Regulation on Minimum Requirements for Credit Risk Management in Credit Unions

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Date of creation: 2026-04-30

Approved

by the Resolution of the Board of the National Bank of the Kyrgyz Republic

of December 23, 2009 No. 50/7

REGULATION

on minimum requirements for credit risk management in credit unions

(In the edition of the Resolutions of the Board of the NB KR of December 12, 2012 No. 48/10, October 23, 2013 No. 39/4, May 30, 2014 No. 24/10, September 16, 2015 No. 53/9, February 10, 2016 No. 7/3, August 24, 2016 No. 35/4, September 28, 2016 No. 40/6, May 31, 2017 No. 21/9, August 15, 2018 No. 2018-P-33/33-8, January 30, 2019 No. 2019-P-33/4-2, August 21, 2019 No. 2019-P-33/43-8, March 11, 2020 No. 2020-P-33/10-1, July 8, 2020 No. 2020-P-33/39-3, December 21, 2022 No. 2022-P-12/81-7, June 14, 2023 No. 2023-P-12/38-4, August 30, 2023 No. 2023-P-12/55-1, December 8, 2023 No. 2023-P-12/76-1, August 14, 2024 No. 2024-P-12/36-1, October 16, 2024 No. 2024-P-12/53-2-(NFKU), October 31, 2024 No. 2024-P-12/58-2-(NPA), June 18, 2025 No. 2025-P-12/28-1-(NPA), October 23, 2025 No. 2025-P-12/55-3-(NPA), October 23, 2025 No. 2025-P-12/55-4-(NPA), December 19, 2025 No. 2025-P-12/68-2-(NPA),

April 23, 2026 No. 2026-P-12/25-2-(NPA))

1. General Provisions

1.1. (Lost force in accordance with the Resolution of the Board of the NB KR of May 31, 2017 No. 21/9)

1.2. The purpose of this Regulation is to define the minimum requirements for the formation in credit unions, including credit unions carrying out operations according to Islamic principles of banking and finance (hereinafter - credit union), of an adequate system of credit risk management.

Terms and definitions used in the part on Islamic principles of banking and finance correspond to the terms and definitions provided in the legislation of the Kyrgyz Republic regulating the activities of credit unions carrying out their activities according to Islamic principles of banking and finance.

(In the edition of the Resolution of the Board of the NB KR of April 23, 2026 No. 2026-P-12/25-2-(NPA))

1.3. Credit risk is the risk of borrowers failing to fulfill their obligations in accordance with the terms and conditions of the contract, as well as counterparties to financial contracts.

Credit risk is associated with both payment delays due to the borrower's fault due to insolvency, and with the quality of collateral, the type of borrower by ownership form, industry affiliation, presence and types of guarantees and reliability of guarantors, assessment of the fulfillment of previously given obligations on loans, prospects for further development of the borrower, etc.

Credit risk is present in all types of activities of the credit union, where a positive result depends on the fulfillment by the participant-borrower of the credit union (hereinafter borrower), or by counterparties of obligations to the credit union provided for by agreements and/or contracts.

The goal of credit risk management is to determine the degree of exposure of the credit union to credit risk, identify the causes of its occurrence and determine internal and external trends of risk increase, on the basis of which credit risk can be forecasted, and take necessary measures to minimize it to an acceptable level.

1.4. Women's entrepreneurship is entrepreneurial activity in accordance with the legislation of the Kyrgyz Republic.

(In the edition of the Resolution of the Board of the NB KR of June 18, 2025 No. 2025-P-12/28-1-(NPA))

1.5. Self-prohibition on concluding a credit transaction (hereinafter - self-prohibition) is the independent expression of will of a physical person to establish a ban on concluding a credit agreement or another agreement providing for the provision of monetary funds and/or other property on loan (hereinafter - credit agreement) in accordance with the requirements of the Law of the Kyrgyz Republic "On the Exchange of Credit Information".

Establishment of self-prohibition, as well as removal of self-prohibition, is carried out by a physical person free of charge, independently via the state portal of electronic services of the Kyrgyz Republic or by another method determined by the National Bank. The established self-prohibition does not have retroactive effect with respect to credit agreements concluded with credit unions before the establishment of this self-prohibition. Information about the self-prohibition on concluding credit agreements is sent to credit bureaus at the choice of the physical person who established the self-prohibition. Credit unions ensure inter-system integration with existing credit bureaus in order to obtain information about the self-prohibition (removal of the ban) on concluding credit agreements.

The procedure for determining the terms of the start of establishment, action and termination of the self-prohibition, as well as the form of establishment and requirements for the self-prohibition (removal of the ban) are regulated by the Rules for regulating the activities of credit bureaus on the territory of the Kyrgyz Republic, approved by the Resolution of the Board of the National Bank of September 28, 2016 No. 40/5.

(In the edition of the Resolution of the Board of the NB KR of October 23, 2025 No. 2025-P-12/55-3-(NPA))

1.6. Total cost of consumer credit – the total amount of all expenses of the borrower under the contract related to obtaining and servicing the consumer credit, including interest (markup), commissions and other mandatory payments, as well as the increase in the cost of goods (works, services) due to the provision of a consumer credit.

1.7. Consumer credit – a loan or financing according to Islamic principles, provided by a credit union on terms of maturity, repayment and cost, including for the purpose of paying for goods, works or services with subsequent payment by the borrower in installments (deferred payment) within the framework of a consumer credit agreement. Consumer credit is provided to physical persons for personal, family or household purposes not related to entrepreneurial activity and profit making. For the purposes of this Regulation, loans and installments related to the acquisition, construction or completion of residential real estate, secured by real estate, are not considered consumer credits. Consumer credits may be provided without accrual of interest (markup) by agreement of the parties.

Information on the general conditions for providing loans, the size of interest rates, markups, as well as commission fees and tariffs for services must be open and accessible to clients and cannot be the subject of commercial or banking secrecy.

The conditions and procedure for providing a consumer credit are subject to mandatory disclosure at customer service locations and on the official website (if any) of the credit union, freely accessible to an unlimited number of persons.

Information on changes in interest rates on consumer credits is published at customer service locations, on the official website of the credit union (if any) and/or via other communication channels no later than the date of their introduction into force.

1.8. For the purposes of this regulation:

• under the term "credit" is also meant financing provided according to Islamic principles of banking and finance;
• under the term "credit agreement" is also meant a financing agreement provided according to Islamic principles of banking and finance;
• under the term "interest rate" is also meant the markup on financing provided according to Islamic principles of banking and finance.

Markup – the rate of return on contracts in accordance with Islamic principles of banking and finance, brought to a nominal annual percentage value, as well as an increase in the amount of the borrower's obligation compared to the price (cost) of goods, works or services upon full one-time payment.

For the purposes of this regulation, in an agreement on Islamic principles of banking and finance, the markup must be indicated in absolute value with additional disclosure of the nominal annual percentage value (for operations for which a repayment schedule or income accrual schedule is compiled).

(In the edition of the Resolution of the Board of the NB KR of April 23, 2026 No. 2026-P-12/25-2-(NPA))

2. Credit Risk Management

2.1. The Board of the credit union must ensure the presence of an effective credit risk management system, which must include a clearly defined credit structure with the establishment of rights and obligations on all aspects of management and monitoring of credit risk, as well as appropriate tools that allow to determine, assess and control credit risk.

2.2. Determination of credit risk is a process carried out on a constant basis, which must be oriented towards identifying risks.

(In the edition of the Resolution of the Board of the NB KR of September 16, 2015 No. 53/9)

2.3. Measurement of credit risk must be carried out taking into account the external and internal conditions of this credit union. Risk measurement tools used by the credit union must reflect the complexity and levels of risk taken by the credit union. The credit union must periodically assess the risk measurement tools it applies.

2.3. Control over credit risk. The credit union must establish and set out in policies, rules and procedures limits defining the rights and responsibilities of credit union employees. Control restrictions must be adjustable, i.e., the credit union must have the ability to make changes to the specified limits in the order established in the policies.

2.4. Reports on credit risk monitoring must be periodic, accurate, timely and must be submitted to responsible persons of the credit union for taking necessary corrective measures.

2.5. Credit operations of the credit union are carried out in accordance with its internal credit policy, approved by the General Meeting of participants of the credit union. The General Meeting of participants of the credit union must periodically review the adequacy of the credit policy.

The Board of the credit union is responsible for the implementation of the credit policy, for which it must develop and implement into the activities of the credit union policies and procedures for identifying, measuring, monitoring and controlling credit risk.

2.6. Credit unions carrying out operations according to Islamic principles of banking and finance, within the framework of credit risk management, must ensure that the credit policy, standard contracts, general conditions for providing all products comply with Shariah standards and regulatory legal acts of the Kyrgyz Republic.

Compliance of the credit policy, standard credit agreements, general conditions for providing all products with Shariah standards is ensured by the Shariah Council, created in the credit union or at associations (unions) of financial and credit organizations.

All significant changes made to the conditions of the credit policy, standard credit agreements, conditions for providing products must be approved by the Shariah Council.

When performing its functions, the Shariah Council must be independent from the Board of the credit union.

The Regulation on the Shariah Council must define:

• the organization of the work of the Shariah Council (regulation) – the composition of the council, the procedure for holding meetings;
• powers and responsibilities of the Shariah Council;
• the procedure for interaction with the Board and the Financing Committee;
• the procedure for holding meetings, which may be held in person or in absentia. At the same time, it should be determined that meetings with the physical participation of members of the Shariah Council must be held no less than once a year, and the Shariah Council is empowered to consider and make decisions on agenda items if 2/3 of the members of the Shariah Council are present at the meeting;
• the procedure for early termination of the powers of members of the Shariah Council.

A financing agreement (credit agreement) may be amended and supplemented by the credit union (in part clarifying its conditions taking into account the specifics and details of the transaction for the placement of funds) without additional coordination with the Shariah Council on condition that all significant (main) conditions of the standard agreement approved by the Shariah Council remain unchanged in it.

Decisions made by the Shariah Council must be available, both for the client of the credit union and for third parties. The credit union is obliged to provide an explanation of the decision of the Shariah Council. At the same time, the explanation provided to clients must be preliminarily coordinated with the Shariah Council.

(In the edition of the Resolution of the Board of the NB KR of April 23, 2026 No. 2026-P-12/25-2-(NPA))

3. Credit Policy of the Credit Union

3.1. The credit policy must define the strategy, criteria, parameters and procedures that employees of the credit union must follow in activities related to the provision, documentation of loans, monitoring and risk management.

The credit policy of the credit union must reflect issues regarding the possible organization of periodic training of employees on lending and monitoring issues of analysis and assessment of the borrower's solvency, taking into account the methodology for assessing borrower solvency implemented in the credit union, work with problem loans, as well as on other lending issues, including communication with clients, and other requirements of the legislation of the Kyrgyz Republic and principles of responsible lending.

(In the edition of the Resolution of the Board of the NB KR of May 31, 2017 No. 21/9)

3.2. The credit policy must reflect the main provisions regarding the issuance of loans:

3.2.1. General provisions, including:

• types of loans depending on the purposes of lending and other conditions, including loans aimed at the development of women's entrepreneurship;
• currency of the loan;
• quantitative lending limits;
• loan terms;
• procedure for determining the solvency of potential borrowers, including the procedure for calculating the debt burden indicator for consumer loans in accordance with the requirements of this Regulation;
• interest rates and methods for their establishment;
• geographical restrictions;
• loan concentration (by groups of borrowers, geographical sign, by industry and other factors);
• restrictions on loans issued to members of the management bodies of the credit union;
• criteria for assessing the value and acceptability of collateral;
• and others.

(In the edition of the Resolutions of the Board of the NB KR of October 23, 2013

No. 39/4, June 18, 2025 No. 2025-P-12/28-1-(NPA), April 23, 2026 No. 2026-P-12/25-2-(NPA))

3.2.2. Procedure for loan documentation:

• document forms;
• procedure for issuing loans;
• procedure for approving loans;
• requirements for collateral and documentation (types of collateral, loan coverage ratio by collateral, assessment of market value and its location, right to dispose of collateral, methods for assessing collateral);
• control over the correct documentation of loans.

The credit union, for the purpose of organizing work on risk assessment when concluding, changing and monitoring the execution of credit transactions, is obliged to conclude agreements on the exchange of credit information with existing credit bureaus, as well as in accordance with concluded agreements, provide them with credit information available in the credit union.

The credit union provides credit information to credit bureaus with the consent of the client, except in cases where negative credit information is provided. At the same time, information about non-fulfillment of contractual obligations (overdue debt) for more than ninety calendar days and/or other mandatory payments due to an emergency situation and/or martial law is not included in negative credit information on condition that the client submits an application in which circumstances related to the introduction of an emergency situation and/or martial law that affected the proper fulfillment of obligations must be specified.

In the event that overdue debt arose as a result of an emergency situation and/or martial law, the credit union, when transmitting information about overdue loans to credit bureaus, must indicate information that payment delays on loans are related to the introduction of an emergency situation and/or martial law.

Credit information must be reliable and updated, based on factual data.

Internal documents of the credit union on the management of credit activities must contain the procedure and requirements regarding the organization of work on the exchange of credit information:

• on ensuring the storage and protection of credit information from unauthorized access, destruction, alteration, use or disclosure;
• on the prohibition of disclosure of information by the credit union and its employees who gained access to information in the process of exchanging credit information, as well as after the termination of their employment contract (contract).

In addition, the main conditions and obligations are reflected in internal documents on the management of credit activities when concluding an agreement on the exchange of credit information with a credit bureau, including:

• to promptly notify the credit bureau about changes and updates to credit information;
• at the request of the subject of credit information and/or the credit bureau regarding identified errors and discrepancies in data, make changes to the credit information previously transmitted to the credit bureau;
• to ensure uninterrupted functioning of the data transmission system to the credit bureau in accordance with the agreement on the exchange of credit information.

The credit union is responsible for the distortion of credit information transmitted to credit bureaus, as well as for the completeness of the transmitted information, including with respect to all borrowers in accordance with the legislation of the Kyrgyz Republic and regulatory legal acts of the National Bank.

(In the edition of the Resolutions of the Board of the NB KR of September 16, 2015 No. 53/9, September 28, 2016 No. 40/6, August 30, 2023 No. 2023-P-12/55-1, October 23, 2025 No. 2025-P-12/55-3-(NPA))

3.2.3. Requirements for credit management:

• maintaining an adequate credit file of the borrower;
• control over the execution of credit agreements;
• analysis and monitoring of the targeted use of the loan;
• periodicity of collateral monitoring;
• conditions for extending or renewing overdue loans;
• classification and formation of a reserve to cover potential losses and damages (RPPU);
• procedure for reclassification of restructured loans.

Note: Upon detection of facts of use of a loan by a participant for non-targeted purposes, the credit union has the right to increase the interest rate on the loan, provided that the requirements of the legislation of the Kyrgyz Republic on the maximum permissible size of the interest rate (markup) on loans are met, including the requirements of the Law of the Kyrgyz Republic "On Restriction of Usurious Activity in the Kyrgyz Republic" and the Law of the Kyrgyz Republic "On Consumer Credit". At the same time, the internal documents of the credit union must contain norms establishing clear rules on liability measures for the participant, including the size of the increase in the interest rate on the loan.

(In the edition of the Resolutions of the Board of the NB KR of September 16, 2015 No. 53/9, July 8, 2020 No. 2020-P-33/39-3, April 23, 2026 No. 2026-P-12/25-2-(NPA))

3.2.4. Procedure for work on identifying, analyzing and recovering overdue and unpaid debt on loans.

(In the edition of the Resolution of the Board of the NB KR of September 16, 2015 No. 53/9)

3.3. Within the limits of regulatory requirements established by the legislation of the Kyrgyz Republic and regulatory legal acts of the NBKR, the credit union independently determines the types of loans, forms the loan portfolio and sets interest rates.

The credit union is obliged to ensure compliance with the requirements of the legislation of the Kyrgyz Republic on the maximum permissible size of the interest rate (markup) on loans, including the requirements of the Law of the Kyrgyz Republic "On Restriction of Usurious Activity in the Kyrgyz Republic" and the Law of the Kyrgyz Republic "On Consumer Credit", as well as other requirements of the legislation of the Kyrgyz Republic regulating the procedure for providing consumer loans.

(In the edition of the Resolution of the Board of the NB KR of April 23, 2026 No. 2026-P-12/25-2-(NPA))

4. Credit Committee of the Credit Union

4.1. The body carrying out the credit policy is the Credit Committee of the credit union, elected by the General Meeting of the credit union. All issues related to the issuance of loans, guarantees, obligations, sureties, etc. are decided by the credit committee.

(In the edition of the Resolution of the Board of the NB KR of September 16, 2015 No. 53/9)

4.1-1. Employees of the credit union involved in lending and monitoring processes are recommended to increase their level of knowledge in the part of responsible lending.

(In the edition of the Resolution of the Board of the NB KR of August 24, 2016 No. 35/4)

4.2. The activities of the Credit Committee are regulated by the Regulation on the Credit Committee, which is approved by the Board of the credit union, within the powers established by legislation and the Charter of the credit union.

4.3. The Regulation on the Credit Committee must define:

• the organization of the work of the Credit Committee - composition, procedure for holding meetings, list of documents necessary for making decisions;
• powers and responsibilities of the Credit Committee;
• other issues related to the work of the Credit Committee.

5. Organization of the work of the credit union on the provision of loans

5.1. Analysis of loan applications

5.1.1. Work on the provision of loans begins from the moment of accepting from the borrower an application for a loan, in which the purpose of the loan, the required amount, term and conditions for obtaining the loan, information about the sources of loan repayment and collateral must be specified.

5.1.2. All loan applications submitted for consideration must be registered in the accounting journal, regardless of the decision made on the application.

The internal policies of the credit union must define the term for consideration of the application.

(In the edition of the Resolution of the Board of the NB KR of September 16, 2015 No. 53/9)

5.1.3. In general, each analysis of a loan application must be based on the policy of the credit union and focus on the following key factors for conducting an analysis of the borrower's solvency:

• right to borrow funds. The credit employee must ensure that the borrower has the right to obtain a loan and sign a credit agreement;
• character of the borrower. The credit employee must establish that the borrower responsibly treats borrowed funds and will make every effort to repay the debt. In the analysis, it is also necessary to take into account whether the borrower has used loans in other financial and credit organizations in the past, how the repayment was carried out, his discipline, readiness to fulfill his obligations. It is also important to consider his reputation, both in a professional and in a general human sense. It is also important to consider the term and experience of the borrower's work in this industry, his successes and achievements. It makes sense to request information about loans provided to him in other credit organizations. In addition, it is necessary to request information (credit report) about the borrower and at the discretion of the credit union about persons associated with the borrower (if they have their consent in accordance with the legislation) from at least two credit bureaus.

The credit union must observe confidentiality and security of the credit report received from the credit bureau and not disclose the credit information contained in it to third parties and use the credit report only for the purposes established by legislation.

The credit union is responsible for the distortion of information contained in the credit report.

• funds. The main question that the credit employee analyzing the application must answer is p