Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 27, 2019 No. 2019-P-12/68-2-(NPA) on Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic

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Creation date: 2020-01-15

Resolution of the Board

National Bank

of the Kyrgyz Republic

december 27, 2019

No. 2019-P-12/68-2-(NPA)

On Amendments to Certain Regulatory Legal Acts

of the National Bank of the Kyrgyz Republic

In accordance with Articles 20 and 68 of the Law of the Kyrgyz Republic

"On the National Bank of the Kyrgyz Republic, Banks and Banking Activities", the Board of the National Bank of the Kyrgyz Republic resolves:

Make amendments to the following resolutions of the Board of the National Bank of the Kyrgyz Republic (attached):

"On Approval of the Instruction on Determining Capital Adequacy Standards for Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/2;
"On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated August 25, 2005 No. 26/5;
"On Approval of the Regulation "On Minimum Requirements for Operational Risk Management in Commercial Banks of the Kyrgyz Republic" dated December 15, 2005 No. 37/5";
"On Approval of the Regulation "On Minimum Requirements for Liquidity Risk Management of Commercial Banks of the Kyrgyz Republic" dated March 29, 2019 No. 2019-P-12/17-3-(NPA)".

This resolution enters into force on April 1, 2020.
Establish a compliance deadline for all commercial banks for the Total Capital Adequacy Ratio (K2.1), including capital required to cover operational risks, starting October 1, 2020.
Legal Department:

publish this resolution on the official website of the National Bank of the Kyrgyz Republic;
after official publication, send this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

The Supervision and Licensing Methodology Department shall bring this resolution to the attention of the Non-State Commercial Organization "Union of Banks of Kyrgyzstan", commercial banks, the State Development Bank of the Kyrgyz Republic, JSC "Financial Company of Credit Unions", relevant structural subdivisions, regional departments, and the representative office of the National Bank in the Batken region.
Control over the implementation of this resolution is entrusted to the Member of the Board of the National Bank of the Kyrgyz Republic overseeing the Supervision and Licensing Methodology Department.

Chairman

T. Abdygulov

Appendix

to the Resolution of the Board

of the National Bank

of the Kyrgyz Republic

december 27, 2019

No. 2019-P-12/68-2-(NPA)

Amendments to certain regulatory legal acts

of the National Bank of the Kyrgyz Republic

Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on Determining Capital Adequacy Standards for Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/2:

in the Instruction on Determining Capital Adequacy Standards for Commercial Banks of the Kyrgyz Republic, approved by the aforementioned resolution:

paragraph 2.2 is worded as follows:

"2.2 Capital adequacy ratios based on weighting of balance sheet assets and off-balance sheet liabilities by risk degree:

a) the Total Capital Adequacy Ratio (K2.1) must be at least 12% and is determined by the formula:

K2.1 = (TCE / (RWA + P * Kor)) * 100%, where:

TCE

Net Total Capital, which is determined as the sum of Tier 1 Capital and Tier 2 Capital.

RWA

sum of balance sheet assets and off-balance sheet liabilities, weighted by risk degree, minus special reserves for covering potential losses and losses.

established indicator (number, inverse of the total capital adequacy coefficient - 8.33 (100%:12%)).

Kor

size of capital reserved to cover operational risks. Calculation of capital reserved to cover operational risks using the Basic Indicator Approach is carried out in accordance with the Procedure for Determining the Level of Capital Required to Cover Operational Risks of Banks, approved by the Resolution of the Board of the National Bank dated December 27, 2019 No. 2019-P-12/68-1-(NPA).

b) the Tier 1 Capital Adequacy Ratio (K2.2) must be at least 6% and is determined by the formula:

K2.2 = (T1C / RWA) * 100%, where:

T1C

Tier 1 Capital, which is determined in accordance with paragraph 3.6 of this Instruction.

c) the Common Equity Tier 1 Capital Adequacy Ratio (K2.3) must be at least 4.5% and is determined by the formula:

K2.3 = (CET1 / RWA) * 100%, where:

CET1 - Common Equity Tier 1 Capital.

The National Bank of the Kyrgyz Republic (hereinafter - the National Bank) has the right to increase the minimum size of capital adequacy ratios based on risk assessment and systemic significance of banks.";

paragraph 2.3 is worded as follows:

"2.3. Leverage (K2.4) must be at least 6% and is determined by the formula:

K2.4 = (T1C / (TA+LOB) * 100%, where:

total assets of the bank minus intangible assets and special reserves for covering potential losses and losses;

LOB

off-balance sheet liabilities except for liabilities for which the bank has the right of unconditional recall/cancellation at any time without prior notice.

The value of Tier 1 Capital is calculated taking into account the provisions of paragraph 3.10 of this Instruction.";

paragraph 2.4 is worded as follows:

"2.4. In order to preserve the financial stability of the bank and the stability of its activities, a requirement is established for supporting the "additional bank capital buffer" (the "capital buffer index") for dividend payments. The "capital buffer index" is determined as the ratio of Net Total Capital to the sum of balance sheet assets and off-balance sheet liabilities, weighted by risk degree, minus special reserves for covering potential losses and losses. The value of the "capital buffer index" for banks is established by the Supervisory Committee of the National Bank.";

the twenty-sixth paragraph of paragraph 3.9 is worded as follows:

"6) the investor / creditor does not have any rights to early repayment of future scheduled payments (interest income or principal of the instrument), except in cases of bankruptcy and liquidation;";

paragraph 4.1 is worded as follows:

"4.1. Assessment of capital adequacy within the framework of this Instruction is carried out with respect to credit risk, i.e., risk related to various types of assets and consisting in the inability of the client to ensure full or partial return of the asset, as well as operational risk in part of calculating the total capital adequacy ratio in accordance with sub-paragraph "a" of paragraph 2.2 of this Instruction.";

paragraph 6.1 is worded as follows:

"6.1. Information on compliance with capital adequacy standards and their calculation is submitted by banks monthly as part of the Periodic Regulatory Bank Report.".

Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated August 25, 2005 No. 26/5:

in the Regulation on the Periodic Regulatory Bank Report, approved by the aforementioned resolution:

paragraph 4.9 is worded as follows:

" 4.9. A copy of the published financial report with the conclusion of an independent audit company is submitted to the National Bank within two working days after approval by the shareholders' meeting.";

in Appendix 1:

paragraph 22 is supplemented with the following line:

I. Information on bank risk events

Monthly

Within 5 working days after the end of the reporting period

in Appendix 2:

Sections 14, 14 G and 14 D are worded as follows:

SECTION 14

INFORMATION ON COMPLIANCE WITH ECONOMIC NORMS AND REQUIREMENT FOR SUPPORT OF ADDITIONAL BANK CAPITAL BUFFER (THE "CAPITAL BUFFER INDEX")

Name of economic norms and requirement for support of additional bank capital buffer (the "capital buffer index")

Designation

Calculation of the norm

Actual value of the norm

Established value of the norm

Deviation from the established norm

Maximum risk size for one borrower or group of related borrowers

K1.1

TCE

no more than 20%

K1.2

TCE

no more than 15%

K1.3

TCE

no more than 30%

K1.4

TCE

no more than 15%

Capital Adequacy Ratio

K2.1

TCE

RWA+P*Kor

at least 12%

K2.2

T1C

RWA

at least 6%

K2.3

CET1

RWA

at least 4.5%

K2.4

T1C

TA+LOB

at least 6%

Liquidity Ratio

K3.1

at least 45%

Additional Bank Capital Buffer (the "Capital Buffer Index")

TCE

RWA

at least __% (indicate value)

Foreign Currency Liquidity Indicator

Note:

P – established indicator (number, inverse of the total capital adequacy coefficient - 8.33 (100%:12%)

Kor – size of capital reserved to cover operational risks. Calculation of capital reserved to cover operational risks using the Basic Indicator Approach is carried out in accordance with the Procedure for Determining the Level of Capital Required to Cover Operational Risks of Banks, approved by the Resolution of the Board of the National Bank dated December 27, 2019 No. 2019-P-12/68-1-(NPA)

T1C – Tier 1 Capital

CET1 – Common Equity Tier 1 Capital

Average values for the reporting period

1 week

2 week

3 week

4 week

5 week

6 week

LA - Liquid Assets

OB - Bank Liabilities

Ratio K3 = LA/OB

Average values for the reporting period

1 week

2 week

3 week

4 week

5 week

6 week

LA - Liquid Assets in Foreign Currency

OB - Bank Liabilities in Foreign Currency

Indicator (PL)=(LA/OB)*100

0.0%

Calculation of capital reserved to cover operational risks

Net income for year 1

…

Net income for year 2

…

Net income for year 3

…

15 %

Kor

Periodic Regulatory

Bank Report

as of "" ____ 20_ year

G. REPORT ON COMPLIANCE WITH THE SHORT-TERM LIQUIDITY RATIO (K3.2) AND THE SHORT-TERM LIQUIDITY INDICATOR IN FOREIGN CURRENCY (PKL)

(currency)

Date

K3.2

PKL

HLA

SLO

Actual value

HLA

SLO

Actual value

dd.mm.yyyy

Average for the week

0.0

dd.mm.yyyy

Average for the week

0.0

dd.mm.yyyy

Average for the week

0.0

dd.mm.yyyy

Average for the week

0.0

dd.mm.yyyy

Average for the week

0.0

dd.mm.yyyy

Average for the week

0.0

Executor: ______ Signature: ______

Full Name

D. DAILY REPORT ON COMPLIANCE WITH THE INSTANT LIQUIDITY RATIO (K3.3)

AND THE INSTANT LIQUIDITY INDICATOR IN FOREIGN CURRENCY (PML)

(currency)

Date

K 3.3

PML

HLA

SLO

Actual value

HLA

SLO

Actual value

01.01. 20___year

02.01. 20___year

03.01. 20___year

04.01. 20___year

05.01. 20___year

06.01. 20___year

07.01. 20___year

08.01. 20___year

09.01. 20___year

10.01. 20___year

11.01. 20___year

12.01. 20___year

13.01. 20___year

14.01. 20___year

15.01. 20___year

16.01. 20___year

17.01. 20___year

18.01. 20___year

19.01. 20___year

20.01. 20___year

21.01. 20___year

22.01. 20___year

23.01. 20___year

24.01. 20___year

25.01. 20___year

26.01. 20___year

27.01. 20___year

28.01. 20___year

29.01. 20___year

30.01. 20___year

31.01. 20___year

Executor: ______ Signature: ______

Full Name

Section 18 "Other Information" is supplemented with subsection 18 "I" of the following content:

" 18.I. Information on bank risk events

No.

Date of registration / commission / occurrence of the risk event

Date of detection of the risk event

Date of elimination of the risk event

HO / branch / name of SP / ATM No. / name of service point / TSP /

Business process where the incident occurred / type of activity

Description of the risk event

Causes of risk occurrence

Measures taken to eliminate the consequences of the risk event

Decision on the method of operational risk management (insurance, justified acceptance, minimization, refusal)

Control measures / activities

Risk Level (impact / losses)

Note

on bank activity

on reputation

on finances

Risk Level Scale

Amount

Internal fraud, i.e., abuses or illegal actions by bank employees.
External fraud, i.e., illegal actions by persons external to the bank.
Hiring practices, violations of banking, labor and other legislation, working safety conditions and employee health protection.
Violation by the bank of obligations under contracts with bank clients and third parties, abuse of information about bank clients, poor quality of operations or provision of services, non-compliance with business customs, violation of antimonopoly legislation, non-compliance with customer due diligence requirements.
Damage to the bank's tangible assets (e.g., as a result of fire, natural disasters, acts of terrorism, vandalism, etc.).
Failures in the functioning or breakdown of information and other systems, equipment, bank communications.
Improper organization of internal processes and information flows.
Other risk events.

Executor: ______ Signature: ______

Full Name.".

Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Minimum Requirements for Operational Risk Management in Commercial Banks of the Kyrgyz Republic" dated December 15, 2005 No. 37/5":

in the Regulation

"On Minimum Requirements for Operational Risk Management in Commercial Banks of the Kyrgyz Republic", approved by the aforementioned resolution:

the second paragraph of paragraph 1.2 is worded as follows:

"Commercial banks carrying out operations in accordance with Islamic principles of banking and financing are guided by this Regulation in order to comply with operational risk management standards established by the Regulation "On Minimum Requirements for Risk Management in Banks Carrying Out Operations in Accordance with Islamic Principles of Banking and Financing", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic (hereinafter - the National Bank) dated July 18, 2018 No. 2018-P-12/30-3-(BS).";

paragraph 3.3 is worded as follows:

"3.3. To ensure effective identification of operational risk, the bank must maintain a register of all events related to the occurrence of operational risk. Information on the bank's risk events is submitted by the bank to the National Bank monthly as part of the Periodic Regulatory Bank Report.";

Appendix 1 to the Regulation is recognized as having lost force.

Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Minimum Requirements for Liquidity Risk Management of Commercial Banks of the Kyrgyz Republic" dated March 29, 2019 No. 2019-P-12/17-3-(NPA)":

in the Regulation "On Minimum Requirements for Liquidity Risk Management of Commercial Banks of the Kyrgyz Republic", approved by the aforementioned resolution:

Chapter 3 is supplemented with paragraph 5-1 of the following content:

"§ 5-1. Procedure for calculating the liquidity indicator

in foreign currency

50-1. In order to manage liquidity risk, the bank calculates the liquidity indicator in foreign currency (PL).

The liquidity indicator in foreign currency (PL) is calculated in accordance with paragraph 14 of the Regulation "On Economic Norms and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic", approved by the Resolution of the Board of the National Bank dated December 27, 2019 No. 2019-P-12/68-3-(NPA) (hereinafter - the Regulation "On Economic Norms and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic") for each foreign currency separately, the position of which is significant.

The liquidity indicator in foreign currency is determined by the formula:

PL = (LA / OB) * 100%, where:

LA - liquid assets in foreign currency;

OB - bank liabilities in foreign currency.

50-2. The bank calculates the short-term liquidity indicator in foreign currency (PKL) in accordance with paragraph 21 of the Regulation "On Economic Norms and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic" for each foreign currency separately, the position of which is significant.

The short-term liquidity indicator in foreign currency (PKL) is determined by the formula:

PKL = (HLA / SLO) * 100, where:

HLA - highly liquid assets in foreign currency;

SLO - short-term liabilities in foreign currency.

Note: A currency position is considered "significant" for a bank if liabilities denominated in this currency account for at least 5% of total liabilities.

50-3. The bank calculates the instant liquidity indicator in foreign currency (PML) in accordance with paragraph 25 of the Regulation "On Economic Norms and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic" for each foreign currency separately, the position of which is significant.

The instant liquidity indicator in foreign currency (PML) is determined by the formula:

PML = (HLA / SLO) * 100, where:

HLA - highly liquid assets in foreign currency;

SLO - short-term liabilities in foreign currency.

Note: A currency position is considered "significant" for a bank if liabilities denominated in this currency account for at least 5% of total liabilities.

The list of banks required to calculate the instant liquidity indicator in foreign currency is established by the Supervisory Committee of the National Bank. In this regard, the norms of the Regulation "On Criteria for Systemicity of Commercial Banks and Non-Bank Financial and Credit Organizations", approved by the Resolution of the Board of the National Bank dated June 8, 2017 No. 2017-P-12/23-9-(NPA), are taken into account.

50-4. Information on the calculation of the liquidity indicator is submitted by banks monthly as part of the Periodic Regulatory Bank Report.".

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