Resolution of the Board of the National Bank of Kyrgyz Republic No. 30/5 on Amendments and Additions to Certain Regulatory Documents

EXPIRED in accordance with Article 36 Law of the Kyrgyz Republic of July 20, 2009 No. 241 "On Normative Legal Acts of the Kyrgyz Republic"

Registered in the Ministry of Justice of the Kyrgyz Republic

December 2, 1998 registration number 40
Bishkek

November 17, 1998 No. 30/5

RESOLUTION OF THE BOARD OF THE NATIONAL BANK OF THE KYRGYZ REPUBLIC

On Amendments and Additions to
Certain Regulatory Documents of the NBKR

(In the edition of Resolutions of the Board of the National Bank of the KR of July 21, 2004 No. 18/2, September 15, 2004 No. 24/4, May 19, 2005 No. 16/2)

Having considered the attached amendments and additions to certain regulatory documents of the NBKR, the Board of the National Bank of the Kyrgyz Republic resolves:

1. Approve the attached amendments and additions to the Instruction "On Credit Restrictions", the Rules for Regulating Banks in the Kyrgyz Republic, the Regulation on Preventive Measures and Sanctions Applied by the National Bank of the Kyrgyz Republic, the Regulation "On the Commission on Sanctions", the Requirements for External Audit of Banks and Financial-Credit Institutions Licensed by the National Bank of the Kyrgyz Republic, and the Instruction on Determining the Capital Adequacy Standard for Commercial Banks of the Kyrgyz Republic, approved by resolutions of the Board of the NBKR Nos. 21/6, 14/1, 26/3, 26/15 and 19/3 dated September 1, 1995, July 8, 1997, December 24, 1997 and August 12, 1998, respectively.

2. Recognize as having lost force the amendments and additions to the Regulation on Preventive Measures and Sanctions Applied by the National Bank of the Kyrgyz Republic, approved by the resolution of the Board of the NBKR of September 16, 1998 No. 24/1.

3. This resolution shall enter into force on November 20, 1998, except for the amendments and additions to the Regulation on Preventive Measures and Sanctions Applied by the National Bank of the Kyrgyz Republic, which shall enter into force from the moment of state registration.

4. The Legal Department jointly with the Banking Supervision Department shall carry out state registration of the amendments to the Regulation on Preventive Measures and Sanctions Applied by the National Bank of the Kyrgyz Republic in the Ministry of Justice of the Kyrgyz Republic.

5. The Banking Supervision Department shall bring this resolution to the attention of the regional Offices of the NBKR and bring an excerpt from this resolution, including amendments and additions concerning their activities, to the attention of commercial banks and RSCs.

6. Control over the implementation of this resolution is entrusted to M. Tarchiyeva - Deputy Chairman of the NBKR.

Chairman of the Board of the National
Bank of the Kyrgyz Republic M. Sultanov

Approved by the resolution of the Board of the National Bank of the Kyrgyz Republic of November 17, 1998 No. 30/5 @1

AMENDMENTS AND ADDITIONS to certain regulatory documents of the National Bank of the Kyrgyz Republic

(In the edition of Resolutions of the Board of the National Bank of the KR of July 21, 2004 No. 18/2, September 15, 2004 No. 24/4, May 19, 2005 No. 16/2)

I. (Lost force in accordance with resolution of the Board of the National Bank of the KR of September 15, 2004 No. 24/4)

II. Rules for Regulating Banks in the Kyrgyz Republic, approved
by the resolution of the Board of the National Bank of July 8, 1997 No. 14/1.

1. Paragraph 4.3. be worded as follows:

"4.3. All credits (and other substitutes equal to them) issued to various borrowers, when calculating the maximum risk ratio, must be summed up and considered as a single aggregate debt, if the non-repayment of a loan received by one borrower inevitably entails problems with the repayment of a loan received by another borrower. In this case, when considering various loans for the purpose of summing them up as a single risk, it is necessary to study the degree of interconnection of borrowers, the state of the industries into which borrowed funds will be invested, the experience and quality of work of borrowers in these industries, forecast conditions for loan repayment, etc. It is also necessary to carefully analyze and evaluate how the non-repayment of a loan by one borrower may affect the repayment of a loan by another borrower.

Criteria under which various loans can be summed up and considered as a single risk are as follows:
a) cross-guarantees; b) significant financial interdependence. Significant financial interdependence, including through agreements on mutual cooperation, exists, as a rule, if 50 or more percent of the annual gross income (expense) or other receipts and payments of one borrower resulted from transactions with another borrower; c) the same source is used for loan repayment. When assessing the potential risk of non-repayment inherent in a particular loan, it is necessary, first of all, to rely on qualitative indicators. Quantitative indicators can only be used in cases where persons reviewing loans have any doubts after evaluating all qualitative indicators. In this case, to resolve these doubts, quantitative indicators can be used."

2. Paragraph 4.5. be worded as follows:

"4.5. In the event that according to the requirements of para. 4.3, the debt of several borrowers who fall under the requirements of different columns of the table in para. 4.2 is summed up, the total aggregate debt of borrowers considered as a single risk must not exceed the maximum risk ratio determined for borrowers falling under the requirements of the column with the lowest serial number. At the same time, the total aggregate debt of borrowers falling within the limits of one column must not exceed the maximum risk ratio determined for this column."

III. (Lost force in accordance with the resolution of the Board of the Na-
tional Bank of the KR of May 19, 2005 No. 16/2)

IV. Regulation "On the Commission on Sanctions", approved by the reso-
lution of the Board of the National Bank of December 24, 1997 No. 26/3.

1. Paragraph 2.1. of Section 2 be worded as follows:

"2.1. The powers of the Commission include consideration of committed violations and making decisions on the application of the following types of preventive measures and sanctions:

• appointment of a qualified consultant;
• introduction of higher economic ratios;
• decision on the introduction of direct banking supervision;
• imposition of a monetary fine on the bank;
• imposition of a monetary fine on individual members of the Council and executive officials of the bank;
• suspension or restriction of certain types of banking operations;
• presentation of a requirement to replace executive officials of the bank;
• presentation of a requirement to conduct an unscheduled audit at the expense of the audited party."

V. Requirements for External Audit of Banks and Financial-Credit Insti-
tutions Licensed by the National Bank of the Kyrgyz Republic, ap- proved by the resolution of the Board of the National Bank of December 24 1997 No. 26/15.

1. Regarding paragraph 4:

1.1. In the sentence "The audit program of a bank or financial-
credit institution must include the following issues:" replace the word "program" with the word "scope".

1.2. Exclude from paragraph 4 the following sub-items:

• compliance with mandatory economic ratios established by the National Bank of the Kyrgyz Republic;...
• fulfillment of mandatory reserve requirements;...
• fulfillment of prescriptions, requirements and directive instructions of the National Bank of the Kyrgyz Republic.

1.3. Sub-item 8 of paragraph 4, starting with the words "correspondence of establishment and maintenance of correspondent relations..." add the words "(verification is carried out by obtaining confirmation of balances on accounts from correspondent banks by the auditing company upon its requests, regardless of the presence of such confirmation in the bank)".

1.4. Sub-item 19 of paragraph 4, starting with the words "other issues..." be worded as follows:

• "other issues, at the discretion of the bank, financial-credit institution or auditing firm".

2. In paragraph 5, between the words "in the form of Conclusion", insert the word "single".

3. Regarding paragraph 6:

3.1. Sub-item starting with the words "about the auditing firm..." be worded as follows:

• "about the auditing firm (full official name of the firm, legal address and telephone; license number, date of issue and validity period; registration certificate number and date of issue)".

3.2. In the sub-item starting with the words "about the audited client..." before the words "name of the bank" add the words "full official".

3.3. Exclude the sub-item starting with the words: "duration of the audit...".

3.4. Replace the sub-item starting with the words "type of audit conducted..." with the following:

• "information on the scale and progress of the audit;"

4. Supplement the Requirements with paragraph 8 of the following content:

"8. The National Bank of the Kyrgyz Republic may require a detailed report (or management letter) on the conducted audit."

5. Change the numbering of paragraph 8 to 9.

VI. (Lost force in accordance with the resolution of the Board of the Na-
tional Bank of the KR of July 21, 2004 No. 18/2)