137,11139,11141,11143,11145,11146,11147,11149, 11153,11155,11157,11158,11159,11161,11301,11303, 11305,11307,11309,11311,11313,11315,11317,11319, 11321 ,11323,11325,11327,11329,11331,11333,11335,11337, 11339,11501,11503,11505,11506,11507,11509,11511, 11513,11515,11516,11517,11519,11521,11523,11525, 11526 ,11527,11529,11531,11533,11535,11536,11537,11539, 11541,11543,11545,11546,11547,11549,11551,11553, 11555,11556,11557,11559,11561,11563,11565,11566 ,11567,11569,11571,11573,11575,11576,11577,11579, 11581,11583,11585,11586,11589<br>Loans issued under pledge of NBT Securities: Part of accounts 10701,10703,10705,10707,10709, 10711, 10713,10715,10717,10719,10721,10723,10901,10903, 10905,10907,10909,10911,10912,10913,10914,10915, 10917,10919,10921,10922,10923,10925,10927,10929, 10931,10933,10934,10935,10937,10939,10943,10945, 10947,10948,10949,10951,10957,10959,10961,10962, 10963 ,10965,11101,11103,11105,11107,11109,11111,11112, 11113,11114,11115,11117,11119,11121,11122,11123, 11125,11127,11129,11131,11133,11134,11135,11137, 11139,11141,11143,11145,11146,11147,11149,11153, 11155,11157,11158,11159,11161,11301,11303,11305, 11307,11309,11311,11313,11315,11317,11319,11321, 11323 ,11325,11327,11329,11331,11333,11335,11337, 11339,11501,11503,11505,11506,11507,11509,11511, 11513,11515,11516,11517,11519,11521,11523,11525, 11526 ,11527,11529,11531,11533,11535,11536,11537,11539, 11541,11543,11545,11546,11547,11549,11551,11553, 11555,11556,11557,11559,11561,11563,11565,11566 ,11567,11569,11571,11573,11575,11576,11577,11579, 11581,11583,11585,11586,11589<br>Loans issued under pledge of gold bullions: Part of accounts 10701,10703,10705,10707, 10709, 10711,10713,10715,10717,10719,10721,10723,10741, 10743,10745,10747,10749,10751,10752,10753,10754, 10755,10757,10759,10761,10763,10765,10767,10769, 10771,10772,10773,10774,10775,10777,10779,10901, 10903,10905,10907,10909,10911,10912,10913,10914, 10915 ,10917,10919,10921,10922,10923,10925,10927,10929, 10931,10933,10934,10935,10937,10939,10943,10945, 10947,10948,10949,10951,10957,10959,10961,10962, 10963 ,10965,11101,11103,11105,11107,11109,11111,111 12,11113,11114,11115,11117,11119,11121,11122, 11123,11125,11127,11129,11131,11133,11134,11135, 11137 ,11139,11141,11143,11145,11146,11147,11149, 11153,11155,11157,11158,11159,11161,11301,11303, 11305 ,11307,11309,11311,11313,11315,11317,11319, 11321 ,11323,11325,11327,11329,11331,11333,11335, 11337 ,11339,11501,11503,11505,11506,11507,11509, 11511 ,11513,11515,11516,11517,11519,11521,11523, 11525 ,11526 ,11527,11529,11531,11533,11535,11536, 11537 ,11539,11541,11543,11545,11546, 11547 ,11549,11551,11553, 11555 ,11556,11557,11559, 11561 ,11563,11565,11566 , 11567,11569,11571,11573, 11575 ,11576,11577,11579, 11581 ,11583,11585,11586, 11589<br>Unused credit lines: Part of accounts 90901, 90903<br>Forward operations and SWAP with certain international financial organizations (Credit risk size of agreements calculated by "Current Risk" method)
Group 3	70%	Funds in correspondent accounts, placements, loans, subordinated loans and acceptances of non-resident banks of OECD member countries: Part of accounts 10507, 10509, 10515,10517, 10535, 10537, 10555,10557,11705,11707<br>REPO operations with non-resident banks of OECD member countries: Part of accounts 10571,10573<br>Debt securities and shares issued by state-owned enterprises: 11911,11935,13107,13129,15107,15129 Part of accounts 11933,11947,13127,13141,15127,15141<br>Debt securities issued by OECD member states: 11919,13113,15117, part of accounts 11933,11947,13127,13141, 15127,15141<br>Debt securities issued by non-resident banks of OECD member countries: Part of accounts 11929,13123,15123,11933,11947, 13127,13141,15127,15141<br>Part of unused obligations with contractual term up to one year or less: Part of accounts 97103,93101,91701,91901<br>Letters of credit of OECD member countries: Part of accounts 90101,90103,90105,90107<br>Standby agreements of OECD member countries: Part of account 90113<br>Underrating agreements of OECD member countries: Part of account 93103<br>Guarantees of OECD member countries: Part of account 90701<br>Sold assets with the right to repurchase in OECD member countries: Part of account 95101<br>Securities of non-resident banks in OECD member countries: Part of account 97101<br>Funds in correspondent accounts, placements, loans, subordinated loans and acceptances of resident banks: 10501,10505,10511,10513,10531,10533,10551,10553, 11701,11703