Regulation on the Lender of Last Resort Credit

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Date of creation: 2025-07-09

Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated "14" June 2017 No. 2017-P-09/24-6-(NPA)

REGULATION "ON THE LENDER OF LAST RESORT CREDIT"

(as amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated 25.10.2017 No. 2017-P-09/45-9-(NPA), dated 28 June 2019 No. 2019-P-09/34-2-(NPA), dated 14.12.2022 No. 2022-P-09/78-12-(NPA), dated 27.06.2025 No. 2025-P-09/31-3-(NPA))

CHAPTER 1. General Provisions

This Regulation "On the Lender of Last Resort Credit" (hereinafter - the Regulation) defines the general conditions and procedure for providing the National Bank of the Kyrgyz Republic (hereinafter - the National Bank) last-resort credit to a commercial bank of the Kyrgyz Republic holding a license from the National Bank (hereinafter - the Bank), for the purpose of protecting the integrity and stability of the banking system, maintaining liquidity, and protecting deposits of individuals.

Last-resort credit (hereinafter - the credit) is provided in accordance with Articles 6, 16, and 17 of the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic" and this Regulation.

Credit is provided to the Bank in exceptional cases when the Bank has exhausted all available means and opportunities to maintain the minimum level of liquidity.

By providing this credit, the National Bank exercises its function as a lender of last resort. The credit is provided to the Bank for the purpose of preventing systemic risk, preserving the stability of the banking system, and protecting deposits of individuals in the national currency.

Credit is provided to a troubled Bank implementing financial rehabilitation measures, whereby, for the purposes of implementing this Regulation, a troubled Bank is understood to be a Bank in which the following are established:

• facts of violations in the Bank's activities related to the inability of the administration to ensure the Bank's operation in accordance with banking legislation, involvement of the Bank in unhealthy banking practices;

• violations by the Bank of the economic standard of adequacy of Tier 1 capital;

• loss-making activities of the Bank leading to its inability to fulfill obligations to clients.

The decision to provide credit, including the terms of provision, term, and volume of the credit, is taken by the Board of the National Bank upon the recommendation of the Supervisory Committee of the National Bank.

The Board of the National Bank has the right to establish certain requirements that the Bank must fulfill before the consideration of the issue of providing credit.

Credit is provided in the national currency in compliance with the general principles of lending: term, cost, repayability, and collateral.

The obligation to repay the credit is secured by collateral. Requirements for collateral, the volume of sufficiency (in percentage), type, and other parameters of collateral security are established by the Board of the National Bank upon the recommendation of the Supervisory Committee of the National Bank.

The interest rate on the credit is established by the Board of the National Bank.

The National Bank has the right to provide funds to a Bank on a contractual basis, which operates in accordance with Islamic principles of banking and financing and is operating on the basis of a corresponding license of the National Bank. The relationship of the Bank operating in accordance with Islamic principles of banking and financing with the National Bank is regulated by this Regulation and a separate agreement on the provision of funds, taking into account the specifics and features of Islamic principles of banking and financing.

CHAPTER 2. Conditions for Providing Credit

A mandatory condition for receiving credit is the introduction of a Temporary Administration of the National Bank into the Bank to control the implementation of financial rehabilitation measures and the targeted use of credit funds. At the same time, the Bank cannot incur new obligations (interbank loans, deposits, etc.) without the consent of the National Bank.

The Board of the National Bank has the right to establish other requirements for the Bank during the period until the full repayment of the credit.

During the period of the credit's validity, the Bank's powers in the Automated Trading System of the National Bank may be suspended, such as access to the primary securities market, and the Bank is excluded from the clearing system for settlement of outgoing transactions and transferred to a gross settlement system for them without charging for services at the National Bank.

The Bank is not entitled to use the credit for the payment of deposits (deposits) to officials and persons related to or affiliated with the Bank. The National Bank may establish additional restrictions on transactions with persons related to or affiliated with the Bank.

The Bank is not entitled to use the credit for the payment of administrative expenses, including all types of remuneration/bonuses and other types of incentive payments to officials and employees of the Bank. In addition, the National Bank has the right to establish a requirement for the Bank to reduce its administrative expenses.

In the event of the Board of the National Bank's decision to refuse to provide the Bank with credit, the National Bank notifies the Bank of this in writing.

CHAPTER 3. Collateral for Credit

The Bank's obligation to repay the credit is secured by collateral. The subject matter of the pledge provided as security for the credit cannot be pledged or re-pledged to a third party.

As security for the credit, the following types of pledge may be used:

state securities of the Cabinet of Ministers of the Kyrgyz Republic and notes of the National Bank;

deposits in the National Bank or in another financial-credit organization acceptable to the National Bank;

gold and other refined precious metals in standard and weight bars;

foreign currency;

rights to claims on the Bank's credit portfolio;

other types of assets and property acceptable to the National Bank, in cases established by the Board of the National Bank.

19-1. Shares of legal entities supervised by the National Bank cannot be the subject matter of the pledge.

The subject matter of the pledge must belong to the pledgor by right of ownership and not be encumbered by other obligations.

Insufficient collateral is grounds for refusing to provide the amount of credit requested by the Bank.

The market value of the pledged property must be no lower than the amount of the requested credit, including the amount of accrued interest for the expected period of its use.

The procedure for foreclosure and realization of property transferred as security (pledge) is established by the legislation of the Kyrgyz Republic, Pledge Agreements, and additional agreements to them.

CHAPTER 4. Procedure for Providing and Repaying Credit

To obtain credit, the Bank is obliged to provide the following documents to the National Bank:

• an application-petition for the provision of credit indicating the purpose of obtaining the credit;

• a protocol of the Board of Directors of the Bank or another authorized person on the decision to obtain credit and provide assets and/or property as security for the requested credit;

• duly certified copies of documents confirming the pledgor's right of ownership to the subject matter of the pledge;

• documents containing a description of the subject matter of the pledge, confirming the right of ownership and the valuation of the subject matter of the pledge by an independent appraiser;

• documents confirming that the Bank has notified the shareholders of the Bank of its intention to apply to the National Bank for credit (notifications are delivered personally under signature or sent by mail to the last known address);

• the National Bank has the right to request other documents necessary for considering the issue of providing credit;

• a plan for the financial rehabilitation of the Bank, signed by the Chairman of the Board of Directors of the Bank and an authorized official of the Bank.

To issue the credit, the National Bank and the Bank conclude an Agreement on the Opening of a Credit Line according to Appendix 1 to this Regulation, a Credit Agreement, and a Pledge Agreement, the format and requirements of which are determined by the National Bank depending on the type of collateral. A special account is opened in the National Bank for the transfer of credit resources.

Credit is provided in tranches (stages) as the financial rehabilitation plan of the troubled bank is implemented and it provides a detailed report on the targeted use of the previously received tranche according to Appendix 2 to this Regulation.

Tranches are issued for a term not exceeding the date of closing of the credit, determined by the Board's decision. The date of closing of the credit and/or the date of final repayment of tranches may be extended by the decision of the Board of the National Bank.

Repayment of the principal amount of the tranche and accrued interest on it is made on the terms defined in the Agreement on the Opening of a Credit Line.

In the event of non-targeted use of the credit or non-fulfillment/improper fulfillment by the Bank of its obligations, the National Bank has the right to stop issuing the next tranche of credit and demand early repayment, or foreclose on the pledged property.

CHAPTER 5. Calculation of Interest on Credit

Interest on the amount of each tranche of the credit is accrued according to the simple interest formula for the period of actual use of the issued tranche, based on 360 calendar days in a year, according to the following formula:

P = (C x I x T) /360/100, where:

P – amount of interest on the tranche;

C – amount of the tranche (som);

I – interest rate (in % per annum);

T – term of use of the tranche (in days).

The calculation of the actual number of calendar days during which the Bank used the issued tranche includes weekends and holidays established by legislation or declared by the Cabinet of Ministers of the Kyrgyz Republic.

In the event that the date for repayment of the principal amount of the credit and/or payment of accrued interest on it falls on a holiday, non-working, or weekend day, then repayment of the principal amount of the credit and/or payment of accrued interest on it is made on the next working day.

CHAPTER 6. Special Conditions

The National Bank has the right at any time, at its discretion, to conduct an inspection of the Bank's activities.

During the period of the credit's validity, the Bank is obliged to comply with all requirements defined in the Agreement on the Opening of a Credit Line and Pledge Agreements, as well as decisions of the National Bank.

In case of the Bank's failure to comply with any of the requirements defined by the decisions of the National Bank, the Agreement on the Opening of a Credit Line, and/or Pledge Agreements during the period of the credit's validity, the National Bank has the right to suspend the action of the credit line and demand early repayment of the provided tranches and accrued interest on them. In case of the Bank's failure to fulfill the requirement for early repayment of obligations, the National Bank may initiate a procedure for out-of-court foreclosure on the subject matter of the pledge or deduct without acceptance from any account of the Bank held at the National Bank, including in foreign currency, the amount necessary to repay the Bank's debt.

Upon the request of the National Bank, the Bank provides a report on the use of the credit and other necessary documents in the form and timeframes established by the National Bank.

CHAPTER 7. Liability and Unlawful Actions

The National Bank is not liable for any losses arising from the non-fulfillment or partial fulfillment by the Bank of the conditions for providing credit.

The provision of credit by the National Bank cannot be considered as the National Bank assuming obligations towards the Bank.

At any stage of obtaining and using the credit, the National Bank has the right to apply to the Bank measures of impact provided for by the legislation of the Kyrgyz Republic and regulatory legal acts of the National Bank.

The Bank is liable for compliance with the targeted use of the credit and all other conditions of the credit agreements.

Officials of the Bank, shareholders of the Bank, persons related to or affiliated with the Bank, bear liability in accordance with the legislation of the Kyrgyz Republic for the following unlawful actions:

• concealment, falsification of records, or insertion of false records into accounting and other documentation related to the Bank;

• exerting influence on officials of the Bank and its employees with the aim of having them make decisions in favor of specific creditors and debtors;

• refusal to cooperate with officials of the Bank or obstruction in the return of the Bank's property;

• hindering officials of the Bank in the performance of their duties and non-fulfillment of its lawful requirements;

• actions recognized by the court and which led to forced liquidation, including bankruptcy.

Appendix 1 to the Regulation "On the Lender of Last Resort Credit" AGREEMENT on the opening of a credit line city of Bishkek No. ________ from __________ The National Bank of the Kyrgyz Republic, hereinafter referred to as the "National Bank", represented by ______________, acting on the basis of ________________, on the one hand, and __________, hereinafter referred to as the "Bank", represented by ______________, acting on the basis of the Charter, on the other hand, hereinafter jointly referred to as the "Parties", have concluded this Agreement on the opening of a credit line (hereinafter - the "Agreement") on the following:

TERMS AND DEFINITIONS

1.1. For the purposes of this Agreement, the following terms have the following meanings: Credit Limit – the maximum amount of the total sum established in accordance with this Agreement, within which the Bank, during the validity of this Agreement, has the right to obtain loans/tranches subject to compliance with the main requirements. Main Requirements – requirements established by the Regulation "On the Lender of Last Resort Credit", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated ___________ year No. _____ . Period of Availability of the Credit Limit – the period of time from the moment of signing this Agreement until __________ year inclusive, during which the Bank has the right to obtain loans/tranches within the opened credit line under this Agreement. Credit/Tranche – monetary funds provided by the National Bank to the Bank on the terms provided for in this Agreement, in a total amount not exceeding the credit limit. Credits/tranches are provided in accordance with the Bank's applications. The terms of credits/tranches are determined by specific credit agreements on the issuance of credit/tranche. Free Balance of the Credit Limit – the amount of monetary funds of the credit limit remaining after the last issuance of credit/tranche by the National Bank to the Bank and equal to the difference between the credit limit and the total amount of issued but not repaid (i.e., active) credits/tranches in accordance with the terms of this Agreement. The free balance of the credit limit may be issued to the Bank as a credit/tranche within its size and the period of availability of the credit limit, as well as with sufficient collateral. Credit Agreement on the issuance of credit/tranche – an agreement concluded by the parties within the framework of this Agreement, on the basis of which the National Bank provides the Bank with a credit/tranche, and being an integral part of this Agreement. The Credit Agreement on the issuance of credit/tranche is concluded in the form specified in Appendix 1 to this Agreement. Date of provision of credit/tranche – the day of transfer of the amount of credit/tranche to the Bank's special account at the National Bank. Date of repayment of credit/tranche – the day of receipt of funds from the Bank to the account of the National Bank, in an amount covering the volume of claims of the National Bank under this Agreement and credit agreements on the issuance of credit/tranche, including the amount of the principal debt, accrued interest on it, and other payments, but no later than ________________ year.

SUBJECT OF THE AGREEMENT

2.1. The National Bank provides (opens) to the Bank a credit line with a credit limit in the amount of ________________ (amount in words) som on the terms of term, repayability, cost, collateral, and other conditions defined in this Agreement, and the Bank undertakes to repay to the National Bank the received credits/tranches within the framework of the opened credit line and pay interest for their use in the amount, timeframes, and on the terms provided for in this Agreement and credit agreements on the issuance of credit/tranche. 2.2. The credit line with the credit limit is provided (opened) from ___________ year to __________ year, after the end of which the Bank must fully repay the debt on credits/tranches provided in accordance with this Agreement, including the amount of the principal debt, accrued interest, and other payments on credits/tranches. 2.3. Within the established credit limit during the term of validity of this Agreement, but no later than the period of availability of the credit limit, the Bank has the right to obtain the next credit/tranche within the free balance of the credit limit, subject to compliance with the main requirements at the time of submitting the corresponding application for the issuance of credit/tranche. Compliance with the main requirements is confirmed by the corresponding information and documents provided by the Bank to the National Bank at the time of submitting the application for the issuance of credit/tranche. 2.4. The remaining debt of the Bank on received credits/tranches during the entire term of validity of this Agreement cannot exceed the credit limit established by paragraph 2.1 of this Agreement. 2.5. Credit funds issued by the National Bank to the Bank within the framework of this Agreement have a targeted purpose and must be used by the Bank to maintain liquidity. At the same time, the provided credit funds are primarily directed to satisfy claims for the return of deposits (deposits) of individuals. 2.6. The Bank is not entitled to use the credit funds provided by the National Bank for lending, for conducting transactions in the securities market. The National Bank has the right to establish restrictions on transactions with persons related to or affiliated with the Bank.

PROCEDURE FOR ISSUING CREDITS/TRANCHES

3.1. To obtain a credit/tranche within the credit line, the Bank must submit an application for the issuance of credit/tranche to the National Bank indicating the amount, term of the credit/tranche, and the list of assets offered as security for the credit/tranche. Documents and information on the Bank's compliance with the main requirements must be attached to the Bank's application for the issuance of credit/tranche. 3.2. The credit/tranche may be obtained with a repayment term of no more than_____ months from the date of conclusion of this Agreement. 3.3. Credits/tranches will be provided by the National Bank to the Bank with the execution of corresponding credit agreements on the issuance of credit/tranche, in which the specific terms of issuance of the credit/tranche will be stipulated: size (amount), term, interest rate, terms of repayment of the principal amount and interest on the credit/tranche, etc. The specified credit agreements on the issuance of credit/tranche must contain a reference to this Agreement. 3.4. The Bank is obliged to comply with all requirements of the National Bank regarding the submission of necessary documents for obtaining credit/tranche. The National Bank has the right to request additional documents and information from the Bank regarding the Bank's application for the issuance of credit/tranche. 3.5. The provision of credit/tranche will be carried out by the National Bank after studying all necessary materials and documents directly related to the issuance of credit/tranche, in accordance with the main requirements. After considering the completeness, justification, and compliance of the documents provided by the Bank for the issuance of credit/tranche, the National Bank makes a decision on the provision or refusal to issue the credit/tranche, in accordance with its internal procedures, in compliance with the terms of this Agreement. 3.6. The credit/tranche will be provided to the Bank within 2 (two) working days after the Bank provides the National Bank with confirmation of the corresponding authorized body on the registration of the pledge agreement in accordance with the signed credit agreement on the issuance of credit/tranche. In exceptional cases, the credit/tranche may be issued to the Bank before the completion of the procedures for the registration of pledge agreements in authorized bodies.

TERMS OF CALCULATION, ACCRUAL, AND PAYMENT OF INTEREST FOR THE USE OF CREDIT/TRANCHE AND OTHER AMOUNTS

4.1. For the use of credits/tranches provided by the National Bank, the Bank undertakes to pay interest to the National Bank. Interest is accrued on the remaining debt of the Bank on the principal amount of the credit/tranche. The interest rate of the National Bank on the credit is fixed and established at the amount of _____ percent per annum 4.2. Accrual and payment of interest for the use of credit/tranche is made on a monthly basis. 4.3. Interest is accrued from the date of provision of the credit/tranche (excluding this day) to the date of repayment of the credit (including this day) on the actual remaining debt on the credit/tranche based on 360 days in a year and the actual number of days in the month. 4.4. Repayment of the principal debt and/or accrued interest on the credit/tranche is made no later than the working day of the end of the validity of this Agreement. 4.5. The procedure for payment of the principal debt and accrued interest on individual credits/tranches will be determined by separate credit agreements on the issuance of credit/tranche.

RIGHTS AND OBLIGATIONS OF THE PARTIES

5.1. Rights and obligations of the National Bank: 5.1.1. The National Bank undertakes to timely carry out all necessary actions for the issuance of credit/tranche in accordance with this Agreement and credit agreements on the issuance of credit/tranche; 5.1.2. The National Bank has the right to take any measures provided for by the current legislation of the Kyrgyz Republic necessary for the Bank to fulfill its obligations under this Agreement and credit agreements on the issuance of credit/tranche; 5.1.3. During the period of validity of this Agreement, the National Bank has the right to conduct measures to check the financial condition of the Bank, the condition of collateral for the opened credit line, and the targeted use of the credit/tranche; 5.1.4. The National Bank has the right to request and receive from the Bank any information necessary to it, including information on the condition of collateral for the credit line, targeted use of the credit/tranche, including copies of payment documents certified by the Bank on the transfer of amounts and other information, and documents for monitoring and control; 5.1.5. The National Bank has the right in an unaccepted (dispute-free) order, without the approval and consent of the Bank, to withdraw in any currency (regardless of the currency of the credit/tranche issued to the Bank) all amounts of overdue debt on the principal amount of credits/tranches, accrued interest on them, penalties in the form of fines and penalties, and other amounts provided for by this Agreement and credit agreements on the issuance of credit/tranche, including losses and expenses of the National Bank incurred as a result of violations of the fulfillment of the Bank's obligations under this Agreement and credit agreements on the issuance of credit/tranche or violations by the Bank of the terms and provisions of pledge agreements concluded between the Bank and the National Bank as security for this Agreement and credit agreements on the issuance of credit/tranche; 5.1.6. In the event that the Bank does not fulfill the requirements of the National Bank regarding the provision of additional collateral or replacement of the subject matter of the pledge provided by the Bank as security for this Agreement and credit agreements on the issuance of credit/tranche, the National Bank has the right in an unaccepted (dispute-free) order to deduct from the correspondent account of the Bank, opened at the National Bank, the entire or partial amounts of the Bank's debt under this Agreement, credit agreements on the issuance of credit/tranche, including the principal amount of credits/tranches, accrued