Resolution of the Board of the National Bank of the Kyrgyz Republic No. 2019-P-12/20-2-(NPA) of April 15, 2019 on Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of April 15, 2019 No. 2019-P-12/20-2-(NPA)

On Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic

In accordance with Articles 20, 68 and 136 Law "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 to the following Resolutions of the Board of the National Bank of the Kyrgyz Republic (attached):

• "On Approval of the Regulation on economic standards and requirements mandatory for commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/1";

• "On Approval of the Instruction on the determination of capital adequacy (sufficiency) standards for commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/2;

• "On Approval of the Regulation "On the classification of assets and corresponding provisions for potential losses and losses" of July 21, 2004 No. 18/3";

• "On Approval of the Regulation "On the procedure for conducting credit auctions by the National Bank of the Kyrgyz Republic for refinancing and liquidity support purposes" of November 27, 2013 No. 45/13.

2. This Resolution enters into force after the expiration of fifteen days from the date of its official publication, is valid until July 16, 2020, and applies only to mortgage-backed bonds issued by JSC "State Mortgage Company" under the issuance registered on June 29, 2018.

3. 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 Supervision and Licensing Methodology Department shall bring this Resolution to the attention of commercial banks, the State Development Bank of the Kyrgyz Republic, the Non-Commercial Organization "Union of Banks of Kyrgyzstan", structural divisions, regional departments, and the representative office of the National Bank of the Kyrgyz Republic in the Batken region.

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

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 of April 15, 2019 No. 2019-P-12/20-2-(NPA)

AMENDMENTS to certain regulatory legal acts of the National Bank of the Kyrgyz Republic

1. Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation on economic standards and requirements mandatory for commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/1:

in the Regulation on economic standards and requirements mandatory for commercial banks of the Kyrgyz Republic, approved by the aforementioned Resolution:

• paragraph 1 of point 4.2 is supplemented with an eleventh paragraph as follows:

"- mortgage-backed bonds issued by JSC "State Mortgage Company".

At the same time, mortgage-backed bonds issued by JSC "State Mortgage Company" must be classified as a "normal asset" in accordance with the conditions of the Regulation "On the classification of assets and corresponding provisions for potential losses and losses", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/3. Mortgage-backed bonds issued by JSC "State Mortgage Company" classified not in the "normal asset" category are not included in the composition of liquid assets."

2. Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on the determination of capital adequacy (sufficiency) standards for commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/2:

in the Instruction on the determination of capital adequacy (sufficiency) standards for commercial banks of the Kyrgyz Republic, approved by the aforementioned Resolution:

• paragraph 1 of point 4.3 is supplemented with paragraph "i" as follows:

"i) mortgage-backed bonds issued by JSC "State Mortgage Company".

At the same time, mortgage-backed bonds issued by JSC "State Mortgage Company" must be classified as a "normal asset" in accordance with the conditions of the Regulation "On the classification of assets and corresponding provisions for potential losses and losses", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/3";

• paragraph 4 of point 4.3 is supplemented with paragraph "g" as follows:

"g) mortgage-backed bonds issued by JSC "State Mortgage Company" classified not in the "normal asset" category in accordance with the conditions of the Regulation "On the classification of assets and corresponding provisions for potential losses and losses", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/3."

3. Make the following amendment 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" of July 21, 2004 No. 18/3":

Regulation "On the classification of assets and corresponding provisions for potential losses and losses", approved by the aforementioned Resolution:

• supplemented with point 4.1.3 as follows:

"4.1.3. The Bank may classify mortgage-backed bonds issued by JSC "State Mortgage Company" as a "normal asset" with the formation of a provision for potential losses and losses (PPL) at 0%.

The following conditions must be met:

• the bank conducts monthly monitoring of the mortgage collateral to control the coverage of the value of mortgage-backed bonds at a level of not less than 120%;

• all assets included in the mortgage collateral must be, at a minimum, in the "satisfactory" category.

In case of non-compliance of the mortgage collateral for mortgage-backed bonds with the specified classification conditions, classification must be carried out in accordance with the established requirements of the National Bank."

4. Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On the procedure for conducting credit auctions by the National Bank of the Kyrgyz Republic for refinancing and liquidity support purposes" of November 27, 2013 No. 45/13":

in the Regulation "On the procedure for conducting credit auctions by the National Bank of the Kyrgyz Republic for refinancing and liquidity support purposes", approved by the aforementioned Resolution:

• paragraph 2 of point 41 is redacted as follows:

"2) Government securities of the Government of the Kyrgyz Republic, notes of the National Bank, municipal securities issued by the Mayor's Office of Bishkek, having a listing and quoted on a licensed trading platform of the Kyrgyz Republic, and mortgage-backed bonds issued by JSC "State Mortgage Company" (hereinafter - securities);";

• Regulation is supplemented with Appendix 9 to the General Agreement on Credit Auction as follows:

	"Appendix 9 to the General Agreement on Credit Auction of "_" ______________ 20 g. No. ____

PLEDGE AGREEMENT No. _____ to the Credit Agreement of "_" ________________ 20 g. No. ______ (pledge agreement for mortgage-backed bonds issued by JSC "State Mortgage Company")

Bishkek	"_" ___________________ 20 g.

The National Bank of the Kyrgyz Republic, hereinafter referred to as the "National Bank" or "Pledgee", represented by ______________________________, acting on the basis of ______________________________, on the one hand, and ___________________________, hereinafter referred to as the "Bank" or "Pledgor", represented by __________________, acting on the basis of _________________________, on the other hand, hereinafter jointly referred to as the "Parties", have concluded this Pledge Agreement for mortgage-backed bonds issued by JSC "State Mortgage Company" (hereinafter "Agreement") on the following.

1. Subject of the Agreement

1.1. The Pledgee has provided the Pledgor with a loan in the amount of __________________ (amount in words) som. The final maturity date for the loan and accrued interest occurs within the timeframes specified in the Credit Agreement for the issuance of the loan of "___" ___________________ year No. _______ (hereinafter - Credit Agreement), concluded within the framework of the General Agreement of _________________ year No. ______ (hereinafter - General Agreement).

1.2. To secure the performance of the Pledgor's obligations under the Credit Agreement, the Pledgor transfers to the Pledgee the following mortgage-backed bonds issued by JSC "State Mortgage Company" (hereinafter - securities) in pledge, specifying the total volume of issued bonds, nominal value, term of circulation, and order of income payment:

No.	Registration Number	Date of Issue of Securities	Date of Maturity of Securities	Quantity of Securities (pieces)	Nominal Price of 1 Security (som)	Nominal Value of Securities (som)	Order of Income Payment
	Total:

1.3. This Agreement serves as security for the performance of the Pledgor's obligations under the Credit Agreement and General Agreement during its term.

1.4. The Pledgor is liable to the Pledgee with the pledged property specified in paragraph 1.2 of this Agreement for the full volume of its obligations under the Credit Agreement and General Agreement, including the principal amount of the loan, accrued interest, penalties and fines; reimbursement of costs and other expenses (including court costs) caused by the enforcement of claims on the pledged items due to non-performance, delay in performance, or other improper performance of the main obligation, according to the Credit Agreement and General Agreement.

1.5. Ownership of the pledged securities transfers to the Pledgee in the event of full or partial non-performance by the Pledgor of its obligations to the Pledgee in the manner established by this Agreement, the General Agreement, and the current legislation of the Kyrgyz Republic.

1.6. The Pledgor guarantees that the securities specified in paragraph 1.2 of this Agreement are not pledged elsewhere, not in dispute, and not under prohibition, and are not and will not be the subject of security for other obligations of the Pledgor.

2. Rights and Obligations of the Parties

2.1. The Pledgor is obliged:

2.1.1. To properly perform the Credit Agreement, General Agreement, and fully repay the debt to the Pledgee.

2.1.2. Not to transfer gratuitously, not to pledge, not to exchange the securities (except for cases provided for by this Agreement), and not to dispose of the pledged securities in any other way without the written consent of the Pledgee.

2.1.3. To notify the Pledgee of changes in its location and other changes in the Pledgor's activities that could affect the Pledgor's performance of its obligations to the Pledgee under this Agreement, Credit Agreement, and General Agreement before the day of the onset/beginning of action of these changes.

2.1.4. The Pledgor guarantees and gives its full consent to the immediate (dispute-free) out-of-court enforcement of claims on securities covered by mortgage, in accordance with the conditions of this Agreement and the current legislation of the Kyrgyz Republic in the event of non-performance or improper performance of obligations assumed under the Credit Agreement, General Agreement, and this Agreement.

2.1.5. In cases specified in this Agreement, the Pledgor undertakes to replace, in full or in part, the securities with municipal securities, government treasury bills, government treasury bonds, and National Bank notes and/or other collateral acceptable to the Pledgee, thereby concluding an additional agreement.

2.1.6. The registrar conducts the registration of this pledge agreement and subsequent prohibition of the use of these securities, as well as performs other functions provided for by the legislation on mortgage securities.

2.1.7. To timely and properly conduct all activities provided for by the current legislation of the Kyrgyz Republic necessary for the registration and entry into force of this Agreement.

2.1.8. To ensure (with prior written notification to the Pledgee) the replacement of securities, the maturity of which occurs before the end of the term of the Credit Agreement, with other securities (municipal securities, government treasury bills, government treasury bonds, and National Bank notes) with a later maturity date or other collateral acceptable to the Pledgee. The replacement of securities must be carried out 20 (twenty) working days before the maturity date of the securities of the corresponding issuance/issuances.

2.2. For the pledged securities, the Pledgor has the right to receive fixed interest on their nominal value.

2.3. Subsequent pledge of securities that are the subject of pledge under this Agreement is not permitted.

2.4. To bear the risk of loss or decrease in value of the Subject of Pledge and in the event of loss or other circumstances leading to the devaluation of securities or non-compliance of securities with the "normal" classification category, according to the Regulation on the classification of assets and corresponding provisions for potential losses and losses, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/3, to provide, with the consent of the Pledgee, other security equivalent in value to the value of the securities, within the timeframes specified in point 4.1 of this Agreement.

2.5. To inform the Pledgee by the 10th (tenth) day of each quarter about the confirmation of the Pledgor's performance of the activities specified in p.4.1.3 of the Regulation on the classification of assets and corresponding provisions for potential losses and losses, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/3 and the classification of mortgage coverage for securities, providing a report according to Appendix 1.

2.6. To comply with the Pledgee's requirements for collateral security and, in case of deviation from them, to provide additional collateral within the timeframe specified in point 4.1 of this Agreement.

2.7. The Pledgor has the right at any time before the moment of realization by the Pledgee of the pledged items, which may be carried out in accordance with this Agreement, to perform the obligation secured by this pledge or that part of its performance which is delayed.

2.8. The Pledgee has the right:

2.8.1. To demand early performance of obligations specified in this Agreement from the Pledgor, and if its demand is not satisfied, to enforce claims on the securities in the following cases:

1. in case of violation by the Pledgor of the requirements and provisions of the Credit Agreement and General Agreement;

2. in case of violation by the Pledgor of the rules on subsequent pledge, obligations to notify the Pledgee of the rights of third parties to the securities;

3. in case of non-performance by the Pledgor of other requirements and provisions specified in this Agreement or the legislation of the Kyrgyz Republic.

2.8.2. In the event that the Pledgor or a third party hinders the transfer of securities to the possession of the Pledgee, to take legal actions necessary to obtain the property from the Pledgor or third party.

2.8.3. To transfer its rights under this Agreement to a third party.

2.8.4. Enforcement of claims on securities is carried out out-of-court in accordance with the legislation of the Kyrgyz Republic and the conditions of this Agreement, taking into account the conditions of their issuance (emission).

2.9. The Pledgee undertakes to return to the Pledgor the difference from the amount exceeding the size of the claim secured by the pledge of the Pledgee. The Pledgee's claims, which are satisfied from the value of the securities, include: repayment of the principal amount of the loan, payment of interest for the use of the loan, compensation for possible losses and penalties (fines, fines) due to non-performance, delay in performance, or other improper performance of the main obligation, according to the Credit Agreement and General Agreement; reimbursement of costs and other expenses (including court costs) caused by enforcement of claims.

3. Conditions of Pledge

3.1. The Parties agreed that when providing securities in pledge, the Pledgor will provide a document confirming the right to ownership of the securities, and also, at the request of the Pledgee, other documents provided for by the legislation on mortgage securities.

3.2. By mutual agreement of the Parties, securities pledged in accordance with this Agreement may be replaced with other securities or other equivalent pledges specified in the General Agreement, belonging to the Pledgor, with the design, by agreement of the Parties, of new pledge agreements between the Pledgee and the Pledgor, with their registration in the corresponding state bodies and payment of the registration fee. Expenses for registration and design are borne by the Pledgor.

3.3. In the event of non-performance by the Pledgor of the requirements specified in paragraph 2.1 and other points of this Agreement, upon the maturity of securities pledged in accordance with this Agreement and located in the pledge account of the Pledgor with the registrar, who carries out the storage and accounting of securities, the Parties authorized the registrar to transfer the nominal value amount of the specified securities from the Pledgor's account to the Pledgee's account.

3.4. The Parties agreed that fees for the registration of this Agreement, storage and accounting of securities, and other expenses with the registrar, as well as any other expenses related to the execution of this Agreement, are paid by the Pledgor.

4. Procedure for Replacement of Collateral

4.1. During the term of this Agreement, upon identification of a deterioration in the classification of securities, the Pledgee sends a corresponding requirement-notice to the Pledgor regarding the need to provide additional collateral.

The Pledgor, within 10 (ten) working days from the date of receipt of the corresponding requirement-notice from the Pledgee regarding the need to provide additional collateral, undertakes to provide the Pledgee with additional collateral and to design, as well as register, an Agreement on the provision of additional collateral in accordance with point 3.2 of the General Agreement, or to repay early the corresponding part of the loan received by the Pledgor from the Pledgee, according to the Credit Agreement for the provision of the loan.

At the same time, in the presence of other types of collateral, the Pledgee has the right to calculate the amount of additional collateral to be provided, taking into account the total value of other types of collateral (applying corresponding pledge coefficients). The Pledgee has the right not to demand the provision of additional collateral by the Pledgor in accordance with the first paragraph of this point if other types of collateral (taking into account the corresponding pledge coefficients applied by the Pledgee) cover the current outstanding balance of the Pledgor's debt to the Pledgee for the received credit funds, according to the Credit Agreement for the provision of the loan.

5. Liability of the Parties

5.1. In the event of non-performance or improper performance of obligations under this Agreement, the Parties compensate each other for all damages caused in accordance with the legislation of the Kyrgyz Republic.

5.2. Compensation for damages and payment of fines does not exempt the guilty party from performing obligations specified in this Agreement, the Credit Agreement, and the General Agreement.

5.3. In the event of non-performance or improper performance by the Pledgor of obligations specified in point 2.1 and other points of this Agreement, the Pledgor pays the Pledgee a fine in the amount of 0.05 percent of the nominal value of the securities specified in paragraph 1.2 of this Agreement, for each day of delay (non-performance of its obligations).

6. Procedure for Enforcement of Claims on Pledged Items

6.1. In the event of the need to enforce claims on securities, in accordance with the provisions of this Agreement, the Parties agreed that enforcement of claims on securities will be carried out immediately, out-of-court, in accordance with the conditions of this Agreement, the General Agreement, and the current legislation of the Kyrgyz Republic.

7. Other Conditions

7.1. This Agreement is subject to registration in the Pledge Registration Department of the Ministry of Justice of the Kyrgyz Republic and with the registrar, enters into force from the moment of its registration, is valid until the full repayment by the Pledgor of its obligations to the Pledgee, including the return of the principal loan amount, accrued interest, payment of fines/fines, and compensation for other losses/expenses caused by non-performance or improper performance by the Pledgor of its obligations under the Credit Agreement, General Agreement, and this Agreement.

7.2. The conditions of this Agreement may be changed and supplemented only by mutual agreement of the Parties.

7.3. Costs for the execution and registration of this Agreement are borne by the Pledgor. Registration of this Agreement is carried out by the Pledgor.

7.4. This Agreement enters into force from the moment of registration in the corresponding authorized bodies in accordance with paragraph 7.1 of this Agreement.

7.5. This Agreement is drawn up in 5 (five) original copies, having equal legal force: 1 (one) copy - for the Pledgor, 1 (one) copy - for storage at the National Bank of the Kyrgyz Republic, the remaining copies for authorized bodies. If there is a requirement to provide a copy to the authorized body carrying out the pledge registration, an additional 1 (one) copy is prepared. All copies have equal legal force.

8. Legal addresses, details and signatures of the Parties

PLEDGEE:		PLEDGOR:
National Bank		Bank: JSC/OJSC "Commercial Bank"
of the Kyrgyz Republic		b. Bishkek, st. ____________________.
b. Bishkek, Chui Ave 168		Account at the National Bank
		No. 1010126 ______________________
		BIC of the National Bank No. ______
		TIN No. _________________________
		OKPO No. _______________________
		Code of the Tax Inspectorate: _______________________
Position _____________________		Position ______________________
(signature) __________________ M.P.		(signature) __________________ M.P.

		Appendix 1 to the Pledge Agreement for mortgage-backed bonds issued by JSC "State Mortgage Company" dated "_" ______________ 20 g. No. ____

Quarterly by the 10th day of the following month

Form 4

REPORT on monitoring the state of mortgage coverage of bonds issued by JSC "State Mortgage Company" (as of the date), under the credit agreement No. __________ (auction code)

		period
		bank
		in soms

Initial mortgage coverage		Mortgage coverage at the beginning of the reporting quarter		Mortgage coverage at the end of the reporting quarter		Classification of mortgage coverage as of the reporting date (som)
Amount (som)	Quantity	Amount (som)	Quantity	Amount (som)	Quantity	norm.	good	watch	substandard	doubtful	losses
Total

Full Name of the bank manager

signature

seal".