Instruction on Lending Restrictions

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Date of creation: 2025-11-27

Appendix
to the Resolution of the Board of the National Bank of the Kyrgyz Republic of April 12, 2023 No. 2023-P-12/23-5-(NPA)

INSTRUCTION

on lending restrictions

(As amended by the Resolutions of the Board of the NBKR of January 17, 2024 No. 2024-P-12/1-3, April 12, 2024 No. 2024-P-12/17-3, November 12, 2025 No. 2025-P-12/60-4-(NPA))

Chapter 1. General Provisions

1. This Instruction applies to all commercial banks (hereinafter - banks).

(As amended by the Resolution of the Board of the NBKR of January 17, 2024 No. 2024-P-12/1-3)

2. The purpose of this Instruction is to establish lending limits, as well as requirements and procedures mandatory for banks to comply with.

3. Lending limits are risk restrictions per single borrower or group of connected borrowers (hereinafter - single borrower), established by the National Bank of the Kyrgyz Republic (hereinafter - National Bank) through the economic indicator "Maximum risk size per single borrower or group of connected borrowers".

Chapter 2. Procedure for calculating the maximum risk size indicator per single borrower

4. The maximum risk size indicator per single borrower (K1) is calculated using the following formula:

K1 = SZ / CSK ⨯ 100%,

where aggregate debt or claims (SZ) refers to the total debt of a single borrower for:

• loans (regardless of repayment term);
• factoring;
• financial leasing;
• interbank placements;
• investments in the form of debt securities;
• accrued interest receivable;
• any other type of direct or indirect provision of funds to borrowers that are essentially credit substitutes;
• the amount of off-balance sheet obligations (guarantees, letters of credit, obligations to issue loans) issued to this borrower;
• any risk of the bank regarding a third party that is unconditionally guaranteed by this borrower;
• previously written-off loans, including interest. In the credit file of each borrower, information on previously written-off loans and interest of this borrower and related persons must be attached, containing the following information: name of the borrower and related persons, amount of the written-off loan and interest, date of write-off, and the reason why this debt was written off. If such information is absent, the credit file must contain a conclusion from an authorized person of the bank stating that there is no previously written-off debt of this borrower and related persons.

CSK - net aggregate capital of the bank.

5. The maximum risk size per single borrower not connected to the bank must not exceed the following values:

• for borrowers other than banks (K1.1) - no more than 20%;
• for banks (K1.3) - no more than 30%.

6. The limits and procedure for lending to persons connected to the bank are determined in accordance with the Instruction "On requirements for bank operations with affiliated and connected persons", approved by the Resolution of the Board of the National Bank of May 31, 2017 No. 21/5.

7. In order to comply with the economic indicators and requirements specified in this Instruction, and to further reduce risks, banks are recommended to establish internal lending limits that must be lower than the limits established by the National Bank in paragraph 5 of this Instruction.

Chapter 3. Exceptions from the calculation of the maximum risk size indicator per single borrower

8. Exceptions not related to collateral:

1. Funds in the correspondent account at the National Bank.

2. Funds placed in commercial banks having a long-term credit rating of no lower than "BBB", assigned by the rating agency Standard and Poor’s, or an equivalent rating assigned by one of the rating agencies Fitch Ratings, Moody’s Investors Service, Japan Credit Rating Agency (JCR), Dominion Bond Rating Service (DBRS), and other rating agencies meeting the criteria established by paragraph 3 of the Regulation "On economic indicators and requirements mandatory for commercial banks of the Kyrgyz Republic", as well as loans guaranteed by such banks. To fall under this exception, the bank must have appropriate documentation confirming the assigned rating, specifically the name of the rating agency, dates of initial assignment of the rating and last confirmation of the assigned rating, an acceptable source of information about the rating, and the latest annual report of the correspondent bank.

3. Funds placed in securities of the Cabinet of Ministers of the Kyrgyz Republic, the National Bank, or securities for which there are unconditional guarantees of the Cabinet of Ministers of the Kyrgyz Republic or the National Bank.

4. Claims against governments or central banks having a long-term sovereign credit rating of no lower than level "A", assigned by the rating agency Standard & Poor's, or an equivalent rating assigned by one of the rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody’s Investors Service, and other rating agencies meeting the criteria established by paragraph 3 of the Regulation "On economic indicators and requirements mandatory for commercial banks of the Kyrgyz Republic".

(As amended by the Resolution of the Board of the NBKR of April 12, 2024 No. 2024-P-12/17-3)

9. Exceptions related to collateral:

1. When calculating the maximum risk size indicator per single borrower, only those claims that are secured by:

• securities of the Cabinet of Ministers of the Kyrgyz Republic and the National Bank;
• funds held in a separate deposit account in this bank,
  are excluded.

2. Claims or off-balance sheet obligations accepted by the bank, for which there is a state guarantee or surety issued by decision of the Cabinet of Ministers of the Kyrgyz Republic to a subject of the national economy, including for the purpose of facilitating the provision of national and food security of the country.

3. Claims secured by securities of the Cabinet of Ministers of the Kyrgyz Republic and the National Bank or securities for which there are unconditional guarantees of the Cabinet of Ministers of the Kyrgyz Republic or the National Bank. In this case, the market value of such securities must exceed the principal amount of the loan by at least 20%.

The loans mentioned in paragraphs 8 and 9 of this Instruction, issued to state bodies of the Kyrgyz Republic, and guarantees/sureties issued by decision of the Cabinet of Ministers of the Kyrgyz Republic, must be properly documented, including confirmation of their reflection in the budget of the Kyrgyz Republic in accordance with the legislation of the Kyrgyz Republic. At the same time, the total amount of guarantees/sureties issued by decision of the Cabinet of Ministers of the Kyrgyz Republic must not exceed 60% of the size of the net aggregate capital of the bank.

4. Claims secured by funds held in a separate deposit account in this bank. A separate deposit account refers to a segregated deposit account of an individual or legal entity. Client settlement accounts and the bank's correspondent account cannot be used as collateral.

The following conditions must be met:

• the deposit certificate or deposit book must be stored at the bank;
• the credit agreement and pledge agreement must stipulate that the bank has the right to seize funds held in the separate deposit account of the borrower without acceptance in case of non-performance of its obligations;
• in any case, the bank must develop appropriate procedures and carry out internal control ensuring the safety of the deposit until the end of the term provided for in the agreement;
• funds in the deposit securing the claims must be in the national currency of the Kyrgyz Republic or in a currency freely convertible into Kyrgyz som based on publicly available and reliable currency quotes. In this case, if the deposit is in the same currency as the claim, it must cover the amount of the claim by at least 100%, and a deposit in a currency different from the currency of the claim - by at least 120% in som equivalent;
• mandatory weekly revaluation of the deposit, if monetary funds in a currency different from the currency of the asset are provided as collateral.

5. Claims guaranteed by governments or central banks having a long-term sovereign credit rating of no lower than level "A", assigned by the rating agency Standard & Poor's, or an equivalent rating assigned by one of the rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody’s Investors Service, and other rating agencies meeting the criteria established by paragraph 3 of the Regulation "On economic indicators and requirements mandatory for commercial banks of the Kyrgyz Republic", or guaranteed by international financial institutions (EBRD, ADB, etc.).

6. Off-balance sheet obligations accepted by the bank, for which the beneficiary is a central bank or government having a long-term sovereign credit rating of no lower than level "A", assigned by the rating agency Standard & Poor's, or an equivalent rating assigned by one of the rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody’s Investors Service, and other rating agencies meeting the criteria established by paragraph 3 of the Regulation "On economic indicators and requirements mandatory for commercial banks of the Kyrgyz Republic".

7. The amount of the share of participation in a loan sold by the bank to another bank without the right of repurchase. This means that the acquiring bank fully assumes the risk of non-repayment of the loan on the same conditions on which the acquiring bank usually issues loans. The loan participation agreement must stipulate that in case of non-performance of obligations, the risk of loss for each bank depends on the percentage ratio of their participation in the loan. When acquiring a loan, the National Bank's regulations on limiting the maximum risk size per single borrower must be observed.

(As amended by the Resolutions of the Board of the NBKR of April 12, 2024 No. 2024-P-12/17-3, November 12, 2025 No. 2025-P-12/60-4-(NPA))

Chapter 4. Requirements for collateral securing the exception from the calculation of the maximum risk size indicator per single borrower

10. If the subject of the pledge is securities and/or monetary funds, the pledge is carried out in the form of a deposit pledge in accordance with the legislation of the Kyrgyz Republic.

11. If the subject of the pledge is uncertificated securities, the bank must have documentation confirming the registration of this pledge in accordance with the legislation of the Kyrgyz Republic. At the same time, the bank must ensure that the bank's claims for recovery of the subject of the pledge are of first priority.

12. The pledge is documented in accordance with the Civil Code of the Kyrgyz Republic, the Law of the Kyrgyz Republic "On Pledge", and other normative legal acts of the Kyrgyz Republic.

13. The pledge agreement must stipulate the prohibition of further re-pledge in accordance with the legislation of the Kyrgyz Republic.

14. In case of a decrease in the market value of the subject of the pledge, the bank is obliged to immediately demand an increase in its value in accordance with the requirements of this Instruction and ensure compliance with this requirement within 10 (ten) working days.

15. The bank is obliged to develop appropriate procedures and carry out internal control for monitoring the compliance of the pledge with the requirements of Chapters 3 and 4 of this Instruction.

16. If the requirements of the legislation of the Kyrgyz Republic and this Instruction regarding the pledge (including the procedure for registration of the pledge, presence of appropriate documentation, dispositive powers regarding the pledge, certified properly, etc.) are not met, the claim will not fall under the exception from the calculation of the maximum risk size indicator per single borrower.

17. The share of the loan not falling under the requirements of Sections 3 and 4 must be considered in accordance with the general rules of this Instruction when calculating the maximum risk size indicator per single borrower.

Chapter 5. Requirements for limiting concentration risk

18. The aggregate debt of a single borrower exceeding 10% of the size of the net aggregate capital of the bank is considered a large risk.

19. The total amount of all large risks of the bank must not exceed five times the size of the net aggregate capital.

20. Each claim constituting a large risk must be approved by the Board of Directors of the bank. The minutes of the Board of Directors meeting must clearly indicate approval for its issuance, as well as the voting results of each member of the Board of Directors.

21. The condition of paragraph 20 of this Instruction applies to any additional claim to an existing borrower if it falls or continues to fall under the definition of a large risk.

22. The total size of unsecured loans must not exceed 50% of the size of the net aggregate capital of the bank.

Chapter 6. Group of connected borrowers

23. When calculating the maximum risk size indicator per single borrower, the debt of various borrowers must be summed up and considered as a connected unified aggregate debt if financial difficulties of one borrower can lead to payment problems for other persons.

24. For the purposes of this Instruction, the term "borrower" implies a person/group of persons to whom the bank has issued loans/credit substitutes and/or provided assets carrying credit risk (in the form of investments, prepayment for goods/services, etc.).

25. The bank may make investments (including issuing loans/credit substitutes, placing assets carrying credit risk) on the condition that persons connected to each other are considered as one person.

26. Concentration risk management in lending must be linked to the identification of potential connections between individual borrowers, as there may be cases where two (or more) borrowers, interacting separately with the bank when obtaining a loan, represent a single risk due to legal and economic interconnectedness.

When determining connected borrowers, it is insufficient to simply consider groups of companies that provide and/or are required to provide consolidated reporting. Connectedness/interdependence of borrowers may include, for example, joint ownership, control, or management. Cross-guarantees may also serve as an indicator of interconnectedness of borrowers.

In practice, the bank must exercise due diligence and make all necessary and possible efforts to identify distortion of any information and/or non-provision of information (for the purpose of concealing relationships between borrowers) by borrowers to identify risks associated with them.

27. In particular, the debt of various borrowers must be summed up if:

• one borrower controls another;
• a loan is issued to both a legal entity and a participant/founder of this legal entity;
• they have at least one controlling person or significant participant, except in cases where the controlling person or significant participant is a state body of the Kyrgyz Republic;
• there is significant financial interdependence between several borrowers. Significant financial interdependence, including an agreement on mutual cooperation, exists, as a rule, if 50 or more percent of the annual gross income/expense or other receipts or payments of one borrower arose from transactions with another borrower;
• the same source is used for loan repayment, including a situation where borrowers use loan funds to participate in a joint venture or common activity, or when both use the same secondary source of repayment (collateral);
• one of the borrowers guaranteed the obligations of the other (cross-guarantees), or when the same third party is a guarantor for both borrowers;
• funds received by one or more borrowers are used for the direct benefit of a third party, other than state bodies of the Kyrgyz Republic (regardless of whether the bank had a claim to this third party or not), or when funds or assets purchased with these received funds are transferred to a third party, except in cases of purchase of goods or services from it in the ordinary course of business;
• they have one pledgor, except in cases where the pledgor is a state body of the Kyrgyz Republic.

Chapter 7. Procedure for applying this Instruction in cases of non-compliance with established restrictions

28. If the maximum risk size per single borrower at the time the risk arose at the bank allowed compliance with the restrictions established by this Instruction, but subsequently exceeded them (for example, due to exchange rate changes), the bank is obliged to immediately inform the National Bank about this fact. The National Bank may, without applying impact measures, establish a certain period of time during which this non-compliance must be eliminated.

Chapter 8. Reporting

29. The bank is obliged to constantly maintain a database and keep an accounting journal for the group of connected borrowers, which must contain information on all claims to each borrower and related persons.

30. The bank, as part of banking reporting, must submit to the National Bank information on all large risks and correspondent banks having a rating in accordance with the requirements of paragraph 8 of this Instruction.

31. In case of occurrences of non-compliance with the requirements of this Instruction, the bank must submit information on them to the National Bank as of the last day of each month, inclusive (Appendix 1).

Chapter 9. Other Requirements

32. Members of the Board of Directors and the Board of the bank, who are part of the collegial body for granting a loan, who approved the issuance of a loan in violation of the requirements of this Instruction, are liable for the repayment of debt to the bank for this claim or operation.

33. If a loan is issued or an operation is carried out in violation of the requirements of this Instruction, and as a result the bank incurs losses, then each member of the Board of Directors and the Board of the bank, who is part of the collegial body for granting a loan and approved the operation, is liable in accordance with the legislation of the Kyrgyz Republic.

Appendix 1

INFORMATION

on cases of non-compliance with the requirements of this Instruction

Name of the borrower and related persons

Balance of aggregate debt (SZ) as of the reporting date

(thousand som)

Amount exceeding the indicator

(thousand som)

Repayment date according to the contract

Number of restructurings

Classification

1

2

Total aggregate debt

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