Resolution of the Board of the National Bank of the Kyrgyz Republic No. 2019-P-12/22-4-(NPA) of April 24, 2019 on Amendments to Regulatory Acts on Lending and Enforcement Measures

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of April 24, 2019 No. 2019-P-12/22-4-(NPA)

On Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic Regarding Lending and Enforcement Measures

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 Activity," the Board of the National Bank of the Kyrgyz Republic

RESOLVES:

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

• "On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated June 30, 2010 No. 52/4";

• "On Approval of the Regulation "On Asset Classification and Corresponding Provisions for Potential Losses and Write-offs" dated July 21, 2004 No. 18/3";

• "On the Regulation "On Enforcement Measures Applied to Banks and Certain Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-4-(NPA)";

• "On Approval of the Regulation "On Bank Liquidation" dated June 8, 2017 No. 2017-P-12/23-5-(NPA)";

• "On Approval of the Regulation "On Licensing of Bank Activities" dated June 8, 2017 No. 2017-P-12/23-1-(NPA)";

• "On Approval of the Regulation "On Certain Transactions/Operations of Commercial Banks and Microfinance Companies of the Kyrgyz Republic with Real Estate" dated August 29, 2012 No. 36/2";

• "On Approval of the Regulation on Minimum Requirements for External Audit of Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-2-(NPA)";

• "On Approval of the Regulation on Economic Indicators and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/1";

• "On Approval of the Instruction "On Lending Restrictions" dated September 15, 2004 No. 24/4".

2. This Resolution enters into force after the expiration of fifteen days from the day of official publication.

3. The 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.

4. The Department of Supervision and Licensing Methodology shall bring this Resolution to the attention of the Limited Liability Partnership "Union of Banks of Kyrgyzstan," commercial banks, the State Development Bank of the Kyrgyz Republic, the Limited Liability Partnership "Association of Microfinance Organizations," microfinance companies, and JSC "Financial Company of Credit Unions," as well as all structural divisions, regional departments, and the branch of the National Bank in the Batken Region.

5. Control over the implementation of this Resolution is entrusted to the Board Member overseeing the Department of Supervision and Licensing Methodology of Banks.

Chairman of the Board of the National Bank of the Kyrgyz Republic		T. Abdygulov

		Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 24, 2019 No. 2019-P-12/22-4-(NPA)

AMENDMENTS AND ADDITIONS to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic Regarding Lending and Enforcement Measures

1. Make the following amendments and additions 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 June 30, 2010 No. 52/4:

in the Regulation "On Minimum Requirements for Credit Risk Management in Commercial Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic," approved by the aforementioned Resolution:

• paragraph 3-2 is to be worded as follows:

"3-2. Blank loans are loans secured by neither real estate, movable property, guarantees, sureties, nor other instruments considered as collateral in asset classification, except for overdrafts on payment cards within salary projects, and are issued exclusively to creditworthy borrowers based on their reputation and assessment of their income level.";

• paragraph 9 is to be supplemented with the following paragraphs:

"If the interest rate on issued loans exceeds the maximum allowable rate calculated in accordance with the Law of the Kyrgyz Republic "On Restriction of Usurious Activity in the Kyrgyz Republic," the bank must ensure compliance with the requirements of said Law,, including:

• in case of the borrower's failure to fulfill obligations to the creditor, the seizure of the borrower's collateral property must be carried out exclusively through judicial proceedings;

• when determining the monetary and/or material obligations of the borrower to the creditor, the amount of penalty (fines, penalties) accrued for the entire period of the loan or credit agreement must not exceed 20 percent of the loan amount issued.";

• in paragraph 12:

the fourth paragraph is to be worded as follows:

"All issues regarding the issuance of loans must be resolved solely by the Credit Committee or persons to whom the committee delegates this right in accordance with internal documents regulating credit policy, except for issues within the competence of the Bank's Board of Directors.";

the ninth paragraph is to be worded as follows:

"The bank's credit policy must also contain methodologies for assessing borrower solvency. For this purpose, the bank may develop an internal credit rating system. The internal risk rating system must correspond to the nature, size, and complexity of the bank's activities.

The internal credit rating system must contain a comprehensive assessment of the borrower's financial condition, as the main indicator of their future solvency, and must reflect the disclosure of data on borrowers specified in sections 4.1 and 4.2 of this Regulation.

Credit rating is the main indicator of loan quality. A credit rating must be assigned at the initial stage of loan approval, and may also be assigned during subsequent loan monitoring, extension, modification of credit agreement terms, or loan restructuring. Developed credit ratings determining borrower solvency are established in the form of alphabetical, numerical, or alphanumeric symbols indicating risks in bank lending. The bank assigns a credit rating taking into account specific characteristics related to the borrower and the loan itself.

Approaches to analyzing borrower solvency when determining credit ratings may be based on various methods:

• quantitative - using relevant indicators that allow determining the credit rating (coefficient method, rating models, scoring models);

• predictive, which relies on past year statistics and aims to model the life cycle of the borrower's loan and the probability of their insolvency;

• qualitative, using a system of diverse qualitative indicators.

In order to conduct an effective assessment of borrower solvency when issuing a loan, the bank may develop its own model, which must consist of approaches best meeting the requirements for assessing borrowers and loans provided by the bank. The basis may include:

• coefficient method, allowing comprehensive assessment of borrowers' financial condition and loan quality;

• rating model - automated assessment using the coefficient method by calculating an integral indicator, which is the most convenient and simple to use;

• scoring model - assessment of creditworthiness in point equivalents by assigning the borrower to a specific group;

• model based on assessment of future cash flows with borrower obligations;

• model using past year statistics, etc.

The internal credit rating system may be used to make decisions on loan issuance; determining loan cost; assisting the bank in monitoring credit risk; creating provisions for potential losses and write-offs; managing received and necessary information; distributing loans according to the credit rating scale, as well as determining the previous position and possible future movement of loans along the credit rating scale; assessing overall risks and trends in the loan portfolio; making changes to the bank's credit strategy.

The use of the internal credit rating system may allow forming a database with historical data, which will evaluate certain types of loans by credit rating indicators over time, allowing banks to assess their credit risk more accurately.

The internal credit rating system in the bank must contain the distribution of powers regarding:

• assigning the initial rating to the borrower (upon receipt of a loan application);

• analyzing the assigned rating (when analyzing all documents regarding client activity, their solvency, and collateral);

• final approval of loan issuance.

Decisions on loan issuance, according to the credit rating, are made for loans to individuals and individual entrepreneurs in amounts up to 100,000 soms.

Subsequently, for loans issued to individuals and individual entrepreneurs in amounts up to 100,000 soms, periodic payment monitoring must be conducted, with monitoring frequency according to this Regulation, as well as analysis of assigned credit ratings for the purpose of monitoring the fulfillment of credit obligations and developing recommendations for rating changes if necessary.

In addition, the bank is obliged to constantly maintain a database and keep a loan register for loans where non-standard decisions were made upon issuance (individual interest rates, collateral structure, etc.).";

• in paragraph 25:

the sixth paragraph is to be worded as follows:

"- document from state authorities on registration (if the borrower is a legal entity or a physical person conducting business activity based on a certificate or patent) except for physical persons - agricultural producers, who are issued a loan in an amount not exceeding 250,000 soms with the provision of documents confirming land use rights or documents confirming the presence of livestock, as well as persons who are issued loans under government programs aimed at developing agriculture.

In case of providing an electronic patent, a legal or physical person conducting business activity, in order to confirm the fact of receiving an electronic patent, may print a copy of the electronic patent and submit it to the bank. In this case, the responsible bank employee must verify the authenticity of the paper copy of the electronic patent by scanning the QR code printed on the electronic patent, using a mobile or other device with the corresponding software.

Note: QR code - a matrix code (two-dimensional barcode) containing information about the patent, created specifically for recognition by mobile devices.";

the ninth paragraph is to be worded as follows:

"- guarantees (sureties) indicating the guarantor (surety), the amount of the guarantee (surety), etc. (if the bank requires the provision of a guarantee (surety), as well as the financial report of the guarantor (if the guarantor is a legal entity));";

• paragraph 30 is to be worded as follows:

"30. In general, the analysis of a loan application must be based on the bank's policy approved by the Board of Directors and focus on the following key factors:

1. right to borrow funds. The bank must ensure that the borrower has the right to obtain a loan and sign a credit agreement;

2. character of the borrower. The bank must establish that the borrower treats borrowed funds responsibly, provides complete answers to the bank's questions, and will make every effort to repay the debt. In the analysis, it should also be considered whether the borrower has used loans in this bank or other financial and credit organizations in the past, how repayment was carried out, their discipline, and willingness to fulfill their obligations. It is also important to consider their reputation in a professional and general human sense, as well as the term and experience of the borrower's work in this industry, their successes and achievements. It makes sense to request information about loans provided to them in other credit institutions. In addition, it is necessary to request information (credit report) about the borrower and, at the Bank's discretion, about persons associated with the borrower (if they have their consent in accordance with legislation) in one or more credit bureaus.

The bank must maintain confidentiality and security of the credit report received from the credit bureau, not disclose the credit information contained therein to third parties, and use the credit report only for purposes established by legislation on the exchange of credit information.

The bank is responsible for distortion of information contained in the credit report received from the credit bureau;

3. funds. The main question that the bank employee analyzing a loan application must answer is: will the borrower be able to obtain sufficient funds in the form of income and cash flow, including in the currency in which they intend to obtain the loan, in order to repay the loan. In the assessment, the bank must find out if there has been stable growth in profit or sales volume in the past, and whether there is a probability that such growth will continue during the term of the credit agreement.

In addition, the bank must determine the sufficiency of the borrower's income (revenue) (including in foreign currency) taking into account exchange rate growth to ensure timely repayment of the loan by the borrower.

In case where the client's income (revenue) in the next 12 months will be predominantly in national currency, the bank must assess the feasibility of issuing a loan in foreign currency to such a client, taking into account the credit risk due to currency risk resulting from a negative change in the exchange rate for the borrower, taking into account the requirements of regulatory legal acts of the National Bank, including regarding PPU;

4. collateral. When assessing collateral, the bank employee must find out whether the borrower has sufficient quality collateral necessary to reduce the risk of non-repayment of the loan.

Various forms, types, and methods of collateral may be used when issuing loans.

Collateral for borrowers' obligations is classified by various criteria:

• property form of loan collateral, understood as a secondary source of loan repayment through proceeds from the sale of property provided by the borrower upon receiving the loan.

The following types of loan collateral may relate to the property form:

• pledge of real estate;

• pledge of movable property (this property, as a rule, remains in the borrower's use - vehicles, goods in circulation, household appliances, etc.);

• pledge (property transferred to the bank for storage - precious metals, securities, deposit pledge, etc.);

• non-property form of loan collateral. Non-property form of loan collateral is a source of debt repayment through legal documentation of the guarantee of fund return.

The following types of loan collateral may relate to the non-property form of loan collateral:

• guarantee;

• surety.

By the degree of obligation coverage, loan collateral is divided into:

• primary collateral;

• additional collateral.

Depending on the completeness of the covered obligation, loan collateral is divided into:

• fully covering the credit obligation;

• partially covering the credit obligation.

A separate form of minimizing bank credit risks may be insurance of credit risk.

Main bank activities for accepting property collateral for a loan:

• the bank must ensure the presence of collateral provided by the borrower. Documents confirming ownership of the property, as well as its physical presence, should be checked. The property (right) offered as collateral must be real. In this case, subsequent pledge of collateral is allowed provided compliance with the legislation of the Kyrgyz Republic;

• the bank must determine the level of liquidity of the collateral, i.e., the possibility of quick sale (realization);

• the bank may independently or with the involvement of independent certified appraisers in accordance with legislative requirements, conduct an assessment of the collateral value. The excess of the market value of loan collateral over the principal debt amount and loan interest, taking into account the possible costs of realizing the collateral subject, is a tool for managing the risk of non-repayment of loans;

• the bank should conduct market analysis to determine the stability of prices for the property offered by the borrower. In this case, the bank should take into account the risks of a decrease in the value of this collateral;

• the bank must accept as collateral property with a service/life term of at least the term of the borrower's use of credit funds. In this case, the possibility of the need for storing the collateral, which may cause additional expenses, should be taken into account.

In case where collateral for contract financing in an amount exceeding 100,000 soms is a guarantee and/or claim right under the contract, the bank must analyze the solvency of the guarantor/counterparty of the borrower for at least the last year, assess risks associated with the performance of obligations by the parties to this loan and the realization of the secondary source of repayment in case of non-repayment of the loan by the borrower;

5. guarantee/surety.

When securing a loan with a guarantee/surety, in order to determine the feasibility of providing such a loan, the bank conducts an analysis of the guarantor/surety's solvency to the same extent as the borrower themselves. The bank must require the guarantor/surety to provide documents requested for analyzing the solvency of the borrower themselves in accordance with the requirements of this Regulation, study their professional reputation, responsibility, and willingness to fulfill their obligations. In this case, failure to comply with this condition entails recognition of such loans, to the extent secured by guarantee/surety, as blank loans.

When considering a loan application by a group of joint liability participants (hereinafter - GSO), the credit specialist should pay attention to ensure that members of one family, living together and/or conducting joint business, are not participants of the same GSO;

6. surety of members of the joint liability group. GSO is understood as a voluntary association of participants - physical persons (at least 3 people) engaged in business activity aimed at making a profit. In this case, GSO members jointly guarantee the fulfillment of obligations of each group member and are responsible for the full repayment of received credit funds jointly, under any circumstances, in accordance with the legislation of the Kyrgyz Republic.

It is necessary to ensure that the number of GSO participants who are not members of one family but have joint business does not exceed 20 percent of the total number of participants of this GSO. And the share of GSO participants who are not members of one family but have joint business does not exceed 20 percent of the total amount of credit issued to the GSO.

For the purposes of this Regulation, joint business is understood as economic activity involving several entrepreneurs (partners, co-owners, etc.). In this case, their activity is aimed at making a profit from joint production and/or sale of goods, provision of services, in which for this purpose property, intangible assets, and labor of these entrepreneurs are used. Participants of joint business share profit from business operations proportionally and bear the risk of loss of all or part of the property.";

• paragraph 32 is to be worded as follows:

"32. After conducting an analysis of a loan application, the bank must prepare a conclusion indicating the feasibility of providing the borrower with a loan, submitted for consideration by the Credit Committee/authorized official together with the client's loan application and other necessary documents provided by the client at the bank's request, in accordance with the requirements of this Regulation and the bank's internal documents.

In case of refusal to issue a loan, the conclusion must specify the reasons, and the bank must notify the borrower of the decision in accordance with the order established by the bank.

The result issued by the bank's internal credit rating, containing the rating value regarding the feasibility/infeasibility of providing the borrower with a loan, may be considered as a corresponding conclusion.";

• the seventh paragraph of paragraph 41 is to be worded as follows:

"- the client's right to prepay the loan in full or in parts at any time without charging penalty sanctions (fees and other charges) provided that the bank is notified in writing 30 (thirty) days before the day of such repayment. In this case, the specified condition establishes the term, after the expiration of which (after sending the notification) the borrower may make prepayment of the loan. The notification may specify another term for prepayment, provided that the notification is sent to the bank no less than 30 (thirty) days before the day of prepayment. Prepayment by one participant of the GSO is possible with the written consent of the GSO participants;";

• paragraph 55 is to be supplemented with the seventh paragraph as follows:

"In case of termination of the pledge, the pledgee is obliged to prepare a notice of termination of the pledge, and in case where the subject of the pledge was subject to registration, register this notice in the authority/authorities that carried out the state registration of the pledge.";

• in paragraph 61:

the second sentence is to be worded as follows:

"The maximum size of risk for blank loans must not exceed 50% of the size of the bank's net aggregate capital (6)."

the paragraph is to be supplemented with the second paragraph as follows:

---

Note: The maximum risk limit for unsecured loans must also include all loans not secured by collateral issued before the date of entry into force of the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 24, 2019 No. 2019-P-12/22-4-(NPA) and not meeting the requirements specified in this Resolution of the Board of the National Bank.

• in paragraph 61-2:

rephrase the first paragraph as follows:

"61-2. The Bank has the right to calculate the maximum risk ratio for unsecured loans in the part of group loans in accordance with paragraph 61-3 of this Regulation, provided that all of the following conditions are met:"

add a paragraph to the paragraph as follows:

"The requirements of this paragraph apply to loans meeting the criteria of unsecured loans issued before the date of entry into force of the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 24, 2019 No. 2019-P-12/22-4-(NPA)."

• in paragraph 61-3:

rephrase the first paragraph as follows:

"61-3. When calculating the maximum risk ratio for unsecured loans, group loans provided under joint liability of members of GSO, which meet all of the following criteria, are excluded:"

add a paragraph to the paragraph as follows:

"The requirements of this paragraph apply to loans meeting the criteria of unsecured loans issued before the date of entry into force of the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 24, 2019 No. 2019-P-12/22-4-(NPA)."

• in paragraph 61-4:

rephrase the first paragraph as follows:

"61-4. When calculating the maximum risk ratio for unsecured loans, loans in the form of contract financing, which meet all of the following criteria, are excluded:"

add a paragraph to the paragraph as follows:

"The requirements of this paragraph apply to loans meeting the criteria of unsecured loans issued before the date of entry into force of the Resolution of the Board of the National Bank of the Kyrgyz Republic dated April 24, 2019 No. 2019-P-12/22-4-(NPA)."

• in paragraph 63-1:

rephrase the third paragraph as follows:

"- not less than once a year for other loans, except for loans up to 100,000 som. For loans up to 100,000 som, payment monitoring is carried out, which implies analysis based on payments made on the loan."

add a fourth paragraph to the paragraph as follows:

"The bank must also establish a corresponding level of control over the use and condition of the loan collateral, in particular, the bank must determine whether the quality of the provided collateral has deteriorated, whether circumstances have led to a decrease in its value, deterioration of the financial condition of the guarantor/surety, and whether the bank will be able to realize the collateral in case of non-performance by the borrower of the loan obligation and collection of debt from the guarantor/surety."

• in Appendix 1 to the Regulation "On Minimum Requirements for Credit Risk Management in Commercial Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic":

rephrase paragraph 1-1 as follows:

"1-1. In addition to the above documents, individuals engaged in individual entrepreneurial activity without forming a legal entity must submit to the bank a copy of a document of a prescribed form issued by an authorized body confirming the fact of state registration (re-registration) as an individual entrepreneur, or a copy of a document confirming the fact of carrying out entrepreneurial activity without state registration in cases provided for by the legislation of the Kyrgyz Republic, with the exception of individuals - agricultural producers who are issued a loan in an amount of no more than 250,000 som with the provision of documents confirming the right to land use or documents on the presence of livestock, as well as individuals who are issued loans under government programs aimed at the development of agriculture."

rephrase paragraph 8 as follows:

"8. Document from state bodies on registration (if the borrower is a legal entity or an individual carrying out entrepreneurial activity based on a certificate or patent), with the exception of individuals - agricultural producers who are issued a loan in an amount of no more than 250,000 som with the provision of documents confirming the right to land use or documents on the presence of livestock, as well as persons who are issued loans under government programs aimed at the development of agriculture.

In the case of providing an electronic patent, a legal or physical entity carrying out entrepreneurial activity, in order to confirm the fact of receiving an electronic patent, may print a copy of the electronic patent and submit it to the bank. At the same time, the responsible bank employee must check the authenticity of the paper copy of the electronic patent by scanning the QR code applied to the electronic patent using a mobile or other device having the corresponding software;"

2. Make the following changes and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On the Classification of Assets and Corresponding Provisions for Potential Losses and Losses" dated July 21, 2004 No. 18/3:

in the Regulation "On the Classification of Assets and Corresponding Provisions for Potential Losses and Losses" approved by the above-mentioned Resolution:

• rephrase the sixth paragraph of paragraph 4.2.2. as follows:

"- there is property security, against which recovery may be made and/or a guarantee/surety meeting the requirements of paragraph 30 of the Regulation "On Minimum Requirements for Credit Risk Management in Commercial Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic", from which the debt may be repaid;"

• rephrase the second paragraph of paragraph 4.3.2. as follows:

"- incomplete security of the asset, otherwise having all the characteristics inherent in satisfactory assets, or security within the framework of contract financing (for example, the right to claim under the financed contract, accounts receivable, etc.);"

• rephrase the tenth paragraph of paragraph 4.3.5. as follows:

"Also, an exception from this sub-item are preferential loans issued under the Development Fund, as well as loans issued under the guarantee of the Development Fund, according to sub-item 4.1.1. of this Regulation."

• add a second paragraph to paragraph 5.1.4. as follows:

"An asset fully secured by a guarantee/surety must be classified as "substandard" upon the occurrence of the 60th day of overdue payments, that is, before the occurrence of the date specified in this paragraph of this Regulation."

3. Make the following changes and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On the Regulation "On Enforcement Measures Applied to Banks and Some Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-4-(NPA)":

in the Regulation "On Enforcement Measures Applied to Banks and Some Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" approved by the above-mentioned Resolution:

• rephrase the first paragraph of paragraph 21 as follows:

"The prescription is applied by authorized heads of structural subdivisions of the National Bank, the Deputy Chairman/Member of the Board of the National Bank overseeing the supervisory block, the Committee on Supervision of the National Bank."

• rephrase the second paragraph of paragraph 32 as follows:

"- on the conduct of measures for financial rehabilitation, restructuring and/or reorganization of the bank;"

• in paragraph 33:

rephrase the first paragraph as follows:

"The National Bank has the right to present a requirement to the bank to conduct measures for the financial rehabilitation of the bank."

rephrase the second sentence of the third paragraph as follows:

"The plan is drawn up for one calendar year and must be submitted to the National Bank by February 1 of the calendar year for which it is submitted."

• rephrase the second paragraph of paragraph 34 as follows:

"In the event of a requirement being presented to the bank to conduct measures for financial rehabilitation, the bank's financial rehabilitation plan, including the updated plan (in case of changes and additions to the financial rehabilitation plan at the request of the National Bank), as well as the bank's measures for its implementation, are subject to approval by the Committee on Supervision of the National Bank."

• add paragraph 3-1-1 to the Regulation as follows:

"§ 3-1-1. Requirement for the reorganization of the bank

36-1. The National Bank has the right to present a requirement to conduct forced reorganization of the bank, including for the purpose of financial rehabilitation of the bank.

36-2. In the event of receiving a requirement from the National Bank for reorganization, the head of the executive body of the bank must, within 3 (three) working days from the date of its receipt, apply to the Board of Directors of the bank to convene an extraordinary meeting of shareholders for the purpose of making a decision on the reorganization of the bank.

36-3. In turn, the bank must, no later than 20 (twenty) working days from the date of receipt of the requirement of the National Bank, make a decision on reorganization and notify the National Bank of this.

36-4. The National Bank has the right to make a decision regarding banks on presenting a requirement for forced reorganization in cases:

• violation by the bank of antimonopoly legislation. In this case, a decision may be made on reorganization in the form of division or separation;

• non-fulfillment of the requirement of the National Bank to increase the charter capital by additional capitalization;

• non-compliance with the minimum size of the charter capital and/or the economic norm for the minimum size of own capital;

• systematic (two or more times within 12 months) violation of the requirements of banking legislation, including violation of economic norms established by banking legislation.

36-5. Forced reorganization of the bank is carried out in the manner established by civil legislation, taking into account the features provided for by banking legislation. Non-fulfillment of the requirement for forced reorganization of the bank is a ground for applying other enforcement measures.

36-6. During the period of conducting the reorganization process, the National Bank may establish separate bans/restrictions on the activities of the bank (or banks).

36-7. The term for conducting the reorganization of the bank must not exceed 6 (six) months. The specified term may be extended by another 6 (six) months;"

• rephrase the second paragraph of paragraph 40 as follows:

"- if facts of providing unreliable (false) information are revealed, on the basis of which permission from the National Bank was obtained to participate in the capital of the bank, or the person ceased to meet the requirements imposed on founders (shareholders) provided for by legislation. At the same time, the National Bank withdraws the permission to acquire shares previously issued to the applicant.

In the event of presenting a requirement to sell shares of a founder (shareholder) of the bank due to the fact that he ceased to meet the requirements imposed on founders (shareholders) according to legislation, simultaneously with the withdrawal of the previously issued permission to acquire shares, the founder (shareholder) may be issued a permission by the National Bank to own 10 (ten) or more percent of the voting shares of the bank (the first threshold value)."

• add a paragraph to paragraph 56 as follows:

"Restrictions or bans on conducting banking/banking operation(s) fully require replacement of the list (indication in the list) of permitted banking operations to the license and are adopted by the Board of the National Bank. A decision on a restriction or ban on conducting banking operations requiring replacement of the list or indication in the list of permitted banking operations to the license is also adopted within the framework of licensing issues for the protection of depositors' interests and ensuring the stability of the banking system (creation of new banks, reorganization of banks, creation of a "transition bank")."

• rephrase the second paragraph of paragraph 62 as follows:

"- dismissal of an official from their position in the bank in case of bringing the official as a suspect/accused in a criminal case;"

• in Appendix 1 to the Regulation on enforcement measures applied to banks and some other financial and credit organizations licensed by the National Bank of the Kyrgyz Republic:

rephrase paragraph 24 as follows:

"24. Non-submission, as well as untimely, incomplete or unreliable submission to the National Bank of reports, as well as other officially requested documents and information."

4. Make the following change to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On the Liquidation of Banks" dated June 8, 2017 No. 2017-P-12/23-5-(NPA)":

in the Regulation "On the Liquidation of Banks" approved by the above-mentioned Resolution:

• recognize the fifth paragraph of paragraph 5 as losing force.

5. Make the following additions and changes to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Licensing of Banking Activities" dated June 8, 2017 No. 2017-P-12/23-1-(NPA)":

in the Regulation "On Licensing of Banking Activities" approved by the above-mentioned Resolution::

• in paragraph 76 of the Regulation, after the words "upon establishment", add the words "by the Board of the National Bank";

• add a third paragraph to paragraph 208 as follows:

"A branch of a foreign bank operates without forming a Board of Directors and a Board. The following officials must be appointed in a branch of a foreign bank: the head of the branch (general manager), two of his deputies, heads of internal audit, risk management, compliance control services, the chief accountant, and heads of structural subdivisions responsible for credit activities/financing according to Islamic principles, for the management of assets and liabilities of the branch."

• in sub-item 7 of paragraph 2.6. of Appendix 21 to the Regulation on licensing of banking activities, after the words "administrative offenses", add the words ", misdemeanors, violations".

6. Make the following changes and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Certain Transactions/Operations of Commercial Banks and Microfinance Companies of the Kyrgyz Republic with Real Estate" dated August 29, 2012 No. 36/2":

in the Regulation "On Certain Transactions/Operations of Commercial Banks and Microfinance Companies of the Kyrgyz Republic with Real Estate" approved by the above-mentioned Resolution:

• rephrase the third sentence of paragraph 37 as follows:

"Banks must notify the authorized structural subdivision of the National Bank in writing about each case of leasing/subleasing unused bank premises and/or replacement of tenants, indicating information about the tenant/subtenant and the lease term."

7. Make the following changes to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation on Minimum Requirements for External Audit of Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-2-(NPA)":

• in the name of the Resolution in the official language, replace the word "organizations" with the word "organizations":

• rephrase the name of the Regulation in the appendix to the said Resolution as follows:

"Regulation on Minimum Requirements for External Audit of Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic";

in the Regulation on minimum requirements for external audit of banks and other non-bank financial and credit organizations licensed by the National Bank of the Kyrgyz Republic, approved by the above-mentioned Resolution:

• rephrase paragraph 1 as follows:

"1. This Regulation on minimum requirements for external audit of banks and other financial and credit organizations licensed by the National Bank of the Kyrgyz Republic" (hereinafter - the Regulation) establishes minimum requirements (criteria) for the audit of banks and microfinance companies, including those engaged in activities in accordance with Islamic principles of banking and financing or having an "Islamic window", JSC "Financial Company of Credit Unions", as well as the State Development Bank of the Kyrgyz Republic (hereinafter - the bank)."

8. Make the following changes to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation on Economic Norms and Requirements Mandatory for Compliance by Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/1":

in the Regulation on economic norms and requirements mandatory for compliance by commercial banks of the Kyrgyz Republic, approved by the above-mentioned Resolution:

• rephrase the name of Section 7 as follows:

"7. Maximum Risk Size for Unsecured Loans";

• rephrase paragraph 7.1. as follows:

"7.1. The maximum risk size for unsecured loans must not exceed 50% of the size of the net total capital of the bank.

Note: The maximum risk size for unsecured loans must also include all loans not secured by collateral issued before the date of entry into force of the Resolution of the Board of the National Bank dated April 24, 2019 No. 2019-P-12/22-4-(NPA) and not meeting the requirements specified in this Resolution of the Board of the National Bank."

• rephrase paragraph 7.2. as follows:

"7.2. The Bank has the right to exclude from the calculation of the maximum risk ratio for unsecured loans loans issued under the guarantee of members of a group of joint liability, provided that the conditions and criteria described in the Regulation "On Minimum Requirements for Credit Risk Management in Commercial Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic" in part of lending to groups of joint liability are met;"

• rephrase the first sentence in the "Designation" column of Section "B" of Appendix 1 to the Regulation on economic norms and requirements mandatory for compliance by commercial banks of the Kyrgyz Republic as follows:

"Maximum risk size for unsecured loans".

9. Make the following change to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction "On Lending Restrictions" dated September 15, 2004 No. 24/4":

in the Instruction "On Lending Restrictions" approved by the above-mentioned Resolution:

• rephrase paragraph 5.5. as follows:

"5.5. The aggregate size of unsecured loans must not exceed 50% of the size of the net total capital of the bank.

Note: The maximum risk size for unsecured loans must also include all loans not secured by collateral issued before the date of entry into force of the Resolution of the Board of the National Bank dated April 24, 2019 No. 2019-P-12/22-4-(NPA) and not meeting the requirements specified in this Resolution of the Board of the National Bank."