Regulation on the Procedure for Conducting Credit Auctions by the National Bank of the Kyrgyz Republic for Refinancing and Liquidity Support

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Date of creation: 2025-07-08

Approved by the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic No. 45/13 dated November 27, 2013.

REGULATION
"On the Procedure for Conducting Credit Auctions by the National Bank of the Kyrgyz Republic for Refinancing and Liquidity Support"

(as amended by Resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated March 19, 2014 No. 9/4, December 31, 2014 No. 60/1, November 25, 2015 No. 71/7, December 23, 2015 No. 78/9, March 10, 2017 No. 10/1, April 26, 2017 No. 17/3, July 19, 2017 No. 2017-P-09/32-3-(NPA), September 27, 2017 No. 2017-P-09/42-7-(NPA), October 25, 2017 No. 2017-P-09/45-9-(NPA), December 13, 2017 No. 2017-P-09/51-19-(NPA), August 15, 2018 No. 2018-P-09/33-2-(NPA), April 15, 2019 No. 2019-P-12/20-2-(NPA), February 26, 2020 No. 2020-P-09/8-5-(NPA), December 14, 2022 No. 2022-P-09/78-12-(NPA), June 4, 2025 No. 2025-P-09/27-2-(NPA), June 27, 2025 No. 2025-P-09/31-3-(NPA))

1. General Provisions

2. This Regulation defines the procedure for providing credit funds by the National Bank of the Kyrgyz Republic (hereinafter – the National Bank) to commercial banks (hereinafter – Bank/Banks), operating on the basis of a license from the National Bank, on an auction basis for refinancing and liquidity support.

3. The National Bank conducts credit auctions in accordance with Articles 6, 16, and 17 of the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic" to implement the monetary policy of the National Bank.

4. The purpose of conducting credit auctions is to provide Banks with credit resources for a specified period for refinancing and maintaining the Bank's short-term liquidity.

5. Credit resources are provided for a term determined by the Board of Directors of the National Bank. The terms and volumes of credit funds are determined by a resolution of the Monetary Policy Committee of the National Bank (hereinafter – MPC).

6. Participants of credit auctions are the National Bank on one side, and Banks meeting the requirements established by this Regulation and regulatory legal acts of the National Bank on the other side.

7. Terms and Concepts Used

8. General Credit Auction Agreement (hereinafter – the General Agreement) is an agreement concluded between the National Bank and a Bank, defining the general terms and procedure for providing credit resources by the National Bank to the Bank for refinancing and liquidity support following a credit auction, as well as the procedure for regulating arising legal relations. The General Agreement is concluded in the form specified in Appendix 1 to this Regulation, provided that the Bank meets the conditions set forth in paragraph 29 of this Regulation.

9. Pledge Agreement is an agreement concluded between the National Bank and a Bank within the framework of the General Agreement following a credit auction, pursuant to which the Bank's obligation to repay credit funds is secured by collateral. The Agreement defines the terms and procedure for providing collateral and is an integral part of the General Agreement.

10. Monetary Policy Committee (MPC) is a collegiate body of the National Bank, whose purpose is to develop and promptly make decisions on current liquidity management.

11. Credit auction is a method of conducting refinancing operations by the National Bank in national currency using an auction mechanism, secured by collateral.

12. Credit resources are funds in Kyrgyzstani soms provided by the National Bank to a Bank on terms of term, cost, and repayment, at a fixed interest rate, secured by collateral.

13. Credit Agreement is an agreement concluded between the National Bank and a Bank within the framework of the General Agreement following a credit auction, pursuant to which the National Bank provides a loan to the Bank. The Agreement defines the terms of provision and repayment procedure for the loan and is an integral part of the General Agreement.

14. Nominal interest rate is the rate specified in the credit agreement between the borrower and the Bank, according to which the amount of interest income payable by the borrower for the use of credit funds is calculated. The nominal interest rate must include all commissions, fees, or other additional payments, including taxes, which may directly and/or indirectly affect exceeding the stated nominal interest rate in monetary terms.

15. Loan term is the time interval expressed in calendar days, calculated from the date of loan issuance to the date of full fulfillment of loan obligations (inclusive), and specified in the credit agreement.

16. Cut-off rate is the rate at which applications are fully satisfied.

17. Operational day – according to the National Bank's operational day regulation, during the time period from 8:30 to 16:30 each working day.

18. Conditions for Providing Credit Resources for Refinancing and Liquidity Support.

19. Credit resources issued by the National Bank for refinancing purposes have a designated use and must be used by the Bank to finance in national currency projects implemented within the territory of the Kyrgyz Republic by legal and natural persons who are residents of Kyrgyzstan, in the following sectors:

• industry, with export-oriented and import-substituting sectors being prioritized;
• agriculture, harvesting, and processing, including:
• animal husbandry;
• crop farming;
• transport, communications, and services sector;
• trade and commerce;
• construction;
• tourism sector.
• financing of green projects;
• financing of women's entrepreneurship.
  Loans for consumer purposes, including improving the borrower's housing conditions, as well as other non-commercial/production-oriented purposes, are not permitted.

17. Banks must use credit resources obtained from the National Bank within credit auctions for project financing in accordance with the terms and sectors specified in paragraph 16 of this Regulation. Credit resources must be provided to the Bank's borrower with a corresponding credit agreement specifying specific loan issuance terms: amount, loan term, interest rate, repayment conditions for principal and interest, etc. The credit agreement terms must comply with all requirements of this Regulation and the General Agreement.

18. The term for providing credit resources by the National Bank for refinancing purposes is determined by the Board of Directors of the National Bank.

19. Collateral for credit resources issued by the National Bank for refinancing purposes may include assets specified in paragraph 41 of this Regulation.

20. The nominal annual interest rate on loans issued by the Bank from credit resources of the National Bank must not exceed the interest rates determined by the MPC, which are communicated to Banks.
    When issuing loans from National Bank funds, the Bank is not entitled to charge/collect commissions, fees, or other additional payments, including taxes, from its borrowers that would directly and/or indirectly affect exceeding the stated nominal interest rate in monetary terms, i.e., the amount payable by the Bank's borrower, except for penalties for borrowers' failure to fulfill loan obligations, which must be specified in agreements with borrowers. Responsibility for the correct calculation and application of the interest rate shall be borne by the Bank in accordance with the agreement on providing credit funds.

21. Providing credit resources by the National Bank for liquidity support is carried out to maintain short-term liquidity.

22. The term for providing credit resources by the National Bank for liquidity support is determined by the Board of Directors of the National Bank.

23. Collateral for credit resources issued by the National Bank for liquidity support may include assets specified in paragraph 41 of this Regulation, excluding pledges of claims under a loan portfolio.

24. The Bank is not entitled to use credit resources obtained from the National Bank for operations in the interbank market, foreign exchange market, and securities market, including the government securities market, as well as for operations with related or affiliated parties. The Bank must use the credit resources obtained from the National Bank exclusively for purposes specified in paragraphs 16, 21, and 25 of this Regulation.

25. Lending to Non-Bank Financial and Credit Organizations (NFKOs)

26. The Bank may use credit resources obtained at the credit auction for subsequent lending to non-bank financial and credit organizations, such as microfinance companies and microcredit companies, in accordance with the conditions specified in paragraph 26 of this Regulation.

27. In the event that credit resources are directed by the Bank for lending to NFKOs specified in paragraph 25 of this Regulation, the following provisions must be observed:

• Banks notify the National Bank in writing on the day of providing credit resources to NFKOs, submitting a copy of the credit agreement concluded between the Bank and the NFKO;
• The Bank's margin when providing credit resources to NFKOs must not exceed the size established by the MPC, which is communicated to Banks;
• The credit agreement between the Bank and NFKO must contain the following clauses:
• Credit resources provided by the Bank to NFKOs must have a designated use and must be used by NFKOs for financing projects implemented within the territory of the Kyrgyz Republic by legal and natural persons who are residents of Kyrgyzstan, in sectors and terms specified in paragraph 16 of this Regulation, as well as comply with the purpose specified in Article 2 of the Law of the Kyrgyz Republic "On Microfinance Organizations in the Kyrgyz Republic";
• Restrictions on using credit resources provided by the Bank to NFKOs, specified in paragraphs 17 and 24 of this Regulation, also apply to NFKOs;
• Interest rates on loans issued by NFKOs from credit resources of the National Bank must comply with the purposes and requirements specified in the Law of the Kyrgyz Republic "On Microfinance Organizations in the Kyrgyz Republic", as well as other regulatory legal acts of the Kyrgyz Republic;
• NFKOs are not entitled to use credit resources obtained from Banks for refinancing non-bank financial and credit organizations, including credit unions, microfinance companies, microcredit companies, microcredit agencies, and other NFKOs, including pawnshops;
• Within 30 (thirty) calendar days from the date of loan issuance, NFKOs are obligated to allocate the funds received from the Bank among their borrowers. In case of full or partial non-utilization of credit resources within the timeframes specified in this paragraph, NFKOs must early repay the unutilized portion of credit resources to the Bank on the next working day after the established term expires;
• During the loan term, funds received from NFKO borrowers to repay loans obtained through funds issued within credit auctions must subsequently be allocated by NFKOs among their clients, with a subsequent report on allocation submitted to the National Bank by the 5th of the following month. NFKOs must allocate funds repaid by borrowers within the month following the reporting period. In case an NFKO fails to allocate funds among its clients as specified in this paragraph, the NFKO is obligated to return to the Bank the entire amount of unallocated funds after the established allocation periods expire.

27. NFKOs that have received credit resources from Banks must submit monthly reports on the use of credit resources and the status of the loan portfolio to the National Bank in the required format.

28. Collateral for credit resources issued by the Bank to NFKOs may include assets specified in paragraph 44 of this Regulation.

29. Procedure for Preparing and Submitting Auction Applications

30. To participate in credit auctions of the National Bank and receive credit resources from the National Bank, a Bank must:

• hold a license from the National Bank to conduct banking operations in national and/or foreign currency;
• have a "depot" account at the Depository for storing and accounting for securities serving as collateral for credit resources provided by the National Bank;
• have a correspondent account in national currency at the National Bank;
• have a signed Agreement on opening and servicing foreign currency deposit accounts for collateral at the National Bank of the Kyrgyz Republic (in case collateral is non-cash foreign currency in the form of claims to funds);
• have a signed General Credit Auction Agreement with the National Bank;
• meet economic standards for bank capital adequacy and maximum risk per borrower established by the National Bank at the time of application submission, and have no systematic violations during the preceding six months;
• provide sufficient collateral meeting requirements established by this Regulation and other regulatory legal acts of the Kyrgyz Republic;
• not be in a special regime. A bank in a special regime may participate in a liquidity support credit auction pledging securities and/or non-cash foreign currency in the form of claims to funds, located at an interest-free deposit account at the National Bank, subject to a corresponding resolution of the Board of Directors of the National Bank;
• not have overdue monetary obligations to the National Bank for obtained loans and interest thereon, as well as no unutilized credit resources from previously obtained or currently being processed loans following credit auctions, including other refinancing instruments of the National Bank;
• not be suspended from the right to participate in credit auctions;
• submit to the National Bank a list of responsible bank personnel with specimen signatures, authorized to sign applications for receiving credit resources on behalf of the Bank;
• submit to the National Bank two specimen signature cards of persons authorized to manage funds in bank accounts, notarized in accordance with Kyrgyz Republic legislation requirements;
• submit to the National Bank a power of attorney from the Bank to the person responsible for receiving bank statements, payment orders, and other documents;
• not have restrictions or prohibitions on conducting certain types of banking operations: attracting deposits from individuals, opening settlement accounts for individuals and legal entities, lending;
• have a rating level of no lower than 3 under the CAMELS rating system and/or no lower than 3 under the risk-oriented supervision rating system;

30. The MPC periodically determines the parameters, terms, and method for conducting credit auctions, including volumes, maximum nominal interest rate for final borrowers of the Bank, minimum interest rate, minimum and maximum volume per application, collateral requirements, and sectoral focus of the loan.

31. The National Bank, no later than two days before the auction, publishes on its official website the parameters and terms for conducting a credit auction, including:

• method of conducting the auction;
• date of the auction;
• auction code;
• volume of credit resources;
• minimum interest rate for the auction (established by MPC resolution);
• minimum volume per application (if established by MPC);
• collateral requirements;
• other information regarding the auction (if any).

32. An application for participation in a credit auction of the National Bank is submitted by Banks to the National Bank in documentary form according to the template of Appendix 2 to the General Credit Auction Agreement. The application must be sealed in an opaque envelope. An application for auction participation must include a resolution of the authorized bank body on participating in the credit auction and providing collateral, along with an attached list of loan collateral. A Bank may submit only one application to the auction.

33. A Bank's application must be submitted to the