Rules for Regulating the Activities of JSC Financial Company of Credit Unions

Back

Print Version

Date of creation: 2025-12-30

Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic of March 20, 2024 No. 2024-P-12/12-2-(NFKU)

RULES

for regulating the activities of JSC "Financial Company of Credit Unions"

(As amended by Resolutions of the Board of the National Bank of the Kyrgyz Republic of October 23, 2025 No. 2025-P-12/55-4-(NPA), December 24, 2025 No. 2025-P-12/69-5-(NFKU))

Chapter 1. General Provisions

1. The National Bank of the Kyrgyz Republic (hereinafter - the National Bank) establishes economic norms and requirements mandatory for compliance by the Open Joint Stock Company "Financial Company of Credit Unions" (hereinafter - FKCU) in order to preserve the stability of the financial system, protect the interests of creditors, reduce the risk of non-repayment of provided loans and leases, and maintain the established size of FKCU's capital.

2. FKCU has the right to establish higher requirements for economic norms and requirements in order to further reduce risks, without violating the values of norms and requirements established by these Rules and other regulatory legal acts of the National Bank.

3. The National Bank applies measures of influence to FKCU in accordance with the legislation of the Kyrgyz Republic.

4. In the presence of a license from the National Bank to attract deposits from credit unions for FKCU, the following are established:

• the norm of the maximum size of risk on demand deposits of credit unions (K3.1);
• the norm of the maximum size of risk on term deposits of credit unions and other liabilities to credit unions (K3.2);
• the norm (indicator) of liquidity (K4).

5. In the presence of a license from the National Bank to carry out operations in foreign currency with credit unions for FKCU, limits are established:

• net currency position for each foreign currency;
• aggregate currency position.

The procedure for calculating open currency positions is determined by the National Bank.

6. For the calculation of the amount of dividends, FKCU must use the smallest of the values of net profit calculated in accordance with International Financial Reporting Standards (hereinafter - IFRS) and the requirements of the National Bank.

7. FKCU is obliged to obtain permission from the National Bank to pay dividends to FKCU shareholders. Documents for obtaining permission from the National Bank to pay dividends must be submitted to the National Bank no later than ten working days before the holding of the general meeting of shareholders of FKCU. The documents must include FKCU's plans for the timing of dividend payments, net profit indicators calculated in accordance with IFRS and the requirements of the National Bank, and calculations on compliance with economic norms after the payment of dividends.

The National Bank may prohibit or impose restrictions on the payment of dividends in the event of the existence of one of the following threats to the stability of FKCU's activities:

1. FKCU does not comply with economic norms and requirements established by the National Bank;

2. the payment of dividends will lead to a violation of economic norms and requirements established by the National Bank;

3. reserves for covering potential losses and losses have not been created or are created in an insufficient amount, according to the requirements of the National Bank;

4. in the presence of losses from previous years or for the reporting year;

5. non-fulfillment of the requirements of the National Bank.

Chapter 2. Maximum size of risk for one borrower

8. (Lost force in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 24, 2025 No. 2025-P-12/69-5-(NFKU))

9. The value of the norm of the maximum size of risk for one or a group of related borrowers who are credit unions (K1.1) must not exceed 15%.

The norm of the maximum size of risk for one or a group of related borrowers who are credit unions is determined by the formula:

K1.1 = SZ / CSK * 100%,

where:

SZ – the size of the aggregate debt of the borrower, who is a credit union, or a group of related borrowers who are credit unions, for loans, factoring, financial leasing (leasing), off-balance sheet liabilities (liabilities for issuing a loan to a credit union), as well as for other issued funds that are essentially credit substitutes. All debts of various borrowers when calculating the norm of maximum risk for one borrower must be summed up and considered as a single aggregate debt, if the non-repayment of debt by one borrower can lead to problems with the repayment of debt by another borrower. In this case, when considering the debt of various borrowers for the purpose of summing them up as a single risk, one should take into account the degree of interconnection of borrowers, the state of the industry (sub-industry) into which the funds were issued, the credit history of borrowers, the proposed terms for repayment of debt, etc.;

CSK – net aggregate capital of FKCU, the procedure for calculating which is determined in accordance with the Instruction on determining standards of sufficiency (adequacy) of capital of commercial banks of the Kyrgyz Republic, approved by the Resolution of the Board of the National Bank of October 12, 2022 No. 2022-P-12/63-1-(NPA) (hereinafter – Instruction on determining standards of sufficiency (adequacy) of capital of commercial banks of the Kyrgyz Republic).

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 24, 2025 No. 2025-P-12/69-5-(NFKU))

9-1. The value of the norm of the maximum size of risk for one or a group of related borrowers who are not credit unions (K1.2) must not exceed 5%.

This norm is established to limit lending to legal entities that are not credit unions, as well as to individuals, including participants of credit unions (hereinafter in this paragraph – borrowers) and is determined by the formula:

K1.2 = SZ / CSK * 100%,

where:

SZ – the size of the aggregate debt of the borrower or a group of related borrowers for loans, factoring, financial leasing (leasing), off-balance sheet liabilities (liabilities for issuing a loan), as well as for other issued funds that are essentially credit substitutes. All debts of various borrowers when calculating the norm of maximum risk for one borrower must be summed up and considered as a single aggregate debt, if the non-repayment of debt by one borrower can lead to problems with the repayment of debt by another borrower. In this case, when considering the debt of various borrowers for the purpose of summing them up as a single risk, one should take into account the degree of interconnection of borrowers, the state of the industry (sub-industry) into which the funds were issued, the credit history of borrowers, the proposed terms for repayment of debt, etc.;

CSK – net aggregate capital of FKCU, the procedure for calculating which is determined in accordance with the Instruction on determining standards of sufficiency (adequacy) of capital of commercial banks of the Kyrgyz Republic.

The maximum aggregate size of debt on loans issued to borrowers who are not credit unions must not exceed 30% of the total volume of FKCU's loan portfolio.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 24, 2025 No. 2025-P-12/69-5-(NFKU))

10. In the event that the value of the net aggregate capital of FKCU becomes equal to zero or a negative value, then the norms of the maximum size of risk for one borrower are not calculated and it is considered that the norms are not complied with.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 24, 2025 No. 2025-P-12/69-5-(NFKU))

11. FKCU must not issue loans and other assets equivalent to them and off-balance sheet liabilities to one borrower and persons and companies associated with him in the event that an increase in the size of the aggregate debt of this borrower will lead to a violation of the permissible size of the norm of maximum risk for one borrower.

Chapter 3. Capital Adequacy Standard (K2)

12. The capital adequacy standard (adequacy) of FKCU (K2) is determined by two coefficients:

K2.1 - Coefficient of adequacy (adequacy) of aggregate capital; K2.2 - Coefficient of adequacy (adequacy) of tier 1 capital.

The calculation of coefficients K2.1, K2.2 is carried out in accordance with the Instruction on determining standards of sufficiency (adequacy) of capital of commercial banks of the Kyrgyz Republic.

The value of the capital adequacy standard (adequacy) of FKCU:

• The coefficient of adequacy (adequacy) of aggregate capital (K2.1) must be at least 12 percent;
• The coefficient of adequacy (adequacy) of tier 1 capital (K2.2) must be at least 6 percent.

Chapter 4. Norm of maximum size of risk on liabilities to credit unions (K3)

13. The norm of maximum size of risk on demand deposits of credit unions (K3.1) is calculated by the formula:

K3.1 = CSK / DVKS * 100%,

where:

CSK - net aggregate capital of FKCU; DVKS - the sum of demand deposits of credit unions.

12. The norm of maximum size of risk on term deposits of credit unions (K3.2) is calculated by the formula:

K3.2 = CSK / SDKS * 100%,

where:

CSK - net aggregate capital of FKCU; SDKS - the sum of term deposits of credit unions.

14. These norms, as well as their values, are established by the decision of the Supervisory Committee of the National Bank.

15. FKCU must comply with the norm of maximum size of risk on demand deposits of credit unions (K3.1) during the reporting period (one month) based on weekly average indicators, and the norm of maximum size of risk on term deposits of credit unions (K3.2) - on a daily basis. During the reporting period, FKCU must calculate weekly average values of demand deposits of credit unions, taking into account only working days. Average indicators are calculated using the arithmetic mean method.

Chapter 5. Norm (indicator) of liquidity (K4)

16. The norm (indicator) of liquidity must be maintained at a level of not less than 30%.

17. The norm (indicator) of liquidity is determined by the formula:

K4 = LA / O * 100%,

where:

LA - liquid assets, which include:

• cash in the cash register;

• funds in settlement accounts;

• government securities issued by the Cabinet of Ministers of the Kyrgyz Republic and notes of the National Bank. These securities when calculating the norm (indicator) of liquidity are taken into account minus the premium (discount), unrealized profit (losses);

• highly liquid securities purchased under a REPO agreement.

O - liabilities of FKCU, which for the calculation of the norm (indicator) of liquidity include:

• demand deposits of credit unions, as well as funds in settlement;
• any other liabilities, as well as off-balance sheet liabilities, the settlement of which occurs within 30 days after the reporting date.

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

18. Any liquid assets that serve as collateral for FKCU's liabilities are excluded from the composition of liquid assets.

19. When calculating the norm (indicator) of liquidity, deposits accepted by FKCU and serving as collateral for assets provided to credit unions or their participants are not included in the composition of FKCU's liabilities, if FKCU has the necessary procedures and control system guaranteeing that the pledge will not be withdrawn before the loan repayment date.

20. In order to reduce liquidity risk, the management of FKCU must carry out daily management of assets and liabilities. FKCU must comply with the norm (indicator) of liquidity during the reporting period (one month) based on weekly average data. During the reporting period, FKCU must calculate values of weekly average liquid assets and short-term liabilities of FKCU (when calculating weekly average values, only working days are included in the calculation). Average indicators are calculated using the arithmetic mean method.

21. FKCU must develop a liquidity risk management policy, which must include, at a minimum, the following:

• daily measurement and monitoring of cash inflows and outflows, as well as daily monitoring of maturity gaps in FKCU's assets and liabilities to control daily liquidity needs and ensure fulfillment of obligations;

• forecasting of necessary liquidity;

• structure and assessment of the stability of the deposit base and other borrowed funds;

• cost of resources;

• ability to borrow in the money market;

• quality of assets;

• fulfillment of off-balance sheet obligations;

• planning for liquidity crisis scenarios;

• management of liquidity in foreign currencies;

• internal control over liquidity risk management;

• necessary management reporting.

Chapter 6. Maximum size of any investments in each organization or bank

22. The maximum size of any investments in each organization or bank, including any financial investments and loans to each organization or bank, must not exceed 10% of the size of the net aggregate capital of FKCU.

23. The total size of any investments in organizations and/or banks must not exceed 50% of the size of the net aggregate capital of FKCU.

24. If FKCU intends to invest in the capital of any organization or bank for the purpose of long-term investment, and not for the purpose of trading shares, in an amount exceeding 5% of its net aggregate capital, then FKCU is obliged to notify the National Bank in writing 40 calendar days before the start of the investment with the attachment of the following documents/information:

1. about the purpose and terms of investment;

2. about the calculations of investment profitability for the next two years;

3. general information about the organization (name, location, organizational and legal form, types of activities, since when it has been working in the market, information about owners and managers);

4. about the presence of common interests between the organization or bank and persons associated with FKCU or affiliated persons of FKCU;

5. about loans and other types of financing ever provided by FKCU to this organization or bank, and their repayment;

6. financial statements of the organization for the last two years (certified by an external auditor if available according to legislation).

For the implementation of its functions, the National Bank has the right to request any additional information from FKCU.

25. The National Bank has the right to send a requirement to suspend investment 10 days before the start of the planned investment, as well as to terminate or limit investment at any time after FKCU has invested funds in the event that:

• the results of the last inspector's check or information obtained within the framework of external supervision showed the existence of a threat to the financial stability and reliability of FKCU or the interests of credit unions that are depositors of FKCU, and other creditors of FKCU;

• the implementation of the investment will be associated with the involvement of FKCU in unhealthy and unsafe practice of conducting its operations, in violation of banking legislation, requirements of the National Bank, or written agreements of FKCU with the National Bank;

• FKCU for some reason cannot monitor this investment;

• the National Bank is aware of facts indicating improper business reputation of the organization or bank, their officials, as well as facts that the previous activities of the organization or bank, their officials contributed to the bankruptcy or significant financial losses of any legal entity;

• FKCU provided documents/information not in full volume or provided unreliable information.

26. When creating or acquiring a subsidiary or dependent company by FKCU, the requirements of parts 5 and 6 of Article 26 and Article 79 of the Law of the Kyrgyz Republic "On Banks and Banking Activity" and regulatory legal acts of the National Bank determining the procedure for creating and/or acquiring a subsidiary or dependent company must be met.

Chapter 7. Maximum size of investments in real estate (fixed assets)

27. The maximum size of investments in real estate (fixed assets) must not exceed 50% of the size of the paid-up charter capital of FKCU.

28. For the purposes of these Rules, real estate means property (including under construction/installation real estate) that belongs to FKCU or is at the disposal of FKCU under a financial lease agreement and is used/will be used as a fixed asset.

29. The calculation of the maximum size of investments in real estate (fixed assets) must include all real estate, capital investments in the improvement of rented property (under an operating and/or financial lease agreement), as well as any investments in shares or bonds or other similar debt obligations of a person owning the real estate of FKCU. All specified assets (except for real estate of FKCU under a financial lease agreement) are included in the calculation at their book value.

Real estate at the disposal of FKCU under a financial lease agreement must be included in the calculation of the maximum size of investments in real estate (fixed assets) at the initial cost minus the current size of liabilities under the financial lease.

30. FKCU may have real estate intended for creating working and rest conditions for employees, provided that the book value of this property is included in the calculation of the maximum size of investments in real estate (fixed assets).

31. When revaluing the cost of real estate, as a result of which the maximum size of investments in real estate (fixed assets) will be violated, FKCU provides a letter-commitment to the National Bank that within 12 months from the moment of revaluation, it will bring the size of investments in real estate (fixed assets) into compliance with the requirements of the National Bank.

32. Property received by FKCU in repayment of debt on issued loans may be accepted by FKCU as a fixed asset upon compliance with the requirements of legislation and fulfillment of the following conditions:

• acceptance of property as a fixed asset will not lead to a violation of the maximum size of investments in real estate;

• the term of its commissioning must not exceed 18 months.

In this case, if the cost of the above property exceeds 10% of the net aggregate capital of FKCU, the decision to accept it as a fixed asset must be made by the Board of Directors.

Chapter 8. Size of investments in securities of the Cabinet of Ministers of the Kyrgyz Republic and non-state debt securities

33. The total size of FKCU's investments in securities of the Cabinet of Ministers of the Kyrgyz Republic at book value must not exceed 25% of the size of the net aggregate capital of FKCU.

34. The total size of FKCU's investments in non-state debt securities at book value must not exceed 10% of the size of the net aggregate capital of FKCU.

Chapter 9. Minimum requirements for limiting concentration risk

35. The sum of the aggregate debt of one borrower equal to or exceeding 10% of the net aggregate capital of FKCU requires special attention from FKCU and constant assessment of the financial condition of such a borrower. Such a size of aggregate debt is considered large.

36. Employees of FKCU must not be participants of credit unions.

37. FKCU has the right to provide loans to employees of FKCU. In this case, the issuance of loans to officials of FKCU must comply with the requirements of the Instruction on requirements for bank operations with affiliated and related persons.

38. The aggregate debt of one employee to whom FKCU has provided loans must not exceed 5 million som.

39. The total amount of loans issued to employees of FKCU must not exceed 10% of the net aggregate capital of FKCU.

40. The internal document of FKCU regulating the procedure for lending to employees must be approved by the Board of Directors of FKCU. The Board of Directors of FKCU must also:

• annually review the internal document of FKCU regulating the procedure for lending to employees, in order to ensure its relevance and compliance with the credit policy of FKCU;

• control the activities of the Board of Management of FKCU to ensure compliance with the requirements of the internal document of FKCU regulating the procedure for lending to employees.

41. FKCU must have and comply with a risk management policy, including concentration risk. The concentration risk management policy (hereinafter – policy) must take into account, at a minimum, the following issues:

• when lending to borrowers who are not credit unions, as well as credit unions for refinancing participants of credit unions, FKCU must identify concentration risk and manage it based on borrower applications, as well as monitor the targeted use of loans by borrowers;

• when lending to borrowers, FKCU must take into account the interconnection of various industries of the economy into which credit funds are directed by credit unions;

• concentration of risk on loans to borrowers directed to the same industry (sub-industry) must be considered as a share of all issued loans;

• FKCU must assess the sizes of various types of collateral. Concentration of risk manifests itself in the concentration in FKCU of one type of collateral for loans;

• when carrying out financial leasing operations, FKCU must consider a group of related persons as a single client, and all amounts of various types of FKCU assets provided to the group of related persons must be summed up and considered as a single risk;

• concentration risk must also be diversified depending on the term and schedule of loan repayment, region (area), type and volume of collateral, type of currency;

• when managing concentration risk, FKCU must assess the effectiveness of risk diversification in its activities.

(As amended by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 24, 2025 No. 2025-P-12/69-5-(NFKU))

42. The Board of Directors and the Board of Management of FKCU must have information on the concentration risk of all types of activities of FKCU. The concentration risk measurement system must combine the exposure to concentration risk arising from various types of activities of FKCU. FKCU, for determining the accepted concentration risk, must at a minimum measure the following positions:

a) sizes of invested/provided funds of FKCU:

• in certain types of assets, including by currency;

• to one borrower;

• in a certain area (region) of the republic;

• by types of currencies;

b) sizes of certain types of liabilities, including by currency;

c) sizes of various types of collateral.

43. FKCU must establish a concentration risk limitation system that would quantitatively determine the maximum permissible size of concentration risk for FKCU, and this system must be periodically reviewed. FKCU must establish, at a minimum, the following concentration risk limitations:

• maximum size of risk for one or a group of related borrowers who are credit unions;

• maximum size of risk for one or a group of related borrowers who are not credit unions;

• certain types of assets as a share of the sum of all assets;

• investments, loans and assets equivalent to them invested in one type of activity (industry of the economy), as a share of all assets;

• investments, loans and assets equivalent to them invested in a certain area (region) of the republic, as a share of all assets;

• by types of currencies in terms of assets and liabilities;

• ten largest loans and assets equivalent to them provided by FKCU to its borrowers, as a share of all loans provided by FKCU;

• ten largest loans and assets equivalent to them provided by FKCU to persons associated with FKCU, as a share of all loans provided by FKCU;

• ten largest sources of financing as a share of the sum of all liabilities