Regulation on Required Reserves (approved by Resolution of the Board of the National Bank of the Kyrgyz Republic No. 42/3 of 26 November 2008)

REPEALED

in accordance with the resolution of the Board of the National Bank of the Kyrgyz Republic

of 19 March 2010 No. 8/2

Registered with the Ministry of Justice of the Kyrgyz Republic

31 December 2008. Registration number 157-08

Approved

by resolution of the Board

of the National Bank

of the Kyrgyz Republic

of 26 November 2008 No. 42/3

REGULATION

on required reserves

1. General provisions

1.1. This regulation has been developed in accordance with the Law

of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", and es-

tablishes requirements for commercial banks to deposit with the National

Bank of the Kyrgyz Republic (hereinafter - the NBKR) required reserves,

determines the amount of required reserves, the procedure for complying with

the requirement and sanctions for non-compliance with the amount of required reserves.

1.2. Required reserves are the amount of funds which

commercial banks are obliged to deposit with the NBKR on the terms estab-

lished by the National Bank.

Required reserve requirements (hereinafter - RRR) are requirements for

a commercial bank to deposit required reserves with the NBKR.

The calculation base is the som and foreign currency liabilities of a commercial

bank recorded on its deposit and other accounts. The list of liabili-

ties included in the calculation base is approved by the Board of the NBKR.

1.3. RRR are one of the instruments of monetary policy

and are used by the National Bank as a regulator of the volume of monetary

aggregates, bank credit and demand for liquidity.

1.4. The amount of required reserves is established by the Board of the NBKR

as a percentage of the calculation base. For various categories of liabilities

included in the calculation base, various percentage values may be established. The amount of required reserves may be changed for the pur-

poses of monetary policy.

1.5. Depositing of required reserves is carried out in the form of

placement by a commercial bank of funds in a correspondent

account with the NBKR.

1.6. Commercial banks are obliged to comply with RRR during the period of validity

of the license to conduct banking operations, except in cases provided

for in clause 4.5 of this Regulation.

1.7. For non-compliance with RRR, a fee is charged from a commercial bank in

the amount established by the Board of the NBKR.

2. Procedure for calculating required reserves

2.1. Required reserves are calculated weekly, on the first work-

ing day of the week, and are determined as a percentage of the average daily calculation

base for the previous week, according to the amount of required reserves established by the Board of the NBKR. The calculated value is valid during the

current working week.

2.2. The calculation base is reduced by the amount of funds transferred

by a commercial bank to a deposit account in foreign currency with the NBKR. The som

equivalent of foreign currency liabilities included in the calculation base

is calculated at the fixed exchange rate established by the Board of the

NBKR.

2.3. The calculation of required reserves is made in the form according to

Appendix 1. The calculation, certified by the signature of the head of the commercial

bank, is submitted to the NBKR weekly, on the first working day of the week

before 12:00. In the case of untimely submission of the "Calculation of re-

quired reserves", as well as submission of unreliable information,

the commercial bank bears responsibility in accordance with the regulatory

legal acts of the NBKR.

2.4. Weekends and holidays officially established by regulatory legal acts of the Kyrgyz Republic are not taken into account in the calculation.

3. Procedure for calculating the amount and payment to commercial banks

of the fee for depositing required reserves with the NBKR

3.1. The amount of the fee for depositing required reserves with the NBKR

is established by the Board of the NBKR.

3.2. The fee is accrued only for those days when the amount of the balance of

funds in the correspondent account of the commercial bank with the NBKR

exceeded or was equal to the required reserves, except for days of ob-

taining "overnight" loans from the NBKR.

3.3. Transfer of the fee is made no later than 5 working days

after the end of the base period. Examples of calculating the amount of the fee for

depositing required reserves with the NBKR are given in Appendix 2.

4. Procedure for calculating and collecting payment for non-compliance

with required reserve requirements

4.1. Control of compliance with RRR is carried out at the end of a two-week

base period. RRR are recognized as fulfilled if the total for the

base period difference between the balance of funds in the correspondent

account of the commercial bank with the NBKR and the amount of required re-

serves is positive or equal to zero. Otherwise, it is considered that

the bank has violated RRR, and a payment for their non-fulfillment is charged from it. The calculation

of compliance with RRR is made in the established form, examples of calculating

the amount of payment for non-compliance with RRR are given in Appendix 3.

4.2. Collection of payment for non-compliance with RRR is carried out without

acceptance, on the second working day after sending the corresponding

notification, unless otherwise provided by the Agreement on correspondent

relations of the commercial bank with the NBKR.

4.3. Non-compliance by a bank with RRR may serve as grounds for conducting

a targeted inspection at that bank. Based on the results of the inspection, the Banking

Supervision Department submits to the management of the NBKR a conclusion on the situation in

that commercial bank for making an appropriate decision.

4.4. Repeated (more than 1 time) consecutive or repeated

within three months violation of RRR may serve as grounds for introducing

a regime of direct banking supervision or a temporary

administration in that bank.

4.5. During the period of operation in a commercial bank of direct banking

supervision or a temporary administration, payment for non-compliance with RRR is not

accrued, unless otherwise provided by the corresponding resolution

of the Board of the NBKR.

Appendix 1

to the Regulation on required reserves,

approved by resolution

of the Board of the National Bank

of the Kyrgyz Republic

of 26 November 2008 No. 42/3

Calculation of required reserves

for the period from ______ to ______

---

(name of the commercial bank)

---

	Liabilities	Amount according to the report for	Average for
		each day of the week	the week
		------	------
		Mon	Tue
--	------	----	----
1	Settlement (current) accounts
2	Demand deposits
3	Time deposits
4	Accounts and deposits
	of the Government of the Kyrgyz Republic and local
	government bodies
5	Total (1+2+3+4)
--	------	----	----
6	Funds in deposit accounts
	with the NBKR in foreign currency
--	------	----	----
	Total - calculation base
	(5-6)
--	------	----	----
	Required reserves

---

Signature of the head of the commercial bank

Seal

Appendix 3

to the Regulation on required reserves,

approved by resolution

of the Board of the National Bank

of the Kyrgyz Republic

of 26 November 2008 No. 42/3

Example of calculating the fee

for non-compliance with RRR

(soms)

---

Reporting	Correspondent	Required reserves	Deviation from
period	account with the NBKR		required reserves
------------	-------------	--------------------	---------------------
1	2	3	4
------------	-------------	--------------------	---------------------
24.01.2002	5937176	7430549	-1493373
25.01.2002	6434832	7430549	-995717
26.01.2002	7060832	7430549	-369717
27.01.2002	7060832	7430549	-369717
28.01.2002	5156920	7430549	-2273629
------------	-------------	--------------------	---------------------
31.01.2002	8735084	7642784	1092300
01.02.2002	8668152	7642784	1025368
02.02.2002	8582829	7642784	940045
03.02.2002	9630548	7642784	1987764
04.02.2002	7896305	7642784	253521
------------	-------------	--------------------	---------------------
Total:			-203154
-----------------------------------------------	---------------------
Average daily deviation	-20315
-----------------------------------------------	---------------------
Fee for non-compliance with RRR	110

---

Formula for calculating deviation from required reserves:

D=C-R,

where

C - correspondent account

R - required reserves

Formula for calculating the fee for non-compliance with RRR:

F=ADR3/100/360*D,

where

AD - average daily deviation of reserve assets from required

reserves

R - average discount rate of the NBKR for the base period

D - number of working days of the base period (in this case 10

days)

For reference:

Average discount rate of the NBKR for the base period (%%) 6.50