Rules for Regulating Commercial Bank Operations in Trust Management

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Date of creation: 2025-11-25

Approved

by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 14, 1998 No. 34/9

RULES

for regulating commercial bank operations in trust management

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of April 25, 2012 No. 18/9, November 16, 2012 No. 43/1, June 15, 2017 No. 2017-P-12/25-12, December 14, 2022 No. 2022-P-12/78-10, October 23, 2025 No. 2025-P-12/55-4-(NPA))

1. General Provisions

These Rules regulate commercial bank operations in trust management in accordance with the Civil Code of the Kyrgyz Republic and the Law of the Kyrgyz Republic "On Banks and Banking Activity".

These Rules define the actions of the commercial bank and the State Development Bank of the Kyrgyz Republic (hereinafter referred to as the "bank") as a trustee.

These Rules define the general procedure for all banks to carry out trust management operations.

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of November 16, 2012 No. 43/1, June 15, 2017 No. 2017-P-12/25-12, December 14, 2022 No. 2022-P-12/78-10)

2. Basic Concepts

Trust management - the activity of banks or other financial and credit organizations in managing property and performing other services on behalf of and in the interests of the client in the capacity of their authorized representative.

Founder of management - the owner of the property transferred to trust management; a state body authorized to do so (with respect to property owned by the state); an enterprise based on the right of economic management (with the consent of the owner).

The trustee is the bank.

Beneficiary - the person in whose favor the trust management agreement was concluded.

The beneficiary has the right to benefits provided for by the trust management agreement. The founder of the trust management may be the beneficiary of the trust management.

Agreement on trust management of property - an agreement under which one party (the founder of management) transfers to the other party (the trustee) property for trust management for a certain period, and the other party undertakes to manage this property in the interests of the founder of management or a person specified by him (the beneficiary).

Conflict of interest - for the purposes of these Rules, a conflict of interest is recognized as a conflict between the interests of the founder of management and the trustee or its employees, arising in the bank during the conduct of trust management operations, banking operations, and other transactions.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 15, 2017 No. 2017-P-12/25-12)

3. Objects of Trust Management

3.1. Objects of trust management may be enterprises and other property complexes, separate objects relating to real estate, securities, rights certified by non-documentary securities, exclusive rights, as well as vehicles and residential real estate only in the presence of a valid insurance policy.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2025 No. 2025-P-12/55-4-(NPA))

3.2. Money may be an object of trust management only as part of an enterprise or another property complex, as well as in settlements for activities related to trust management.

Settlements for activities related to trust management include settlements for payments to the beneficiary, other mandatory payments provided for by legislation, remuneration to the trustee, purchase and sale of assets during trust management, as well as the movement of funds in accordance with the terms of the agreement in accordance with current legislation.

3.3. Monetary funds as means for settlements for activities related to trust management must be transferred to the corresponding accounts within a period of no more than 10 (ten) working days.

4. Conclusion of a Trust Management Agreement

4.1. Activities in trust management of property are carried out on the basis of a trust management agreement concluded between the founder of management and the trustee.

4.2. The liability of the parties is determined by the terms of the trust management agreement. In addition, the trust management agreement must specify:

• the composition of the property transferred to trust management;
• the owner of the property transferred to trust management;
• the name of the legal entity or the name of the individual in whose interests the property is managed (the beneficiary);
• the name of the trustee;
• benefits provided to the beneficiary;
• the size and form of remuneration to the manager (in the form of a commission from the profit received, or a predetermined fixed amount of remuneration), if the agreement does not provide that trust management is carried out gratuitously;
• the obligation of the trustee to compensate the founder of trust management and the beneficiary for losses and lost profits if losses were caused by unlawful actions committed by the manager or his inaction;
• deadlines and procedures for the trustee to provide reports on activities to the founder and beneficiary in accordance with the management agreement;
• actions for which the trustee is authorized with respect to objects of trust management;
• the term of the agreement.

4.3. The trust management agreement enters into force in part of the management of property from the moment of its transfer by the founder of management to the trustee, unless otherwise agreed in the agreement.

4.4. Property acquired by the trustee in the ownership of the founder of management in the process of performing the agreement becomes an object of trust management from the moment of its transfer by the owner to the trustee, unless otherwise provided by the agreement.

4.5. Real estate accepted by the manager in trust management must be insured by the pledgor in cases where the legislation of the Kyrgyz Republic on mandatory insurance or a pledge agreement imposes on the pledgor the obligation to insure the pledged property.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2025 No. 2025-P-12/55-4-(NPA))

4.6. If during trust management the type (kind) of objects of trust management is changed or supplemented, a new agreement must be concluded, unless otherwise agreed in the originally concluded agreement.

4.7. If the founder of the agreement wishes to change or supplement the objects of trust management, a new agreement must be concluded, unless this is provided for in the initial agreement.

5. Rights, Duties, and Liability of the Trustee

5.1. In accordance with the trust management agreement, the trustee has the right to perform any legal and factual actions in the interests of the beneficiary within the powers granted by the agreement and in accordance with legislation.

5.2. The trustee exercises within the limits provided by law and the trust management agreement the rights of ownership with respect to property transferred to trust management on the basis of the agreement.

5.3. The trustee, when performing actions to manage property, is obliged to show due care for the interests of the founder of management and the beneficiary, prudence, and skill.

5.4. The trustee carries out trust management of property personally, except in cases provided for in civil legislation.

5.5. The trustee provides the founder of management and the beneficiary with a report on activities within the timeframes, volume, and order established by the trust management agreement.

5.6. The trustee who has not shown due care for the interests of the founder and beneficiary compensates the beneficiary for lost profits during the period of trust management of property in accordance with the agreement, and compensates the founder of management for losses caused by loss or damage to property, taking into account its natural wear and tear.

5.7. The trustee is liable for losses caused (realized and unrealized), unless he proves that these losses occurred as a result of actions of the beneficiary or the founder of management or force majeure. Force majeure includes:

• force majeure circumstances (natural disasters, war, etc.);
• actions over which the trustee has no control or which cannot be predicted (for example, changes in the legislation of the Kyrgyz Republic or another sovereign state, etc.).

5.8. A transaction concluded by the trustee in violation of the restrictions established for him is recognized as valid if the third parties participating in the transaction did not know and should not have known about these restrictions. The trustee bears liability in these cases provided for by legislation and the agreement.

5.9. The trustee bears subsidiary liability with its own property to third parties for losses caused by improper actions in managing property.

5.10. In case of improper management of property, the founder of trust management may file a claim in court to terminate management and compensate for losses.

5.11. The founder of trust management has no right to interfere in the activities of the trustee, unless otherwise agreed in the agreement.

5.12. The trustee conducts revaluation of property in accordance with the bank's internal policy on the valuation of property in trust management.

The trustee is obliged to ensure the receipt and proper storage of copies of insurance policies with respect to objects transferred to trust management in cases provided for by current legislation and/or the trust management agreement.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2025 No. 2025-P-12/55-4-(NPA))

6. Types of Trust Operations

6.1. Depending on the objects of trust management, trust operations are classified by type:

• property (operations with property);
• operations with securities;
• operations with exclusive rights.

6.2. In turn, types of trust operations depending on the founder of the trust management agreement are divided into the following types:

• with individuals;
• with legal entities.

7. Organization of Trust Operations Department Work

7.1. The bank - trustee, in order to prevent the emergence of conflicts of interest within the bank between its various departments, must develop rules for limiting the exchange of official and confidential information between departments and ensure control over their compliance by bank employees. To implement this requirement, the bank may use the following measures:

• written commitment of bank employees not to disclose confidential information;
• organizational and technical separation of relevant departments (for example, closing access to computer networks of departments carrying out trust management operations and departments carrying out brokerage and dealing operations);
• separate subordination of relevant functional departments of the bank;
• provision of official information only in accordance with current legislation;
• territorial isolation of employees and documents related to trust management operations.

7.2. The management of trust operations is carried out under the supervision of the Chairman of the Board of the bank.

7.3. A trust committee must be established in the bank. The trust committee is a collegial body that determines the norms and rules for carrying out trust management, internal asset valuation policy, and conducts an independent review of trust operations. All issues related to trust management must be resolved only by the trust committee or persons to whom this right is delegated by the trust committee.

7.4. In the group for conducting trust management, it is not allowed for one employee to combine the functions of controller and trustee.

8. Restrictions on Conducting Trust Management Operations

8.1. Separate items relating to movable property, money, things defined by generic characteristics cannot be independent objects of trust management.

8.2. The trustee (both the bank and its employees) cannot be the beneficiary under the trust management agreement for property.

8.3. The bank-trustee is not entitled to:

• accept its own securities as an issuer into trust management;
• accept securities of affiliated companies into trust management;
• use trust management assets for its own benefit (for example, using securities held in trust management as collateral when concluding REPO agreements);
• conduct operations between two different trust management agreements;
• carry out the purchase and sale of assets between the department engaged in trust management operations and other departments of the bank;
• accept trust management assets for lease;
• provide its own assets for lease to the trust.

8.4. The bank that has concluded a trust management agreement is entitled to provide the founder of the agreement with only the following additional banking services (outside the department engaged in conducting trust management operations):

• opening a deposit account;
• cash and settlement services;
• currency operations;
• securities operations;
• consulting services.

8.5. The total cost of property accepted by the bank into trust management must not exceed 50% of the bank's net aggregate capital.

8.6. The bank must conduct an assessment of possible losses from risks in accordance with the internal policy for assessing possible losses.

9. Conflict of Interest

9.1. A conflict of interest in the conduct of trust management operations by the bank may arise between the bank - trustee and the founder of management (beneficiary), bank employees - trustees and the founder of management (beneficiary), different founders of management.

A conflict of interest may arise:

• when the bank carries out professional activities in financial markets on behalf of the founder of management;
• when the founder of management places deposits in the bank - trustee;
• when carrying out other banking operations, except trust ones, on behalf of the founder of management;
• when carrying out banking operations between the bank-trustee and the beneficiary;
• when carrying out banking operations between related parties.

A related party includes: the founder of the agreement, the beneficiary, the trustee (both the bank and its employees), affiliated companies of the bank, founder, beneficiary.

9.2. The bank - trustee must act in the interests of the founder of management (beneficiary) in accordance with the trust management agreement and current legislation and ensure the prevention of conflicts of interest.

9.3. In order to prevent the emergence of conflicts of interest, relations defined by the trust management agreement should not have a significant influence and be considered as a prerequisite for establishing special relations between the parties in other areas of interaction.

Banks - trustees must carry out operations with property for the purposes of trust management at market prices and not allow actions that may lead to the emergence of conflicts of interest, as well as undermine natural pricing and destabilize the market.

9.4. In order to prevent conflicts of personal interests between employees of the bank - trustee and founders of management (beneficiaries), bank employees are prohibited when conducting trust management operations:

• participation in a transaction involving persons or organizations with which the employee or a member of his family has personal ties or financial interests;
• use of official information to conclude transactions, as well as transmission of official information to third parties for the conclusion of transactions.

9.5. In the event that a bank employee anticipates the possibility of a conflict of interest arising as a result of his actions, he is obliged to inform the employee carrying out internal control over trust management about this.

9.6. In the event of a potential conflict of interest, the bank is obliged to immediately notify the National Bank of the Kyrgyz Republic.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 15, 2017 No. 2017-P-12/25-12)

10. Accounting for Trust Management Operations

10.1. Property accepted into trust management is segregated from other property of the founder of management, as well as from the property of the trustee. This property is reflected by the trustee on a separate balance sheet, and independent accounting is maintained for it.

10.2. A separate bank account is opened for settlements for activities related to trust management.

10.3. Accounting for trust management operations is carried out in accordance with the "Policy for Accounting for Trust Management Operations".

11. Reporting by Banks - Trustees

11.1. Banks carrying out trust management of property are obliged to annually submit to the National Bank of the Kyrgyz Republic, in addition to the annual report on the bank's activities, reporting in accordance with Appendices 1, 2, 3, 4, as well as an explanatory note containing the main provisions, methods for assessing trust management assets of the bank's internal policy. The specified information must also be submitted as part of the quarterly and annual Periodic Regulatory Bank Report. The correctness of the reflection of this information must be certified by the signature of the head of the trust operations department,

11.2. The cost of assets accepted by the bank into trust management is not included in the calculation of economic ratios determined by the Rules for Regulating the Activity of Banks in the Kyrgyz Republic.

11.3. The External Supervision Department is obliged to control the timing of information receipt, check compliance with the form, correctness, integrity, and consistency of the received data.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of April 25, 2012 No. 18/9)

11.4. Banks report to the founders of trust management of property in the form and within the timeframes established by the trust management agreement, but no less than once a year. In the event that the trust management agreement is concluded for a period of less than 1 year and the reporting deadlines are not specified, the bank provides a report upon completion of the agreement term.

Appendix 1

to the Rules for Regulating Trust Management Operations

I. Number of trust management agreements by type and types of operations:

1. Number of agreements, total ___________________________

Including:

1.1. for property operations:

a) with individuals; _________________________________ b) with legal entities _________________________________

1.2. for operations with securities:

a) with individuals; _________________________________ b) with legal entities _________________________________

1.3. other ______________________________________________

a) with individuals; _________________________________ b) with legal entities

Appendix 2

to the Rules for Regulating Trust Management Operations

Movement of Trust Management Objects

(thousand som)

Balance at the beginning of the reporting period

Debit turnover on accounts

Credit turnover on accounts

Balance at the end of the reporting period

1. Total

Including:

1.1. for property operations:

a) with individuals; b) with legal entities.

1.2. for operations with securities:

a) with individuals; b) with legal entities.

1.3. other

a) with individuals; b) with legal entities.

Position

Signature

Full Name

---

---

---

---

---

---

Appendix 3

to the Rules for Regulating Trust Management Operations

Objects of Trust Management,

accepted on "____" quarter 199__ year

(thousand som)

Types of objects

Accepted for a period

0-1 month

1-3 months

3-6 months

6-12 months

1-5 years

1. Total

Including:

1.1. for property operations:

a) with individuals; b) with legal entities.

1.2. for operations with securities:

a) with individuals; b) with legal entities.

1.3. other

a) with individuals; b) with legal entities.

Position

Signature

Full Name

---

---

---

---

---

---

Appendix 4

to the Rules for Regulating Trust Management Operations

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of April 25, 2012 No. 18/9)

1. Maximum size of the total cost of property accepted into trust management:

Ratio

Calculation of the ratio

Actual value of the ratio

Established value of the ratio

Deviation from the established ratio

Maximum size of the total cost of property accepted into trust management

TAUM / NAC

not more than ___%

TAUM - Net assets in trust management

NAC - Net aggregate capital (*)

Position

Signature

Full Name

---

---

---

---

---

---

(*) Net aggregate capital is determined in accordance with the Rules for Regulating the Activity of Banks

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