INSTRUCTION

"On the Procedure for Compliance with Limits on Open Currency Position and Open Position in Precious Metals by Banks Carrying Out Operations in Accordance with Islamic Principles of Banking and Finance"

(Approved by the Board of Directors of the National Bank of the Kyrgyz Republic No. 41/4 dated October 14, 2009)

(Changes and additions approved by the Board of Directors of the National Bank of the Kyrgyz Republic resolutions No. 91/7 dated December 16, 2010, No. 21/11 dated May 31, 2017, No. 2020-P-12/39-2-(NPA) dated July 8, 2020, No. 2022-P-12/20-1-(NPA) dated April 6, 2022, No. 2025-P-12/46-1-(NPA) dated September 12, 2025)

I. General Provisions

1.1. (Lost force in accordance with the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11).

1.2. The purpose of this Instruction is to define the procedure for calculating the open position and controlling compliance with the limits of the open currency position and open position in precious metals (hereinafter referred to as "open position") by Islamic banks and banks having an "Islamic window" (hereinafter referred to as "banks"), which have a license from the National Bank of the Kyrgyz Republic (hereinafter referred to as the "National Bank") to carry out operations in foreign currency and the right to conduct banking operations with precious metals.

To achieve the goal and fulfill the tasks of the National Bank, the Board of Directors of the National Bank may, by a separate resolution, change the values of the open position limits established in this Instruction for a limited period.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

1.3. When developing internal policies and procedures for controlling currency risks and risks related to precious metals operations, the bank must be guided by the requirements of this Instruction, Shariah standards, and accounting and reporting standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

1.4. For the purposes of this Instruction, the following definitions are applied:

Currency Risk is the risk of the bank incurring losses due to changes in the value of the bank's claims (assets)/obligations denominated in foreign currency, in the event of an unfavorable change in the exchange rate at the time when the bank has an open currency position in that currency. A currency position arises from the conduct of currency operations and is an indicator of the degree of the bank's exposure to currency risk.

Currency Operations are transactions related to the exchange, purchase/sale (conversion) of foreign currency, as well as other operations resulting in a change in the volume of claims (assets) or obligations denominated in foreign currency.

Net Position is the difference between the bank's claims (assets) and obligations, both on-balance sheet and off-balance sheet, in a separate foreign currency and for each type of precious metal separately (gold, silver), excluding numismatic (collectible) coins.

Open Position is the mismatch between the bank's claims (assets) in foreign currency/type of precious metal and the bank's obligations in the same foreign currency/in the same type of precious metal; in the case of equality, the position is considered closed.

The open position is calculated separately for each foreign currency and for each type of precious metal.

The bank's open position can be long (in case the bank's claims (assets) in the corresponding currency/type of precious metal exceed its obligations in the same currency/same type of precious metal) or short (when obligations exceed claims (assets)). A long position is recorded with a "+" sign, a short position with a "-" sign.

Aggregate Position is the sum of all net positions of the bank for all foreign currencies or types of precious metals, calculated using the "short hand" method defined in paragraph 2.5 of this Instruction.

Open Position Limits are restrictions established by the National Bank, expressed as a percentage ratio of open positions (for each foreign currency/for each type of precious metal and aggregate) to the bank's net total capital. Open position limits are calculated in percentages rounded to two decimal places.

The bank's net total capital is calculated in accordance with the requirements of regulatory legal acts of the National Bank.

For the purposes of this Instruction, when calculating open position limits, the value of the bank's net total capital as of the 1st day of each month is used.

Transaction Date is the date when the parties reach an agreement on the main terms of the transaction (types of currencies, exchange rate, amounts of funds, settlement date, type, mass of precious metal, etc.).

Settlement Date is the date on which funds are credited to the accounts of the transaction participants.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

II. Procedure for Calculating Open Positions

2.1. At the end of each business day, the bank must calculate the following indicators:

• net currency positions for each foreign currency;
• aggregate currency position;
• net positions for each type of precious metal;
• aggregate position in precious metals.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

2.2. Net positions are calculated separately for each foreign currency and type of precious metal as the sum of the following indicators:

• net spot position in foreign currency/type of precious metal for operations carried out by the bank in accordance with Islamic principles of banking and finance. This value is calculated as the difference between on-balance sheet assets and on-balance sheet liabilities, including unfinished spot contracts with a settlement date up to 2 (two) days. The calculation is performed based on the net book value of assets and liabilities;
• irrevocable guarantees, letters of credit, and similar financial instruments issued or confirmed by the bank, denominated in foreign currency/type of precious metal, excluding guarantees, letters of credit, and similar financial instruments secured in the same currency/same type of precious metal. For the purposes of this Instruction, financial instruments include bill guarantees (aval), traveler's checks, and other obligations of the bank accepted in international practice. Credit lines are not considered financial instruments.

At the same time, these guarantees, letters of credit, and similar financial instruments are included in the calculation of the net position from the moment the beneficiary presents a claim for payment of the monetary amount under the obligation or the bank receives documented information indicating a high probability of a claim for payment under these obligations. For example, a letter from the beneficiary regarding the non-performance (delay in performance) of the principal's obligations is grounds for including the guarantee in the calculation of the net position;

• other on-balance sheet and off-balance sheet assets/liabilities in foreign currency/type of precious metal, placed/attracted in accordance with Islamic principles of banking and finance and carrying currency risk and risks related to precious metals operations.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

2.3. Currency operations and precious metals operations are included in the calculation of the net position on the transaction date (including operations containing a future settlement date that is not the transaction date), except for operations based on Mudaraba and Shariika/Musharaka contracts.

Foreign currency transactions based on Mudaraba and Shariika/Musharaka contracts are included in the calculation of the net position on the date the bank receives/provides the amount in foreign currency. Profit or loss resulting from these transactions is included in the calculation of the net position at the moment of their actual occurrence.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

2.4. When calculating net currency positions for each foreign currency, the values of currency positions are converted into the som equivalent at the official exchange rate of the National Bank acting on the reporting date.

When calculating net positions in precious metals:

• precious metals in non-cash form in quantitative terms are calculated based on the evening fixing established by the London Precious Metals Association on the day preceding the day of accounting, calculated through the cross-rate of the official exchange rate of the US dollar to the som established by the National Bank on the reporting date;
• precious metals in physical form are reflected in quantitative terms, and the price is determined in accordance with the bank's accounting policy.

(In the edition of the resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA), dated April 6, 2022 No. 2022-P-12/20-1-(NPA)).

2.5. The aggregate position is calculated using the "short hand" method, i.e., the calculation is carried out by summing separately all long net positions and separately all short net positions for each currency/each type of precious metal. Then, the resulting values are compared with each other (in absolute value), and the largest of the two values is used when calculating the aggregate position limit.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

III. Open Position Limits

3.1. For the purpose of reducing currency risk, the National Bank establishes the following limits for the open currency position:

3.1.1. As of the end of the business day, the bank's open long/short currency position for each foreign currency must not exceed:

a) for currencies of states that are members of the OECD and/or for currencies of countries that have signed Article 8 of the Articles of Agreement with the IMF – 15% of the bank's net total capital.

Note: OECD – Organization for Economic Co-operation and Development.
The list of OECD member states is posted on the official website www.oecd.org. The list of countries that have signed Article 8 of the "Articles of Agreement" with the IMF is posted on the official website www.imf.org;

b) for currencies of countries that have not signed Article 8 of the Articles of Agreement with the IMF – 0% of the bank's net total capital (closed position).

• the seventh paragraph of point 6.2 after the words "internal audit" is supplemented with the words "and internal Shariah audit"

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated September 12, 2025 No. 2025-P-12/46-1-(NPA)).

3.1.2. As of the end of the business day, the size of the aggregate currency position for all foreign currencies of the countries specified in subparagraph a) of point 3.1.1 of this Instruction must not exceed 20% of the bank's net total capital.

3.1.3. For the purpose of regulating buy/sell operations with precious metals, the National Bank establishes for banks a limit for the aggregate open position in precious metals:

a) as of the end of the business day, the size of the open long/short position for each type of precious metal must not exceed 15% of the bank's net total capital;

b) as of the end of the business day, the size of the aggregate position in precious metals in total must not exceed 20% of the bank's net total capital.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.2. Compliance with the established open position limits is mandatory at the end of each business day.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.3. Exceedances of the established open position limits cannot be carried over by the bank to the next business day. By the end of the current business day, the limits must be brought into compliance with the requirements of the National Bank.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.4. The magnitude of open positions during the business day is controlled by the bank independently, based on its own assessment of the permissible level of currency risk and risks related to precious metals operations. At the same time, the bank must keep risk sizes during the day in accordance with the internal risk management policy approved by the Board of Directors.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.5. The maximum value of open position limits may be reduced by a decision of the Supervisory Committee in the event of the bank engaging in unreliable and unhealthy business practices or violating banking legislation.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.6. In the event that the bank's net total capital is negative or equal to zero, the bank must bring net positions for each currency/each type of precious metal to a zero value (closed position) within the timeframes established by the National Bank.

(In the edition of the resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11, dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

3.7. Precious metals held by the bank in safekeeping and as collateral are not obligations of the bank and are not included in the calculation of the open position in precious metals.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

IV. Bank Reporting and Submission Procedure

4.1. Daily by 09:00, the bank must submit reports on open positions as of the end of the last business day to the National Bank in accordance with Appendices 1, 2, 3, and 4 to this Instruction.

(In the edition of the resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11, dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

4.2. The bank, taking into account data from all branches, subsidiary banks, and exchange offices, must submit the following reports on open positions:

• daily report on open currency positions (OCP) for operations carried out in accordance with Islamic financing principles (Appendix 1);
• summary daily report on open currency positions (OCP) (Appendix 2);
• daily report on open positions in precious metals (OPM) for operations carried out in accordance with Islamic financing principles (Appendix 3);
• summary daily report on open positions in precious metals (OPM) (Appendix 4).

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

4.3. An Islamic bank must provide a report on open currency positions in accordance with Appendix 1.

4.4. A bank with an "Islamic window" must provide a report on open currency positions for the bank as a whole in accordance with Appendix 2 to this Instruction.

V. Sanctions for Bank Violation of Established Open Currency Position Limits

5.1. In the event of a bank violating the established open position limits, the National Bank applies impact measures in the form of a fine of 5% of the violation amount, but not more than 10% of the regulatory minimum size of the bank's authorized capital.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

5.2. In the event of systematic (more than twice within consecutive 30 calendar days) violation by the bank of the established limits, the National Bank may apply other impact measures provided for by banking legislation and regulatory legal acts of the National Bank, up to the revocation of the license.

Note: Exceeding established limits within the range of 0-0.05% does not entail the application of a fine.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

5.3. Any attempts by the bank to avoid reflecting the real position in reporting in any way will be considered by the National Bank as:

• attempts to mislead the National Bank;
• unhealthy and unsafe banking practice;
• manipulation of the net position with the purpose of distorting its real magnitude, i.e., conducting dubious operations, the origin and commission of which cannot be clearly identified and/or if these operations affect the bank's financial reporting and its economic indicators;
• provision by the bank of unreliable financial and regulatory reporting. Such operations are not taken into account when calculating open position limits.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

5.4. In the event of a violation of any of the requirements of this Instruction, the bank's management is obliged to immediately inform the National Bank about the violations committed and submit written explanations regarding the causes of the violation within two days, including a list of measures taken by the bank to eliminate it.

5.5. Impact measures in the form of a fine are generally not applied to the bank if the open position limit was violated under conditions of force majeure circumstances.

Force majeure circumstances include: natural disasters (floods, earthquakes, fires, and other natural or technological catastrophes), military conflicts, terrorist acts, civil unrest and riots, as well as the issuance of regulatory legal acts restricting or prohibiting the performance of any actions and affecting the bank's performance of economic indicators established by the National Bank.

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

5.6. During the period of a temporary administration in the bank, the Supervisory Committee has the right to consider the expediency of imposing a fine on the bank for non-compliance with the established open position limits, taking into account all circumstances that led to the violation of this economic indicator.

(In the edition of the resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11, dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

5.7. In the event that the violation of the open position limit during the period of a temporary administration in the bank was the result of the bank's activities prior to the introduction of the temporary administration, the Supervisory Committee has the right to consider the issue of imposing a fine on the bank with a deferral of its payment.

(In the edition of the resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11, dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

VI. Organization of Internal Control for Foreign Currency Operations

6.1. To carry out foreign currency operations, the bank must develop an internal currency risk management policy and organize adequate internal control.

6.2. For each foreign currency operation conducted, corresponding procedures must be developed, which must reflect at least the following issues:

• separation of back and front office functions;
• separation of functional responsibilities of bank employees so that one employee cannot execute and/or control any process in full from the initiation of the transaction to its recording in accounting books;
• implementation of a clear system of authorization for the volume of operations conducted by the bank by corresponding authorized bank employees;
• establishment by the bank of internal limits for open currency positions for each foreign currency and in total for all currencies;
• establishment of the level of information sufficiency regarding the reliability of counterparties, depending on the nature and degree of risk of the operations conducted and the category of the counterparty;
• establishment of requirements for internal audit and internal Shariah audit when conducting currency operation checks (at least, the independence of auditors and their having the necessary qualifications and knowledge);

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated September 12, 2025 No. 2025-P-12/46-1-(NPA)).

• establishment of requirements for accounting and reporting on currency operations for the bank and its branches (form, frequency of submission, responsibility).

6.3. The organization of internal control for precious metals operations is carried out in accordance with the norms established in the Regulation "On Operations of Commercial Banks with Precious Metals Carried Out in Accordance with Islamic Principles of Banking and Finance."

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

Appendix 1

DAILY REPORT on open currency positions (OCP) for operations carried out in accordance with Islamic financing principles as of ___. _.20 g.

Net Total Capital as of "01" __________ year: _______________ thousand som

Type of Currency	National Bank Exchange Rate	OCP Amount (thousand som)	In particular: Unsettled Spot Transactions	Balance	Off-Balance	Sale	Purchase	OCP Amount (% to Net Total Capital)	Deviation from Limit Norm (%)
Aggregate OCP:

Name: ____________________ Position: ______________________ Date: ____________________

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11).

Appendix 2

SUMMARY DAILY REPORT on open currency positions (OCP) as of ___. _________.20 g.

Net Total Capital as of "01" __________ year: _______________ thousand som

Type of Currency	National Bank Exchange Rate	OCP Amount (thousand som)	In particular: Unsettled Spot Transactions	Balance	Off-Balance	Sale	Purchase	OCP Amount (% to Net Total Capital)	Deviation from Limit Norm (%)
Aggregate OCP:

Name: ____________________ Position: ______________________ Date: ____________________

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated May 31, 2017 No. 21/11).

Appendix 3

DAILY REPORT on open positions in precious metals (OPM) for operations carried out in accordance with Islamic financing principles as of ___. _.20 g.

Net Total Capital as of "01" __________ year: _______________ thousand som

Type of Precious Metal	Exchange Rate	OPM Amount (thousand som)	In particular: Unsettled Spot Transactions	Balance	Off-Balance	Sale	Purchase	OPM Amount (% to Net Total Capital)	Deviation from Limit Norm (%)
Gold
Silver
Aggregate OPM:

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

Appendix 4

SUMMARY DAILY REPORT on open positions in precious metals (OPM) as of ___. _.20 g.

Net Total Capital as of "01" __________ year: _______________ thousand som

Type of Precious Metal	Exchange Rate	OPM Amount (thousand som)	In particular: Unsettled Spot Transactions	Balance	Off-Balance	Sale	Purchase	OPM Amount (% to Net Total Capital)	Deviation from Limit Norm (%)
Gold
Silver
Aggregate OPM:

(In the edition of the resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated July 8, 2020 No. 2020-P-12/39-2-(NPA)).

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