Regulatory Alerts2020-11-25 | 127656Instruction on the Distribution of Profit/Loss for Bank Accounts and Bank Deposit (Deposit) Accounts in Accordance with Islamic Principles of Banking and Finance
The National Bank of the Kyrgyz Republic issued this Instruction to establish mandatory procedures for commercial banks operating under Islamic finance principles regarding the calculation, distribution, and accounting of profit and loss on mudaraba and other Islamic deposit accounts. It mandates the creation of distinct financing portfolio pools, requires transparent profit-sharing ratios and reserve mechanisms (including profit smoothing and investment risk coverage reserves), and outlines strict internal controls, Shariah compliance audits, and detailed public disclosure requirements for financial reporting. The regulation further clarifies that banks bear operational and misconduct-related losses from their own capital, while direct pool expenses are deducted from pool income, ensuring that depositor returns align strictly with Shariah-compliant investment performance.