Resolution of the Board of the National Bank of the Kyrgyz Republic No. 2021-P-12/51-1-(NPA) of September 15, 2021 on Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic on Risk and Capital Management

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

of September 15, 2021 No. 2021-P-12/51-1-(NPA)

ON AMENDMENTS TO CERTAIN REGULATORY LEGAL ACTS OF THE NATIONAL BANK OF THE KYRGYZ REPUBLIC ON MATTERS OF RISK AND CAPITAL MANAGEMENT OF BANKS

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:

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 Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/1;;

• "On Approval of the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/2;;

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

• "On Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated August 25, 2005 No. 26/5;;

• "On Approval of the "Rules for the Creation and/or Acquisition of Subsidiary or Dependent Companies by Commercial Banks of the Kyrgyz Republic" dated June 10, 2009 No. 26/3;

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

• "On Approval of the "Order for the Work of Commercial Banks and Other Financial and Credit Organizations Licensed and Regulated by the National Bank of the Kyrgyz Republic with Collateral" dated July 4, 2012 No. 28/7;

• "On Approval of the Instruction on Work with Bank Accounts, Accounts for Bank Deposits (Deposits)" dated October 31, 2012 No. 41/12;

• "On Approval of the Regulation "On Corporate Governance in Commercial Banks of the Kyrgyz Republic" dated May 17, 2017 No. 19/12;

• "On Approval of the Regulation "On Minimum Requirements for Risk Management in Banks of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-8-(NPA);;

• "On Approval of the Regulation "On the Procedure for Placing Funds by Commercial Banks in Foreign Currency in Deposit Accounts Opened in the National Bank of the Kyrgyz Republic" dated February 28, 2018 No. 2018-P-12/7-7-(NPA);;

• "On Approval of the Regulation "On Minimum Requirements for Internal Control Organization in Commercial Banks for Counteracting Financing of Terrorist Activities and Money Laundering", Regulation "On the Procedure for Conducting Exchange Operations with Cash Foreign Currency in the Kyrgyz Republic" and Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic on Matters of Counteracting Financing of Terrorist Activities and Money Laundering" dated August 14, 2019 No. 2019-P-12/42-1-(NPA).

2. This Resolution shall enter into force after the expiration of 1 month from the day of official publication.

3. Establish the compliance period for commercial banks regarding the calculation of the Total Capital Adequacy Ratio (K2.1) taking into account capital required to cover operational risks, as provided in paragraph 2.2 of the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic, starting from July 1, 2022.

4. Establish the compliance period for commercial banks regarding the calculation of the Leverage Ratio (K2.4), as provided in paragraph 2.3 of the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic, starting from January 1, 2023.

5. Establish for commercial banks compliance with the following values:

1) Common Equity Tier 1 Capital Adequacy Ratio (K2.2), as provided in paragraph 3.2 of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, within the following timeframes:

• starting from January 1, 2023 - not less than 6.5%;

• starting from January 1, 2024 - not less than 7.5%;

2) Basic Common Equity Tier 1 Capital Adequacy Ratio (K2.3), as provided in paragraph 3.2 of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, within the following timeframes:

• starting from January 1, 2023 - not less than 5%;

• starting from January 1, 2024 - not less than 6%.

6. Establish for systemically important commercial banks compliance with the following values:

1) Total Capital Adequacy Ratio (K2.1), as provided in paragraph 3.2-1 of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, within the following timeframes:

• starting from January 1, 2023 - not less than 12.5%;

• starting from January 1, 2024 - not less than 14%;

2) Common Equity Tier 1 Capital Adequacy Ratio (K2.2), as provided in paragraph 3.2-1 of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, within the following timeframes:

• starting from January 1, 2023 - not less than 7.5%;

• starting from January 1, 2024 - not less than 9.5%;

3) Basic Common Equity Tier 1 Capital Adequacy Ratio (K2.3), as provided in paragraph 3.2-1 of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, within the following timeframes:

• starting from January 1, 2023 - not less than 6%;

• starting from January 1, 2024 - not less than 8%.

7. Establish for commercial banks the validity period of sub-subparagraph 2 of paragraph 3.10 of the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic regarding the exclusion of intangible assets related to technical and software products until January 2024.

8. Recognize as invalid paragraph 3 of the resolution of the Board of the National Bank of the Kyrgyz Republic "On Amendments to Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" dated December 27, 2019 No. 2019-P-12/68-2-(NPA) from the date of entry into force of this Resolution of the Board of the National Bank of the Kyrgyz Republic.

9. 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.

10. Supervision and Licensing Methodology Department to bring this Resolution to the attention of the Non-Commercial Organization "Union of Banks of Kyrgyzstan," commercial banks, the State Development Bank of the Kyrgyz Republic, JSC "Financial Company of Credit Unions," Non-Commercial Organization "Association of Microfinance Organizations," microfinance companies licensed to attract deposits, corresponding structural subdivisions, regional departments, and the branch of the National Bank in the Batken Region.

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

Chairman	T. Abdygulov

		Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated September 15, 2021 No. 2021-P-12/51-1-(NPA)

AMENDMENTS into certain regulatory legal acts of the National Bank of the Kyrgyz Republic on the issue of risk and capital management of banks

1. Make amendments to the resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/1:

in the Regulation on Economic Normatives and Requirements Mandatory for Commercial Banks of the Kyrgyz Republic, approved by the aforementioned resolution:

• in paragraph 3.2:

in the third paragraph, replace the number "6%" with "7.5%";

in the fourth paragraph, replace the number "4.5%" with "6%";

• Supplement the Regulation with paragraph 3.2-1 of the following content:

"3.2-1. For systemically important banks, capital adequacy (sufficiency) ratios must be:

• Total Capital Adequacy Ratio (K2.1) - not less than 14%;

• Common Equity Tier 1 Capital Adequacy Ratio (K2.2) - not less than 9.5%;

• Basic Common Equity Tier 1 Capital Adequacy Ratio (K2.3) - not less than 8%.";

• in paragraph 3.3, replace the number "8%" with "6%".

2. Make amendments to the resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/2:

in the Instruction on Determination of Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic, approved by the aforementioned resolution:

• rephrase paragraph 2.1.2 as follows:

"2.1.2. Own (regulatory) capital is Tier 1 capital.";

• in paragraph 2.2:

subparagraph "a" rephrased as follows:

"a) Total Capital Adequacy Ratio (K2.1) is determined by the formula:

K2.1 = (TEC / (TWA + P * Cor)) * 100%, where:

TEC - Total Equity Capital, defined as the sum of Tier 1 capital and Tier 2 capital.

TWA - sum of balance sheet assets and off-balance sheet obligations, weighted by risk degree, minus special provisions for potential losses and damages.

P - established indicator (number, inverse of the Total Capital Adequacy Ratio) for commercial banks - 8.33 (100% : 12%), for systemically important banks - 7.14 (100% : 14%);

Cor - amount of capital reserved to cover operational risks. Calculation of capital reserved to cover operational risks using the Basic Indicator Method is carried out in accordance with the Order for Determination of Capital Level Required to Cover Operational Risks of Banks, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic.";

first paragraph of subparagraph "b" rephrased as follows:

"b) Common Equity Tier 1 Capital Adequacy Ratio (K2.2) is determined by the formula:";

first paragraph of subparagraph "c" rephrased as follows:

"c) Basic Common Equity Tier 1 Capital Adequacy Ratio (K2.3) is determined by the formula:";

• rephrase paragraph 2.3 as follows:

"2.3. Leverage (K2.4) is determined by the formula:

K2.4 = (TEC / (TA + OB) * 100%, where:

TA - total assets of the bank minus intangible assets and special provisions for potential losses and damages;

OB - off-balance sheet obligations taking into account credit conversion factors defined in this Instruction, as well as those obligations for which the bank has the right of unconditional withdrawal/cancellation at any time without prior notice to the client, and to which a credit conversion factor of 10% of the total amount of such off-balance sheet obligations may be applied. In this case, the amount of provisions for potential losses and damages is deducted from off-balance sheet obligations (after applying credit conversion factors) within the amount of weighted off-balance sheet obligations.";

• rephrase paragraph 3.10 as follows:

"3.10. Before calculating the coefficients of sufficiency (adequacy) of Total Equity Capital, sufficiency (adequacy) of Tier 1 Capital, Basic Tier 1 Capital, and Leverage Ratio, the following elements are deducted from Basic Tier 1 Capital:

1) losses for the current year;

2) intangible assets, except for assets related to technical and software products (for example, for biometric identification, smart contracts, etc.), aimed at increasing the number of clients and service coverage, which meet the following requirements:

• the solution must be new or significantly different from existing market offerings, or offer new opportunities for using existing technologies, confirmed by market research and comparison of key technology characteristics;

• the solution must offer clients obvious direct or indirect benefits (for example, technical specification showing increased security, service quality, efficiency, product quality, lower prices, combination of any of the listed) and be supported by comparative analysis of the bank with quantitative assessments if necessary.

In case of technical testing results, they must be available to the National Bank. Alternatively, confirmation of technical reliability of the solution from an independent third party may be provided.

These technical and software products must be accounted for by the bank at book value;

3) investments (in the form of shares or equity participation in capital) in other non-consolidated banks and financial and credit organizations, as well as non-financial organizations. If the bank invests additional Tier 1 capital or Tier 2 capital in these organizations, these investments must be deducted from the corresponding capital;

4) all deferred tax assets dependent on future profitability, calculated based on International Financial Reporting Standards (IFRS) 12, except for deferred tax assets related to temporary differences. Deferred tax assets may be offset against deferred tax liabilities if IFRS 12 conditions are met;

5) direct or indirect investments in own shares. The bank has the right to repurchase own shares only for subsequent sale at a higher price, provided that the bank has concluded a preliminary share sale agreement for their realization after repurchase and the bank's activity has been profitable for the previous five years prior to the decision to repurchase own shares. The bank will deduct these shares until they are sold.

Using an identical approach, banks must deduct investments in their own Additional Tier 1 Capital when calculating Additional Tier 1 Capital and must deduct investments in their own Tier 2 Capital when calculating their Tier 2 Capital.

Mutual cross-holdings of capital that lead to artificial increase of the bank's capital position must be deducted in full. Banks must apply the "appropriate deduction approach" for such investments in capital of other banks, other financial and insurance organizations. This means that the deduction must be applied to the same component of capital for which the capital would qualify as if it were issued by the bank itself.";

• in paragraph 4.3:

in subparagraph 1, recognize subparagraph "i" as invalid;

in subparagraph 4, recognize subparagraph "g" as invalid;

• supplement Chapter 5 with paragraph 5.3-1 of the following content:

"5.3-1. For off-balance sheet obligations for which the bank has the right of unconditional withdrawal/cancellation at any time without prior notice to the client, a credit conversion factor of 10% is applied.";

• in the Appendix to the Instruction:

in the section "Off-balance sheet obligations":

supplement with Article 595 of the following content:

"

595	Obligations for which the bank has the right of unconditional withdrawal/cancellation at any time without prior notice to the client	0	10%		0

";

rephrase Article 600 as follows:

"

600	Total off-balance sheet obligations (sum of Art. 510-595)	0			0

".

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

in the Regulation "On Classification of Assets and Corresponding Provisions for Potential Losses and Damages", approved by the aforementioned resolution:

• in paragraph 4.1.1.:

first paragraph rephrased as follows:

"4.1.1. Normal assets are those for which the collateral covers in full the principal amount of the asset and the interest rate amount, calculated as the product of the principal amount of the asset and the nominal interest rate on an annual basis according to the contract (for example, the principal amount of the asset is 100 thousand som, and the interest rate is 10%, respectively, the coverage must be 110 thousand som). At the same time, this collateral consists of:";

second paragraph rephrased as follows:

"- state securities of the Kyrgyz Republic and National Bank notes (hereinafter - State Securities) (if the maturity date of State Securities occurs before the maturity date of the asset, the bank must accept cash received from the maturity of State Securities as collateral, or accept additional similar (similar) State Securities as collateral);";

subparagraph 5 rephrased as follows:

"5) funds on deposit securing assets must be in the national currency of the Kyrgyz Republic, or in currency freely convertible into Kyrgyz som, based on publicly available and reliable currency quotes;";

• recognize paragraph 4.1.3. as invalid;

• in paragraph 4.2.2.:

sixth paragraph rephrased as follows:

"there is property collateral, against which recovery may be levied and/or guarantee/guarantee, 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";";

• in paragraph 5.3.2.:

eighth paragraph rephrased as follows:

"- provision of assets to subjects of offshore zones, the list of which is determined by the authorized state body of the Kyrgyz Republic in the field of counteracting financing of terrorist activities and money laundering.".

4. Make 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 Periodic Regulatory Bank Report", approved by the aforementioned resolution:

• in Appendix 2:

Section 14 rephrased as follows:

"SECTION 14
INFORMATION ON COMPLIANCE WITH ECONOMIC NORMATIVES AND REQUIREMENT FOR SUPPORT OF ADDITIONAL CAPITAL BUFFER (INDEX "CAPITAL BUFFER")

Table 1.

Name of economic normatives and requirement for support of additional bank capital buffer (index "capital buffer")	Designation	Calculation of normative	Actual value of normative	Established value of normative	Deviation from established normative
Maximum size of risk for one borrower or group of related borrowers	K1.1	TWA ----- ----- TEC		not more than 20%
K1.2	TWA ----- ----- TEC		not more than 15%
K1.3	TWA ----- ----- TEC		not more than 30%
K1.4	TWA ----- ----- TEC		not more than 15%
Capital Adequacy (Sufficiency) Normative	K2.1	TEC ----- ----- TWA + P * Cor		not less than 12%/14%
K2.2	TEC ----- ----- TWA		not less than 7.5%/9.5%
K2.3	Basic TEC ----- ----- TWA		not less than 6%/8%
K2.4	TEC ----- ----- TA + OB		not less than 6%
Liquidity Normative (Indicator)	K3.1	LA ----- ----- OB		not less than 45%
Additional Bank Capital Buffer (index "capital buffer")		TEC ----- ----- TWA		not less than ___% (indicate value)
Foreign Currency Liquidity Indicator	PL	LAV ----- ----- OBV		-----	-----

Note:

P - established indicator (number, inverse of the Total Capital Adequacy Ratio) for commercial banks - 8.33 (100% : 12%), for systemically important banks - 7.14 (100% : 14%);

Cor - amount of capital reserved to cover operational risks. Calculation of capital reserved to cover operational risks using the Basic Indicator Method is carried out in accordance with the Order for Determination of Capital Level 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);

TEC - Tier 1 Capital;

Basic TEC - Basic Tier 1 Capital;

• value for systemically important banks.

Table 2.

	Average values for the reporting period	1 week	2 week	3 week	4 week	5 week	6 week
LA - Liquid Assets
OB - Bank Obligations
Normative K3 = LA / OB

Table 3.

	Average values for the reporting period	1 week	2 weeks	3 weeks	4 weeks	5 weeks	6 weeks
LA - Liquid assets in foreign currency
OBV - Bank liabilities in foreign currency
Indicator (PL) = (LA / OBV) * 100		0.0%	0.0%	0.0%	0.0%	0.0%	0.0%

Table 4. Calculation of capital reserved to cover operational risks

Net income for year 1	…
Net income for year 2	…
Net income for year 3	…
b	15%
Kor

";

• in section 15.5 "Off-balance sheet obligations":

amend Article 595 as follows:

"

595	Obligations for which the bank has the right to unconditional withdrawal/cancellation at any time without prior notice to the client	0	10%		0

";

amend Article 600 as follows:

"

600	Total off-balance sheet obligations (sum of items 510-595)	0			0

".

5. Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the "Rules for the creation and/or acquisition of subsidiary or dependent companies by commercial banks of the Kyrgyz Republic" dated June 10, 2009 No. 26/3":

in the Rules for the creation and/or acquisition of subsidiary or dependent companies by commercial banks of the Kyrgyz Republic, approved by the aforementioned Resolution:

• amend sub-item 1 of item 1.4 as follows:

"1) registration and/or operation of such companies is planned in offshore zones, the list of which is determined by the authorized state body of the Kyrgyz Republic in the field of countering the financing of terrorist activities and legalization (money laundering) of criminal proceeds, as well as in states and territories subject to international sanctions adopted by the UN Security Council, mandatory for the Kyrgyz Republic;".

6. 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 June 30, 2010 No. 52/4:

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

• in item 9, after the first paragraph, add a second paragraph as follows:

"In this case, the bank's internal documents must contain procedures for assessing the borrower's (legal entity) activities regarding the conduct of actual activities, namely the provision and sale of certain goods/services in the market.";

• amend item 34-2 as follows:

"34-2. The bank may not issue mortgage and consumer loans in foreign currency to a borrower - an individual, except for persons engaged in entrepreneurial activity based on a certificate or patent, as well as overdrafts on payment cards within the framework of payroll projects and credit limits on payment cards in foreign currency secured by a deposit. Indexation of payments for such loans linked to a currency other than the currency of the loan agreement is not permitted.";

• amend item 41 as follows:

"41. The loan agreement must specify at least:

• names of the parties;

• the term of the agreement;

• main loan conditions - amount, repayment term, collateral, annual interest rate, form of loan issuance: cash (through the cashier) and/or non-cash (including to the client's account, using bank payment cards, etc.);

• purpose of the loan;

• rights and obligations of the parties;

• the client's right to early repayment of the loan in full or in parts at any time without charging penalties (fees and other charges) provided that the bank is notified in writing 30 (thirty) calendar days before the date of such repayment. In this case, this condition establishes the period after which (after sending the notification) the borrower may make early repayment of the loan. The notification may specify a different early repayment period provided that the notification is sent to the bank no later than 30 (thirty) calendar days before the date of early repayment. Early repayment by one participant of a GSO is possible with the written consent of the GSO participants;

• conditions for providing information about the client to the credit bureau, as well as other cases of using client data in accordance with legislation;

• sanctions for breach of obligations by any party, cases of termination of the loan agreement.

In the event of early repayment of the loan by one of the GSO participants in their share, they continue to bear joint liability under the guarantee agreement until the full repayment of the loan obtained as part of the GSO. With the consent of the GSO participants and the bank, as well as compliance with the conditions for the minimum composition of the GSO, the participant who repaid the loan in their share may be released from joint liability.".

7. Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the "Order for the operation of commercial banks and other financial credit organizations licensed and regulated by the National Bank of the Kyrgyz Republic with collateral" dated July 4, 2012 No. 28/7":

in the Order for the operation of commercial banks and other financial credit organizations licensed and regulated by the National Bank of the Kyrgyz Republic with collateral, approved by the aforementioned Resolution:

• in item 7:

amend the first paragraph as follows:

"Banks/FCO must have internal regulatory documents mandatory regulating the main principles of work with various types of collateral for loans, as well as disclosing the main risks associated with the corresponding types of collateral for loans.";

amend the fifth paragraph as follows:

"- assets registered and/or located in offshore zones, the list of which is determined by the authorized state body of the Kyrgyz Republic in the field of countering the financing of terrorist activities and legalization (money laundering) of criminal proceeds.".

8. Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on work with bank accounts, accounts for bank deposits (deposits)" dated October 31, 2012 No. 41/12":

in the Instruction on work with bank accounts, accounts for bank deposits (deposits), approved by the aforementioned Resolution:

• amend item 3 as follows:

"To prevent the conduct of operations related to the financing of terrorist activities and legalization (money laundering) of criminal proceeds, banks are obliged to develop policies and procedures for internal control corresponding to the complexity and scale of the bank's activities, including for operations (transactions) with remote access without direct contact with the client, and subject to mandatory and full compliance.";

• in item 11:

add a twelfth paragraph as follows:

"Kairylman is understood in the meaning specified in the Regulation on the procedure for providing the status of kairylman, approved by the Resolution of the Government of the Kyrgyz Republic dated June 23, 2015 No. 402.";

amend the sixteenth paragraph as follows:

"Financial Intelligence Body - the State Service of Financial Intelligence under the Cabinet of Ministers of the Kyrgyz Republic.";

add a twentieth paragraph as follows:

"Kairylman certificate is understood in the meaning specified in the Regulation on the procedure for providing the status of kairylman, approved by the Resolution of the Government of the Kyrgyz Republic dated June 23, 2015 No. 402.";

• amend the third sentence of item 22 as follows:

"- unreliable documents were submitted.";

• amend item 22-4 as follows:

"22-4. The bank is obliged to verify the identification data of the client, the client's authorized representative, the beneficial owner, and the client's counterparty for the presence or absence in the List of persons, groups, organizations, regarding whom there is information about their participation in the legalization (money laundering) of criminal proceeds. This verification is conducted before establishing and during the course of business relations with the client and/or before conducting any operation (transaction) of the client.

If there is information about the client or beneficial owner's participation in the legalization (money laundering) of criminal proceeds, the bank is obliged to immediately suspend the operation (transaction) conducted by the client and report this to the financial intelligence body within 3 (three) hours from the moment of suspension of the operation (transaction).

Operations (transactions) are suspended until a decision on the seizure of property is made, adopted in accordance with the criminal procedural legislation of the Kyrgyz Republic.

In the event of no decision on the seizure of property, the suspended operation (transaction) is conducted in the established order and based on the order of the financial intelligence body.";

• in item 43:

amend sub-item 1 as follows:

"1) an application for opening an account, signed by persons specified in the specimen signature card, authorized to sign contracts and financial documents with the right of first and second signature and certified by the seal of the legal entity, which must contain:

• full name, as well as abbreviated name and name in a foreign language, if any;

• information on state registration: date, number, name of the registering body, place of registration;

• taxpayer identification number;

• taxpayer codes in accordance with the All-Republican Classifier of Enterprises and Organizations, developed by the National Statistics Committee of the Kyrgyz Republic;

• location;

• postal address;

• contact phone and fax numbers;

• type of activity;

• purpose and expected nature of business relations with the bank;

• other information at the bank's discretion;";

• amend item 53 as follows:

"53. The bank has the right to unilaterally terminate a bank account or bank deposit (deposit) agreement with mandatory fixation of this condition in the agreement and notification of the client one calendar month before closing the account in the event that:

• the amount of funds in the client's account turns out to be below the minimum size specified in the bank account agreement;

• there are no funds in the client's account for a certain period specified in the agreement, or no operations were performed on the account by the client.";

• amend the Instruction by adding item 53-1 as follows:

"53-1. The bank has the right to unilaterally terminate a bank account or bank deposit (deposit) agreement with mandatory fixation of this condition in the agreement, if:

• the client has not submitted the corresponding documents necessary to fulfill the requirements for identification and verification of the client and beneficial owner, as well as other customer due diligence measures, for conducting operations on the account;

• the client has not submitted the corresponding documents necessary for conducting operations on the account, confirming the economic feasibility of the transaction and the actual conduct of real economic activity by the client;

• unreliable documents were submitted.";

• in the Appendix 1 to the Instruction:

in item 5:

amend the first paragraph as follows:

"To verify the identity of physical persons, the bank uses one of the following documents:";

add sub-item 5 as follows:

"5) for kairylmans - a kairylman certificate.";

amend item 12 by adding third and fourth paragraphs as follows:

"The bank must establish reasonable deadlines for the client to submit additional documents, including information about the counterparty, but no more than 10 (ten) working days, in order to determine the economic feasibility and legality of the operations conducted, as well as the source of the client's and beneficial owner's funds. If the client has not submitted the documents requested by the bank within the established deadlines, the bank must refuse the client from conducting operations on the account.

If the client's operations are recognized as suspicious and/or the client is assigned a high risk level, during the waiting period for the requested documents, the bank is not entitled to conduct any operations on the client's account until the client submits the corresponding documents.";

• in the Appendix 3 to the Instruction:

in item 3:

amend the second sentence of the first paragraph as follows:

"The list of offshore zones is determined by the financial intelligence body.".

9. Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Corporate Governance in Commercial Banks of the Kyrgyz Republic" dated May 17, 2017 No. 19/12":

in the Regulation "On Corporate Governance in Commercial Banks of the Kyrgyz Republic", approved by the aforementioned Resolution:

• amend the second sentence of item 20 as follows:

"When making decisions, each member of the Board of Directors must be objective and guided by the interests of the bank, not personal interests or the interests of individual shareholders, bank officials, or third parties.";

• amend item 24 by adding sub-item 7 as follows:

"7) organize an effective control system in the bank to prevent the bank from conducting transactions and operations (transactions) by clients that have no obvious economic sense, legal purpose and/or which may subsequently harm the interests of the bank.";

• amend the first sentence of item 30 as follows:

"30. In carrying out their activities, members of the Board should be objective and guided primarily by the interests of the bank, not personal interests or the interests of individual shareholders, bank officials, or third parties, making every effort to ensure healthy and safe banking practices.";

• amend item 32 by adding the eighth paragraph as follows:

"- take exhaustive measures to prevent the bank from conducting transactions and operations (transactions) by clients that have no obvious economic sense, legal purpose and/or which may subsequently harm the interests of the bank.".

10. 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 Risk Management in Banks of the Kyrgyz Republic" dated June 15, 2017 No. 2017-P-12/25-8-(NPA)":

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

• amend sub-item 4 of item 6 by adding a second paragraph as follows:

"The risk management policy must provide for methods (ways) of limiting the bank's conduct of transactions and operations (transactions) by clients that have no obvious economic sense, legal purpose (the transaction does not bring any benefit to the bank, the transaction/operation is confusing and unusual in nature, the operation does not correspond to the client's usual activity and/or has signs of suspicious operations and other criteria) and/or which may subsequently harm the interests of the bank.".

11. 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 Placing Funds in Foreign Currency by Commercial Banks in Deposit Accounts Opened in the National Bank of the Kyrgyz Republic" dated February 28, 2018 No. 2018-P-12/7-7-(NPA)":

in the Regulation "On the Procedure for Placing Funds in Foreign Currency by Commercial Banks in Deposit Accounts Opened in the National Bank of the Kyrgyz Republic", approved by the aforementioned Resolution:

• in the Appendix 1 to the Regulation:

amend the second sentence of item 2.17 as follows:

"It is prohibited to transfer funds of the Bank in foreign currency, held in deposit accounts opened in the National Bank, to third parties and to FCOs registered in offshore zones, the list of which is determined by the authorized state body of the Kyrgyz Republic in the field of countering the financing of terrorist activities and legalization (money laundering) of criminal proceeds.".

12. 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 Organizing Internal Control in Commercial Banks for Countering the Financing of Terrorist Activities and Legalization (Money Laundering) of Criminal Proceeds", Regulation "On the Procedure for Conducting Exchange Operations with Foreign Currency Cash in the Kyrgyz Republic" and making amendments and additions to certain regulatory legal acts of the National Bank of the Kyrgyz Republic on countering the financing of terrorist activities and legalization (money laundering) of criminal proceeds" dated August 14, 2019 No. 2019-P-12/42-1-(NPA)":

in the Regulation "On Minimum Requirements for Organizing Internal Control in Commercial Banks for Countering the Financing of Terrorist Activities and Legalization (Money Laundering) of Criminal Proceeds", approved by the aforementioned Resolution:

• amend item 3 in the state language by adding the eighth paragraph as follows:

"In order to immediately perform his functions in countering the financing of terrorist activities and legalization (money laundering) of criminal proceeds, the employee is authorized to transfer powers to the employees working under his supervision. In such a case, the employee is not released from responsibility for performing his functions in accordance with requirements.";

• amend sub-item 9 of item 32 by adding a fourth paragraph as follows:

"The bank must establish reasonable deadlines for the client to submit additional documents, including information about the counterparty, but no more than 10 (ten) working days, in order to determine the economic feasibility and legality of the operations conducted, as well as the source of the client's and beneficial owner's funds.";

• amend item 47 in the state language by adding a second paragraph as follows:

"The Bank's Board bears responsibility for the timely termination of further activities, including operations (actions) and/or business relations with the client.".