Regulation on the Issuance, Placement, Circulation and Redemption of Notes of the National Bank of the Kyrgyz Republic

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Date of creation: 2023-05-17

Approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 10/6 dated 28.03.2013.

Regulation "On the Issuance, Placement, Circulation and Redemption of Notes of the National Bank of the Kyrgyz Republic" (as amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated 29.01.2014 No. 2/8, dated 30.10.2014 No. 47/8, dated 26.04.2017 No. 17/3, dated 19.07.2017 No. 2017-P-09/32-2-(NPA), dated 25.10.2017 No. 2017-P-09/45-9-(NPA); dated 25.11.2020 No. 2020-P-09/67-5-(DKP); dated 14.12.2022 No. 2022-P-09/78-12-(NPA))

1. General Provisions

1. This Regulation defines the procedure for the issuance, placement, circulation and redemption of notes of the National Bank of the Kyrgyz Republic (hereinafter - notes of the National Bank) in the territory of the Kyrgyz Republic through the automated trading system of the National Bank (hereinafter - ATS).

2. The issuance of notes of the National Bank is carried out by the National Bank of the Kyrgyz Republic (hereinafter - National Bank) in accordance with Articles 6, 13 and 26 of the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic".

3. (Lost force in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated 25.10.2017 No. 2017-P-09/45-9-(NPA).

4. The Cabinet of Ministers of the Kyrgyz Republic does not bear obligations on the notes of the National Bank.

5. The assignment of a registration number for notes of the National Bank is carried out in accordance with the Regulation "On the procedure for assigning a registration number to state and municipal securities and keeping a register of state and municipal securities in the Kyrgyz Republic", approved by the Resolution of the Government of the Kyrgyz Republic and the National Bank dated September 13, 2010 No. 201.

6. The conditions and rules established by the Regulation on the operation of the Automated Trading System of the National Bank of the Kyrgyz Republic (hereinafter - Regulation on the operation of ATS) apply to this Regulation.

2. Definitions and Terms

For the purposes of this Regulation, in addition to those specified below, definitions and terms established in the Regulation on the operation of ATS are applied:

7. Auction - a form of trading in notes of the National Bank.

8. Additional placement of notes of the National Bank - sale of notes of the National Bank at the weighted average yield established at the last held auctions;

9. Direct participant – a commercial Bank licensed by the National Bank, having a correspondent/current account in the National Bank (hereinafter - Bank), the Social Fund of the Kyrgyz Republic and the Agency for the Protection of Deposits of the Kyrgyz Republic, having concluded with the National Bank a corresponding agreement on work in the market of notes of the National Bank (Appendix 1, 2).

10. Indirect participant - an individual or legal entity that is not a direct participant of the auction, submitting applications for the purchase of notes of the National Bank through commercial banks that are direct participants.

11. Main parameters of the issuance of notes of the National Bank - information including the date of the auction, the method of conducting the auction, the date of additional placement, the registration number of the issuance of notes of the National Bank, the volume of issuance, the maximum yield, the dates of issuance and redemption of notes of the National Bank.

12. Cut-off price – the price at which the satisfaction of applications ends.

3. General Conditions for the Issuance, Placement, Circulation, Maintenance and Redemption of Notes of the National Bank

13. The issuance of notes of the National Bank is carried out by the National Bank for the implementation of monetary policy. Notes of the National Bank are an instrument of monetary policy used by the National Bank to regulate the volume and structure of the money supply.

14. The nominal value of one note of the National Bank is 10,000 (ten thousand) som.

15. Notes of the National Bank are discount securities with a circulation period from 7 to 364 days. The Board of the National Bank has the right to establish other circulation periods for notes of the National Bank.

16. Notes of the National Bank are issued in paperless form.

17. The Monetary and Credit Regulation Committee of the National Bank (hereinafter - MCR Committee) makes a decision on the issuance of notes of the National Bank and establishes the method, volume, maturity, maximum yield, date of the auction, as well as makes a decision on the additional placement of notes of the National Bank.

18. The National Bank publishes the parameters of the issuance of notes of the National Bank on the website of the National Bank and in the ATS.

19. The parameters of additional placement of notes of the National Bank are brought to the attention of direct participants via the ATS and by facsimile communication.

20. The placement of notes of the National Bank is carried out on an auction basis via the ATS and may be carried out by another method, according to the rules established by the National Bank.

21. Owners of notes of the National Bank may be legal and physical entities - residents and non-residents of the Kyrgyz Republic.

22. Owners of notes of the National Bank may enter into civil law transactions with notes of the National Bank, except for restrictions established by legislative acts of the Kyrgyz Republic.

23. The taxation procedure for transactions with notes of the National Bank is determined in accordance with the legislation of the Kyrgyz Republic.

4. Issuance and Circulation of Notes of the National Bank

24. Notes of the National Bank are issued on the next working day after the day of the auction. The decision on the issuance of notes of the National Bank is made by the MCR Committee and is reflected in the protocol of the MCR Committee meeting.

25. In cases where the issuance date is a non-working day in the Kyrgyz Republic, the issuance of notes of the National Bank is carried out on the next working day, at the same time the date of redemption of notes of the National Bank is shifted accordingly.

26. The circulation of notes of the National Bank begins on the day following the day of issuance of notes of the National Bank and ends on the day preceding the day of their redemption.

27. Conclusion of civil law transactions with notes of the National Bank in the secondary market is allowed only during their circulation on working days.

28. The procedure for the circulation of notes of the National Bank is determined by regulatory documents of the National Bank.

5. Placement of Notes of the National Bank

29. The placement of notes of the National Bank is carried out at auctions conducted by the National Bank via the ATS, and may be carried out by another method, according to the rules established by the National Bank. In cases where the date of the auction is a non-working day in the Kyrgyz Republic, the auction is held on the next working day, at the same time the dates of issuance and redemption of notes of the National Bank are shifted accordingly.

30. The auction is recognized as unsuccessful, and the emission as unplaced in the case of participation in the auction of one participant.

31. The volume of announced emission may be canceled or reduced in the case of high volatility of the yield of notes of the National Bank. The decision to cancel or reduce the volume of emission is made by the Deputy Chairman of the National Bank, heading the MCR Committee.

32. Applications for the purchase of notes of the National Bank at the auction may be submitted only by direct participants via the ATS. Indirect participants may acquire notes of the National Bank at the auction through commercial banks that are direct participants.

33. By decision of the MCR Committee, auctions may be conducted by one of the following methods:
auction at multiple prices, in which the satisfaction of applications starts from the highest discounted prices and ends at the cut-off price on terms acceptable to the National Bank. In this case, if several applications are submitted at the cut-off price, the distribution of notes of the National Bank among these applications is carried out on a proportional basis; auction at fixed yield. When conducting an auction with a fixed yield, all applications at the yield established by the MCR Committee are satisfied. In the event that the total volume of applications exceeds the volume of notes of the National Bank offered at the auction, the satisfaction of applications is carried out on a proportional basis.

34. The time schedule for submitting an application for an auction, processing and approval of the auction is regulated by the Regulation on the operation of ATS.

6. Procedure for Filing and Submitting Applications for Auction

35. Applications for participation in the auction for the placement of notes of the National Bank are submitted, edited and/or withdrawn by direct participants in the ATS on the day of the auction in accordance with the time schedule determined by the Regulation on the operation of ATS.

36. Applications of a commercial Bank, which are direct participants, may contain both applications in their own name (own applications) and aggregated applications on behalf of their clients – indirect participants (client applications).

37. An application of a direct participant who is not a commercial Bank must consist only of own applications.

38. An own application of a direct participant with competitive offers must meet the following requirements:

• number of applications - no more than 3;
• number of securities per application - multiple of 10;
• minimum number of securities in one application - no less than 10 units.

39. The total number of securities in the own applications of a direct participant must not exceed the number of securities placed, i.e. the total volume of own applications at par must not exceed the announced volume of issuance.

40. There is no restriction on the minimum volume of an application submitted from one client. The maximum volume of applications submitted from one client must not exceed the volume of issuance of notes of the National Bank.

41. The yield of the security indicated in the application must not exceed the maximum yield established on the day of the auction in accordance with paragraph 17 of this Regulation.

41-1. In the event of the impossibility of conducting an auction in the ATS (in case of technical failures in the ATS and/or other reasons), the National Bank notifies direct participants of the impossibility of conducting an auction in the ATS. In this case, the auction for the placement/additional placement of notes of the National Bank is conducted using EXCEL software based on paper applications signed by the management of the direct participant and certified with a seal. (Appendix 3 to this Regulation).

41-2. Paper applications, sealed in an envelope, are submitted to the National Bank by 12:00 on the day of the auction. The application must be dropped into a box with the inscription: "For applications for auctions of notes of the National Bank", located in cab. 117 of the National Bank on the first floor of the building located at: Bishkek, Chuy Avenue, 168. The application must be registered in the journal of registration of applications.

41-3. The transfer of the results of the auction (Appendix 4 to this Regulation) to direct participants of the auction is carried out on paper via the expedition of the National Bank with prior sending by facsimile communication

42. Applications filled in violation of the formatting procedure are recognized as invalid and are not admitted to the auction.

43. The National Bank ensures the confidentiality of the information specified in the application of the auction participant, except for cases of disclosure of information in the manner established by the legislation of the Kyrgyz Republic.

44. The results of the auction are approved by the Chairman of the MCR Committee on the day of the auction. The Chairman of the MCR Committee may make one of the following decisions: approve the results of the auction; reduce the announced volume of emission or recognize the auction as unsuccessful in accordance with paragraphs 30 and 31 of this Regulation.

45. The adopted decision is brought to the attention of direct participants via the ATS. In the event of approval of the results of the auction, direct participants are informed via the ATS of the volumes of demand and placement, the weighted average price and yield, the maximum price of applications and the cut-off price, the number of direct participants; separately to each direct participant, the quantity and cost of notes of the National Bank acquired by him as a result of his participation in the auction is reported. In the event of recognition of the auction as unsuccessful, the reason is reported.

7. Procedure for Conducting Additional Placement of Notes of the National Bank

46. Additional placement of notes of the National Bank is carried out in the ATS at the weighted average yield established at the last trading sessions for the placement of notes of the National Bank of the corresponding maturity. In the event that the last auction of notes of the National Bank is recognized as unsuccessful, additional placement of notes of the National Bank is carried out at the weighted average yield established at the last held auctions of notes of the National Bank of the corresponding maturity.

47. The parameters of additional placement of notes of the National Bank are accepted by the Deputy Chairman of the National Bank, heading the MCR Committee, depending on the established market conditions.

48. Direct participants connected to the ATS have the right to participate in additional placement. Indirect participants participate in additional placement by submitting applications through commercial Banks that are direct participants.

49. The National Bank ensures the confidentiality of the information specified in the application of the direct participant.

50. An application of a commercial bank that is a direct participant may contain both an application in its own name (own application) and an aggregated application on behalf of its clients – indirect participants (client application). An application of a direct participant who is not a commercial Bank must consist only of an own application.

51. An own application of a direct participant must be no less than 100,000 (one hundred thousand) som in nominal value, the number of securities must be a multiple of ten. Maximum