Instruction No. 175 on the Limits of the Maximum Size of the Open Currency Position and the Procedure for Their Calculation for Credit Financial Organizations

«Registered» «Approved» By the Ministry of Justice of the Republic of Tajikistan No. 548 dated October 13, 2009 By the Resolution of the Board of the National Bank of Tajikistan dated August 10, 2009 No. 264

«Registered» «Approved» Amendments and additions By the Ministry of Justice of the Republic of Tajikistan No. 548 «a» dated January 04, 2019 By the Resolution of the Board of the National Bank of Tajikistan dated November 30, 2018 No. 159

Instruction No. 175 «On the Limits of the Maximum Size of the Open Currency Position and the Procedure for Their Calculation for Credit Financial Organizations»

Instruction 175 “On the Limits of the Maximum Size of the Open Currency Position and the Procedure for Their Calculation for Credit Financial Organizations” (hereinafter - Instruction) is developed in accordance with the requirements of Article 32 of the Law of the Republic of Tajikistan “On Banking Activity”, Article 38 of the Law of the Republic of Tajikistan “On Islamic Banking Activity” and Article 4 of the Law of the Republic of Tajikistan “On Currency Regulation and Currency Control” with the aim of managing currency risks and regulating the domestic currency market. It establishes limits on open currency positions, the procedure for their calculation, compliance, reporting and control thereof for credit financial organizations that have received a license from the National Bank of Tajikistan to conduct banking operations in foreign currency.

1. GENERAL PROVISIONS

1. Credit financial organizations are credit organizations and Islamic credit organizations conducting activities stipulated by law based on a license from the National Bank of Tajikistan.
2. Credit organizations are legal entities (banks and non-bank credit organizations, including microfinance organizations) that conduct all or individual banking operations stipulated by law based on a license from the National Bank of Tajikistan.
3. Islamic credit organizations are legal entities (Islamic banks, Islamic non-bank credit organizations, Islamic microfinance organizations, including “Islamic banking window”) that conduct all or individual Islamic banking operations stipulated by law based on a license from the National Bank of Tajikistan.
4. Open currency position is the difference between the balances of assets and off-balance sheet operations that increase assets, and liabilities and off-balance sheet operations that increase liabilities in various foreign currencies. An open currency position can be of two types: short and long.
5. Short open currency position is an open currency position in a specific foreign currency that arises when liabilities exceed assets, as well as when off-balance sheet operations increasing liabilities exceed off-balance sheet operations increasing assets in that foreign currency.
6. Long open currency position is an open currency position in a specific foreign currency that arises when assets exceed liabilities, as well as when off-balance sheet operations increasing assets exceed off-balance sheet operations increasing liabilities in that foreign currency.
7. Closed currency position is a currency position in a specific foreign currency that arises when assets and liabilities in that foreign currency are equal, as well as when off-balance sheet operations increasing assets are equal to off-balance sheet operations increasing liabilities in that foreign currency.
8. Total value of long open currency positions of a credit organization is the sum of the bank's long positions across all currency types based on balance sheet and off-balance sheet operations of the credit organization.
9. Total value of short open currency positions of a credit organization is the sum of the bank's short positions across all currency types based on balance sheet and off-balance sheet operations of the credit organization.
10. Limits on open currency positions (coefficients K6.1 and K6.2) established by the National Bank of Tajikistan are restrictions on the ratios of total and individual open currency positions to the regulatory capital of a credit organization. These coefficients are determined by the following formulas: K6.1 = Total long (short) open currency position / Regulatory capital of the credit organization (K) K6.2 = Long (short) open currency position by a specific foreign currency / Regulatory capital of the credit organization (K)
11. Regulatory capital (own funds) of a credit organization (K), determined in accordance with the normative legal acts of the National Bank of Tajikistan on prudential standards.
12. A credit organization obtains the right to conduct operations in foreign currency from the date of obtaining a License from the National Bank of Tajikistan and loses such right from the date of its revocation.
13. Compliance with the limits on open currency positions of credit organizations of the Republic of Tajikistan is monitored monthly by the corresponding structural division of the National Bank of Tajikistan for banking supervision.

2. DETERMINATION OF INDIVIDUAL VALUE OF OPEN CURRENCY POSITIONS OF A CREDIT ORGANIZATION 12. For each foreign currency, the open currency position is determined separately. For this purpose, the credit organization's currency positions (for each foreign currency separately) are converted into equivalent in somoni based on the official exchange rates of foreign currencies effective as of the reporting date, which are established by the National Bank of Tajikistan. 13. To determine the open currency position (long or short) or closed for a specific foreign currency, it is necessary to sum the balances of all accounts in foreign currency on the Asset and Liability sides of the bank's balance sheet, where this foreign currency is reflected, and compare them. 14. A long currency position for off-balance sheet operations arises when received guarantees and letters of credit, standby letters of credit and agreements, undrawn credit lines, accepted securities, assets sold with a probability of repurchase, and forward contracts for the purchase of this foreign currency exceed issued guarantees and letters of credit, standby letters of credit and agreements, received promissory notes of credit organizations (drafts of credit organizations), issued securities, and forward contracts for the sale of this foreign currency. 15. A short currency position for off-balance sheet operations arises when issued guarantees and letters of credit, standby letters of credit and agreements, received promissory notes of credit organizations (drafts of credit organizations), issued securities, and forward contracts for the sale of this foreign currency exceed received guarantees and letters of credit, standby letters of credit and agreements, undrawn credit lines, accepted securities, assets sold with a probability of repurchase, and forward contracts for the purchase of this foreign currency. 16. To calculate the total open currency position, it is necessary to determine the value of all open currency positions (long or short) for balance sheet and off-balance sheet operations by individual foreign currencies and compare their result.

3. LIMITS ON OPEN CURRENCY POSITION 17. The following limits on open currency positions are established for each day for credit organizations: a) For freely convertible foreign currency (FCF): - the total value of long open currency positions (K6.1.1) must not exceed 10% of the regulatory capital of the credit organization; - the total value of short open currency positions (K6.1.2) must not exceed 10% of the regulatory capital of the credit organization; - long (short) open currency positions by individual foreign currencies K6.2.1. (K6.2.2) must not exceed 8% and 8%, respectively, of the regulatory capital of the credit organization. The following are included in FCF: USD 840 (US dollars), EUR 978 (euros), CHF 756 (Swiss francs), DKK 208 (Danish krone), JPY 392 (Japanese yen), GBP 826 (pounds sterling), CAD 124 (Canadian dollar), AUD 036 (Australian dollar), SEK 752 (Swedish krona). b) For non-freely convertible foreign currency: - the total value of long (short) open currency positions K6.1.3. (K6.1.4.) must not exceed 10% of the regulatory capital of the credit organization; - long (short) open currency positions by individual foreign currencies K6.2.3. (K6.2.4.) must not exceed 8% of the regulatory capital of the credit organization. 18. Exceeding the established limits on open currency positions cannot be carried over by a credit organization to the next operating day, and in order to comply with the established position limits, a credit organization must conduct a balancing currency operation, i.e., acquire the missing currency or sell the excess. 19. The established limits on open currency positions may be amended by a resolution of the Board of the National Bank of Tajikistan.

4. REPORTING OF CREDIT ORGANIZATIONS AND CONTROL PROCEDURE OVER REPORTING BY THE NATIONAL BANK OF TAJIKISTAN 20. A report on open currency positions is prepared based on accounting data of currency operations and submitted by a credit organization to the National Bank of Tajikistan, starting from the date of conducting the first currency operation, in accordance with the procedure established by the National Bank of Tajikistan. (Appendix No. 1 to this Instruction). 21. The monthly report on open currency positions indicates the size of the regulatory capital (K) of a credit organization as of the last day of the previous month. 22. Credit organizations submit a report on open currency positions (taking into account subordinate institutions) monthly to the corresponding structural division of the National Bank of Tajikistan for banking supervision. 23. Credit organizations submit by 14:00 of the current day a consolidated report on open currency positions of credit organizations to the corresponding structural division of the National Bank of Tajikistan for exchange rate policy for the previous day in accordance with Appendix No. 2 to this Instruction. 24. In case of violation of the requirements of this Instruction, a credit organization will be liable in accordance with the laws and normative legal acts of the National Bank of Tajikistan.

Appendix No. 1 to Instruction No. 175 “On the Limits of the Maximum Size of the Open Currency Position and the Procedure for Their Calculation for Credit Financial Organizations” TABLE 19. FOREIGN CURRENCY POSITION The open currency position must be indicated for each available foreign currency in a credit organization. Column No. 1 indicates the balance sheet report on long currency position. It is calculated by subtracting all liabilities in a specific currency from all assets of the same currency. A long position is achieved when results are positive. Column No. 2 indicates the balance sheet report on short currency position. It is calculated by subtracting all liabilities in a specific currency from all assets of the same currency. A short position is achieved when results are negative. Column No. 3 indicates the off-balance sheet report on long currency position. It is calculated by subtracting all liabilities for sale in a specific currency from all liabilities for purchase of the same currency. A long position is achieved when results are positive. Column No. 4 indicates the off-balance sheet report on short currency position. It is calculated by subtracting all liabilities for sale in a specific currency from all liabilities for purchase of the same currency. A short position is achieved when results are negative. Column No. 5 indicates the trading report on long currency position. It is calculated by subtracting all liabilities for trading in a specific currency from all assets for trading of the same currency. A long position is achieved when results are positive. Column No. 6 indicates the trading report on short currency position. It is calculated by subtracting all liabilities for trading in a specific currency from all assets for trading of the same currency. A short position is achieved when results are negative. Column No. 7 indicates all other long currency positions excluding the trading balance sheet report on long currency position. It is calculated by subtracting liabilities for trading in a specific currency from all assets for trading of the same currency. A long position is achieved when results are positive. Column No. 8 indicates all other short currency positions excluding the trading balance sheet report on long currency position. It is calculated by subtracting liabilities for trading in a specific currency from all assets for trading of the same currency. A short position is achieved when results are negative. The sum of indicators in columns 5 and 7 must be equal to the sum of indicators indicated in column 1. The sum of indicators in columns 6 and 8 must be equal to the sum of indicators indicated in column 2. The sum of indicators in columns 1 and 3 must be equal to the sum of indicators indicated in column 9. The sum of indicators in columns 2 and 4 must be equal to the sum of indicators indicated in column 10.

/Name of credit financial organization and their branches/ Report as of: _____ year. TABLE 19. FOREIGN CURRENCY POSITION

Currency Code	Currency Name & Code	Balance Sheet (Long + / Short -)	Off-Balance Sheet (Long + / Short -)	Indexation/Structural (Long + / Short -)	Foreign Currency Positions (Long + / Short -)
19.01.000	AED	784	0
19.01.005	AMD	051	0
19.01.010	RUB	643	0
19.01.015	AZM	031	0
19.01.020	BYR	974	0
19.01.025	SAR	682	0
19.01.030	SGD	702	0
19.01.035	CNY	156	0
19.01.040	TMM	795	0
19.01.045	EEK	233	0
19.01.050	TRL	792	0
19.01.055	UAH	980
19.01.060	GEL	981	0
19.01.065	INR	356	0
19.01.070	IRR	364	0
19.01.075	ISK	352	0
19.01.080	UZS	860
19.01.085	KGS	417	0
19.01.090	KWD	414	0
19.01.095	KZT	398	0
19.01.100	LTL	440
19.01.105	LVL	428	0
19.01.110	MDL	498	0
19.01.115	NOK	578	0
19.01.120	PLN	985	0
19.01.125	AUD	036	0
19.01.130	CAD	124	0
19.01.135	DKK	208	0
19.01.140	JPY	392	0
19.01.145	SEK	752	0
19.01.150	CHF	756	0
19.01.155	GBP	826	0
19.01.160	USD	840
19.01.165	EUR	978	0

Appendix No. 2 to Instruction No. 175 “On the Limits of the Maximum Size of the Open Currency Position and the Procedure for Their Calculation for Credit Financial Organizations” Report on open currency positions as of the end of the operating day _____________ 20___ year. (Name of bank, non-bank financial organization and their branches)

Currency Type	Currency Name & Code	Limit on Open Currency Positions by Foreign Currency Types (somoni) in % to Regulatory Capital: Balance (1)	Limit on Open Currency Positions by Foreign Currency Types (somoni) in % to Regulatory Capital: Off-Balance (2)	Limit on Open Currency Positions by Foreign Currency Types (somoni) in % to Regulatory Capital: Total (1+2)
I Freely Convertible Currency (FCF)	EUR 978 / USD 840 / ... and others	Long (+) / Short (-)	Long (+) / Short (-)	Long (+) / Short (-)
II Non-Freely Convertible Currency	RUB 643 / UZS 860 / ... and others	Long (+) / Short (-)	Long (+) / Short (-)	Long (+) / Short (-)

Regulatory capital: ______________ somoni Date and time of report acceptance:__________ (as of the end of the previous day) Chairman of the Board F.I.O. and signature Head of Department (Division) responsible officer National Bank of Tajikistan