Regulation on the Procedure for Commercial Banks to Place Foreign Currency Funds in Deposit Accounts Opened at the National Bank of the Kyrgyz Republic

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Creation date: 2023-02-09

Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic of February 28, 2018 No. 2018-P-12/7-7-(NPA)

REGULATION

on the procedure for commercial banks to place monetary funds in foreign currency in deposit accounts opened at the National Bank of the Kyrgyz Republic

(In the edition of the Resolutions of the Board of the National Bank of the KR of September 15, 2021 No. 2021-P-12/51-(NPA), December 14, 2022 No. 2022-P-12/78-10-(NPA))

1. General Provisions

2. This Regulation establishes the minimum requirements for the procedure for commercial banks (hereinafter referred to as the "Bank") to place monetary funds in foreign currency in deposit accounts opened by the Bank at the National Bank of the Kyrgyz Republic (hereinafter referred to as the "National Bank").

3. The Bank places monetary funds in foreign currency in the deposit accounts of the National Bank for the purpose of managing the Bank's liquidity risk, reducing financial risks, and concentrating funds.

4. The transfer of the Bank's monetary funds in foreign currency to deposit accounts opened at the National Bank must be applied only after the Bank has exhausted the opportunities to transfer the specified monetary funds in foreign currency to accounts in other financial and credit organizations (hereinafter referred to as "FCO").

5. The Bank must conduct measures to open accounts in other FCOs for the purpose of transferring monetary funds in foreign currency placed in the deposit accounts of the National Bank, taking into account the conditions established by the Supervisory Committee of the National Bank (hereinafter referred to as the "Supervisory Committee").

6. Monetary funds of the Bank in foreign currency placed in the deposit accounts of the National Bank are included in the composition of liquid assets when calculating liquidity ratios.

7. Monetary funds of the Bank in foreign currency placed in the deposit accounts of the National Bank cannot be used to meet the mandatory reserve requirement ratio.

8. Conditions for placing monetary funds in foreign currency in deposit accounts opened by the Bank at the National Bank

9. To obtain the opportunity to place monetary funds in foreign currency in the deposit accounts of the National Bank, the Bank must send an official appeal regarding the intention to place monetary funds in foreign currency to the National Bank, which is considered by the National Bank within 1 (one) working day. At the same time, the Bank must meet the following requirements:

• have a correspondent account at the National Bank;
• not conduct measures for financial rehabilitation;
• not be in regimes provided for by the Law of the Kyrgyz Republic "On Banks and Banking Activity" (Temporary Administration, direct banking supervision).

By a separate decision of the Board of the National Bank, banks conducting measures for financial rehabilitation/being in regimes provided for by the Law of the Kyrgyz Republic "On Banks and Banking Activity" (Temporary Administration, direct banking supervision) may place monetary funds in foreign currency in deposit accounts.

(In the edition of the Resolution of the Board of the National Bank of the KR of December 14, 2022 No. 2022-P-12/78-10-(NPA))

8. The official appeal must contain:

• reasons/justifications of the Bank, on the basis of which the Bank initiates the issue of placing monetary funds in foreign currency in the National Bank;
• information about the FCO, from the correspondent account of which the transfer of the Bank's monetary funds in foreign currency will be made for subsequent placement in deposit accounts opened at the National Bank;
• type of currency;
• amount;
• term of placement;
• plan of measures of the Bank to open alternative accounts in FCOs with the specified deadlines for closing deposit accounts at the National Bank.

9. Together with the official appeal, the Bank submits to the National Bank the decision of the Board of the Bank/the authorized person on the temporary placement of the Bank's monetary funds in foreign currency in the deposit accounts of the National Bank, as well as account statements by each currency specified in paragraph 14 of this Regulation, as of the date of the official appeal to the National Bank.

10. The main criteria on the basis of which the National Bank considers the Bank's official appeal regarding the intention to place monetary funds in foreign currency in the National Bank:

a) risk of non-compliance with economic ratios established in the Regulation "On economic ratios and requirements mandatory for commercial banks of the Kyrgyz Republic";

b) when more than 50% of the Bank's monetary funds in foreign currency are accumulated in accounts opened in one or several foreign low-rated FCOs or in accounts in FCOs of one country;

c) presence of objective reasons for the risk of loss of monetary funds in foreign currency and confirmed facts about the absence of an alternative account(s) for withdrawing monetary funds in foreign currency from foreign FCOs.

11. Results of the consideration of appeals are officially sent to the Bank.

12. The Bank, for the purpose of transferring monetary funds in foreign currency to the deposit accounts of the National Bank, must conclude an Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank, according to Appendix 1 to this Regulation.

13. The National Bank accepts the Bank's monetary funds in foreign currency in the deposit accounts of the National Bank on the conditions provided for in the Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank.

14. The National Bank places monetary funds of the Bank in foreign currency, expressed in US dollars and euros, in the deposit accounts.

15. The relations of the National Bank and the Bank regarding the placement in the deposit accounts of the National Bank of monetary funds of the Bank in foreign currency are governed by:

• this Regulation;
• Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank.

16. The decision to conclude with the Bank an Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank is taken by the Supervisory Committee in each specific case separately.

17. Upon opening accounts in FCOs, the Bank, with an official appeal to the National Bank, sends an application for the transfer of monetary funds in foreign currency to the Bank's accounts in FCOs, and also submits the decision of the Board of the Bank/the authorized person on the transfer from the deposit accounts at the National Bank of the Bank's monetary funds in foreign currency to the Bank's currency accounts in FCOs.

18. The National Bank, based on the Bank's official appeal, determines the following conditions:

• volume of monetary funds in foreign currency deposited by the Bank;
• type of currency;
• term;
• conditions for placement/withdrawal of monetary funds in foreign currency to/from the deposit account.

19. Placement of the Bank's monetary funds in foreign currency in the deposit accounts of the Bank opened at the National Bank is carried out only in non-cash form.

20. The National Bank accepts monetary funds in foreign currency in the deposit accounts of the National Bank on the conditions of a negative interest rate, the value of which is established from the discount rate of the National Bank at the moment of taking the decision to conclude with the Bank an Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank, depending on the terms of placement:

• up to 3 months (interest rate - 0%);
• up to 6 months (- (minus) 25% of the discount rate of the National Bank);
• up to 12 months (- (minus) 50% of the discount rate of the National Bank);
• over 12 months (- (minus) 75% of the discount rate of the National Bank).

Interest calculation is performed on the balance of the Bank's monetary funds in foreign currency.

21. The term for accruing interest on placed monetary funds in foreign currency in deposit accounts opened by the Bank at the National Bank is the period of time expressed in calendar days and calculated starting from the day following the day of crediting to the deposit account at the National Bank, and until the day preceding the day of transferring monetary funds in foreign currency to the Bank's correspondent account in the FCO, inclusive.

22. For the accrual of interest on placed monetary funds in foreign currency in deposit accounts opened by the Bank at the National Bank, 1 (one) day is taken into account in the calculation and is performed according to the simple interest formula based on 365 days in a year. In the event that the Bank's monetary funds in foreign currency in the deposit accounts opened by the Bank at the National Bank are credited on the last day of the week and/or on the eve of a holiday, then the term for accruing interest is calculated as a period of time expressed in calendar days and calculated starting from the day following the day of crediting monetary funds in foreign currency to the deposit account and until the day preceding the day of transferring the Bank's monetary funds in foreign currency to accounts in FCOs, inclusive.

23. The National Bank deducts from the Bank's correspondent account in national currency the sum of the som equivalent of interest expenses on the account balance, accrued for the placement of monetary funds in foreign currency, taking into account the terms of placement.

24. By a separate decision of the Board of the National Bank, for banks conducting measures for financial rehabilitation/being in regimes provided for by the Law of the Kyrgyz Republic "On Banks and Banking Activity" (Temporary Administration, direct banking supervision), the conditions of placement may be determined and established in each specific case separately and for each currency separately.

(In the edition of the Resolution of the Board of the National Bank of the KR of December 14, 2022 No. 2022-P-12/78-10-(NPA))

25. With each appeal regarding the intention to place monetary funds in foreign currency in the National Bank, the Bank must comply with the requirements specified in paragraph 8 of this Regulation.

26. The transfer by the Bank of monetary funds in foreign currency from the currency deposit account at the National Bank in full may be carried out at any time (within the standard terms of banking practice) with the agreement of the National Bank and as measures aimed at reducing the bank's risks are implemented and/or upon completion of the term for conducting necessary measures to open accounts in other FCOs.

27. Partial withdrawal of monetary funds in foreign currency no more than 3 times within one agreement may be carried out with the agreement of the National Bank.

28. It is prohibited to transfer from the deposit accounts of the National Bank monetary funds of the Bank in foreign currency:

• to third parties;
• to accounts of FCOs registered in offshore zones.

3. Procedure for the Bank to transfer monetary funds in foreign currency

4. The Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank must specify at least:

• conditions under which the Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank is concluded;
• the amount of the Bank's monetary funds in foreign currency to be placed in deposit currency accounts at the National Bank, broken down by foreign currencies;
• the Bank's obligation to conduct measures within the specified period to transfer monetary funds in foreign currency from deposit accounts at the National Bank to currency accounts in other FCOs;
• details of the deposit currency accounts of the National Bank to which the Bank's monetary funds in foreign currency located in FCOs will be placed;
• name, legal address, details of currency accounts of FCOs from which the Bank's monetary funds in foreign currency will be transferred to deposit currency accounts at the National Bank;
• rights, duties, and responsibilities of the National Bank and the Bank;
• conditions for applying sanctions to the Bank in case of violation of the conditions of this Regulation, as well as the conditions of the concluded Agreement;
• conditions for reimbursing the National Bank's expenses.

4. Final Provisions

5. The National Bank and the Bank ensure confidentiality of information about operations for crediting and transferring monetary funds in foreign currency.

6. The Bank reimburses the National Bank for any possible expenses related to the placement in deposit accounts and transfer from said accounts of the Bank's monetary funds in foreign currency.

7. Transfer by the Bank of the right to claim monetary funds in foreign currency placed in deposit accounts to other persons is not permitted.

8. The Bank's expenses specified in paragraphs 20 and 31 of this Regulation are debited from the Bank's correspondent account in national currency.

Appendix 1 to the Regulation on the procedure for commercial banks to place monetary funds in foreign currency in deposit accounts opened at the National Bank of the Kyrgyz Republic of February 28, 2018 No. 2018-P-12/7-7-(NPA)

Standard Form

AGREEMENT

between the National Bank of the Kyrgyz Republic and

---

(name of commercial bank)

on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank of the Kyrgyz Republic

Bishkek

No. _______ from "" _____________ 20 year

The National Bank of the Kyrgyz Republic, hereinafter referred to as the "National Bank", represented by ______________________, acting on the basis of _________________________, on the one hand, and _________________________ (name of commercial bank), hereinafter referred to as the "Bank", represented by ____________________, acting on the basis of ___________ on the other hand, together hereinafter referred to as the "Parties", on the basis of the Regulation "On the procedure for commercial banks to place monetary funds in foreign currency in deposit accounts opened at the National Bank of the Kyrgyz Republic", approved by the Resolution of the Board of the National Bank ___________ from "" ______________ 20 year, (hereinafter referred to as the "Regulation"), concluded this Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank of the Kyrgyz Republic (hereinafter referred to as the "Agreement") on the following:

1. Subject of the Agreement

1.1. The subject of this Agreement is the determination of the conditions for regulating legal relations, settlements, and accounting arising from the placement of the Bank's monetary funds in foreign currency in deposit accounts opened at the National Bank.

1.2. Settlements for the placement of the Bank's monetary funds in foreign currency are carried out through the corresponding account in foreign currency of the Bank opened at the National Bank and affect the nostro account of the National Bank in foreign currency in the National Bank's correspondent bank upon crediting monetary funds in foreign currency, and the correspondent account of the Bank in foreign currency opened in the Bank's correspondent bank upon the reverse withdrawal of monetary funds in foreign currency.

2. General Conditions

2.1. Crediting of the Bank's monetary funds in foreign currency is carried out on the conditions of returnability, paid/free basis within the agreed amount and terms of placement with the National Bank as of the date of official consideration and approval.

2.2. Before crediting monetary funds in foreign currency, the Bank provides an official written appeal in arbitrary form specifying the parameters indicated in paragraphs 8 and 9 of the Regulation.

2.3. For crediting monetary funds in foreign currency to the deposit accounts of the Bank opened at the National Bank, the Bank provides to the National Bank an Application for crediting monetary funds in foreign currency to deposit accounts opened at the National Bank, signed by the head of the executive body and the chief accountant of the Bank, having the right of first and second signature, and certified by the official seal of the Bank in accordance with the notarized card of specimen signatures, according to Appendix 1 to this Agreement.

2.4. The Application for crediting monetary funds in foreign currency to deposit accounts opened at the National Bank must be provided by the Bank to the National Bank no later than 12:00 hours on the date of crediting monetary funds in foreign currency. The Application is provided in an opaque sealed envelope and must be registered in the registration journal.

2.5. The amount specified in the Application for crediting monetary funds in foreign currency to deposit accounts opened at the National Bank must not exceed the amount agreed with the National Bank.

2.6. Additional replenishment of the Bank's deposit currency accounts opened at the National Bank with monetary funds in foreign currency is prohibited.

2.7. Partial withdrawal of monetary funds in foreign currency from the deposit accounts of the Bank opened at the National Bank is possible only with the consent of the National Bank. At the same time, partial withdrawal of monetary funds in foreign currency cannot exceed more than 3 times within this Agreement.

2.8. With each appeal regarding the intention to place monetary funds in foreign currency in the National Bank, the Bank must comply with the requirements specified in paragraph 8 of the Regulation.

2.9. For the reverse withdrawal of monetary funds in foreign currency, the Bank provides to the National Bank an Application for reverse withdrawal of monetary funds in foreign currency from deposit accounts opened at the National Bank, signed by the head of the executive body of the Bank, having the right of first signature, and certified by the official seal of the Bank in accordance with Appendix 2 to this Agreement.

2.10. The Application for reverse withdrawal of monetary funds in foreign currency from deposit accounts of the Bank opened at the National Bank must be provided by the Bank to the National Bank no less than 2 (two) working days before the date of the planned reverse withdrawal of monetary funds in foreign currency from deposit accounts at the National Bank. The Application is provided in an opaque sealed envelope and must be registered in the registration journal.

2.11. In cases where the specified date of crediting monetary funds in foreign currency to the deposit accounts of the National Bank or the date of reverse withdrawal of monetary funds in foreign currency from the deposit accounts of the National Bank in the Application is a non-working day (in the Kyrgyz Republic and/or the country of the correspondent bank), then the crediting/reverse/early withdrawal of monetary funds in foreign currency from the deposit accounts is carried out on the next working day.

2.12. The National Bank ensures the confidentiality of the information specified in the Bank's Application.

2.13. Upon reverse withdrawal of monetary funds in foreign currency from the deposit accounts of the Bank opened at the National Bank, the Bank must send a payment instruction via the SWIFT system in MT202 format. The payment instruction must be filled out in accordance with the conditions specified in the Application for reverse/early withdrawal of monetary funds in foreign currency and sent by 12:00 hours (Bishkek time) on the date of valuation of the withdrawal/early withdrawal of the Bank's monetary funds in foreign currency.

2.14. In the event of a change in the details of currency accounts, the National Bank and the Bank undertake to immediately notify each other in writing, with the signature of officials authorized to dispose of the Bank's monetary funds in foreign currency, 2 (two) days before the final settlement for crediting/reverse/early withdrawal of monetary funds in foreign currency from the deposit currency accounts of the Bank opened at the National Bank.

2.15. In the event of non-implementation or untimely implementation by the Bank of the transfer of monetary funds in foreign currency to the correspondent accounts of the National Bank on the valuation date when placing (crediting) monetary funds in foreign currency in the deposit accounts of the Bank specified in the Bank's application, the Bank must send a letter canceling the previously provided application for crediting monetary funds in foreign currency, specifying the reason for non-crediting of funds, and, if necessary, provide a new application for crediting monetary funds in foreign currency, specifying the new date of crediting, term, and date of completion of the placement term.

2.16. In the event of the Bank crediting to the correspondent account of the National Bank an amount different from the amount specified in the application for crediting monetary funds in foreign currency, the Bank must send a letter canceling the previously provided application for crediting monetary funds in foreign currency, specifying the reason for the discrepancy between the actual amount of crediting and the amount specified in the Bank's application, and provide a new application for crediting monetary funds in foreign currency, specifying the actually credited amount of monetary funds in foreign currency to the correspondent account of the National Bank.

2.17. The transfer of monetary funds of the Bank in foreign currency located in accounts at the National Bank must be made only to the correspondent accounts of the Bank opened in other FCOs. It is prohibited to transfer monetary funds of the Bank in foreign currency located in deposit accounts opened at the National Bank to third parties and to FCOs registered in offshore zones, the list of which is determined by the authorized state body of the Kyrgyz Republic in the field of combating the financing of terrorist activities and legalization (money laundering) of criminal proceeds.

(In the edition of the Resolution of the Board of the National Bank of the KR of September 15, 2021 No. 2021-P-12/51-(NPA))

2.18. Operations with monetary funds of the Bank in foreign currency transferred to the deposit accounts of the Bank opened at the National Bank are carried out only in non-cash form.

2.19. Negative rates are applied to the balance of funds in the Bank's deposit account opened at the National Bank, the value of which is established from the discount rate of the National Bank at the moment of taking the decision to conclude with the Bank an Agreement on the procedure for placing monetary funds in foreign currency in deposit accounts opened at the National Bank. Depending on the storage terms of the funds, the following rates are applied:

• up to 3 months (interest rate - 0%);
• up to 6 months (- (minus) 25% of the discount rate of the National Bank);
• up to 12 months (- (minus) 50% of the discount rate of the National Bank);
• over 12 months (- (minus) 75% of the discount rate of the National Bank).

2.20. The Bank reimburses the National Bank for all expenses on the account balance for the placement of monetary funds in foreign currency by the National Bank in the National Bank's correspondent banks, related to negative interest rates established by the National Bank's correspondent banks.

3. Purpose, maintenance, and regime of accounts

3.1. For the temporary placement of monetary funds of the Bank in foreign currency, according to this Agreement, the National Bank opens deposit accounts for the Bank.

3.2. For the temporary placement of monetary funds of the Bank in foreign currency, according to this Agreement, the Bank must provide all information about the FCO (name, legal address, details of currency accounts), from the accounts of which monetary funds in foreign currency will be credited to the Bank's deposit accounts at the National Bank, according to Appendix 1 to this Agreement.

3.3. Account names: (name of the Bank) deposit accounts in the following currencies: name of foreign currency.

3.4. No. of deposit account name of foreign currency ______________________ No. of deposit account name of foreign currency ___________________________

3.5. Purpose of accounts: accounting of monetary funds of the Bank in foreign currency in deposit accounts.

4. Rights and obligations of the parties

4.1. The Parties have the right to conduct operations for crediting/transferring monetary funds in foreign currency in accordance with the Regulation and this Agreement.

4.2. The Parties agree to the conditions for conducting crediting/transferring monetary funds in foreign currency, set forth in the Regulation and in this Agreement, and recognize their obligations