Resolution of the Board of the National Bank of the Kyrgyz Republic No. 22/7 of April 15, 2015 on Amendments to Certain Resolutions

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of April 15, 2015 No. 22/7

On Amendments and Additions to Certain Resolutions of the Board of the National Bank of the Kyrgyz Republic

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12/23-1)

In accordance with Articles 7 and 43 of the Law "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic resolves:

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

• "On the Temporary Regulation 'On General Principles of Asset Classification and Formation of Reserves to Cover Potential Losses and Losses of Microfinance Organizations in the Kyrgyz Republic Not Having the Right to Accept Deposits from Individuals and Legal Entities' dated October 22, 2003 No. 31/3;

• "On Approval of the 'Temporary Procedure for Applying Special Classification of Loans Meeting Certain Criteria' dated March 2, 2006 No. 5/6;

• "On Approval of the Regulation 'On Minimum Requirements for Credit Risk Management in Microfinance Organizations Not Attracting Deposits (Deposits)' dated September 25, 2013 No. 35/14;

• "On Approval of the New Edition of the Regulation 'On Loan Classification in Credit Unions' dated April 12, 2006 No. 10/6;

• "On Approval of the New Edition of the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses' dated July 21, 2004 No. 18/3;

• "On Approval of the New Edition of the Instruction on Determining Capital Adequacy Standards for Commercial Banks of the Kyrgyz Republic" dated July 21, 2004 No. 18/2;

• "On Approval of the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses of Microfinance Organizations Conducting Operations in Accordance with Islamic Principles of Banking and Financing' dated September 24, 2014 No. 42/8;

• "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 Minimum Requirements for Credit Risk Management in Conducting Operations in Accordance with Islamic Principles of Banking and Financing' dated September 25, 2013 No. 35/13;

• (paragraph lost force in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12/23-1)

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12/23-1)

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 Supervision and Licensing Methodology Department to bring this resolution to the attention of commercial banks, the specialized financial-credit institution JSC "Financial Company of Credit Unions", the State Development Bank of the Kyrgyz Republic, microfinance organizations, credit unions, 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 Deputy Chairman of the National Bank of the Kyrgyz Republic L. Orozbaeva.

Acting Chairman	N. Zhenish

	Appendix

AMENDMENTS AND ADDITIONS to certain resolutions of the Board of the National Bank of the Kyrgyz Republic

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12/23-1)

1. Make the following amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On the Temporary Regulation on General Principles of Asset Classification and Formation of Reserves to Cover Potential Losses and Losses of Microfinance Organizations in the Kyrgyz Republic Not Having the Right to Accept Deposits from Individuals and Legal Entities" dated October 22, 2003 No. 31/3:

• in the title and throughout the text, replace the words "Temporary Regulation" in various cases with the word "Regulation" in the corresponding cases;

in the Temporary Regulation on General Principles of Asset Classification and Formation of Reserves to Cover Potential Losses and Losses of Microfinance Organizations in the Kyrgyz Republic Not Having the Right to Accept Deposits from Individuals and Legal Entities, approved by the aforementioned resolution:

• in the title and throughout the text, replace the words "Temporary Regulation" in various cases with the word "Regulation" in the corresponding cases;

• rephrase the second sentence of paragraph 2.4 as follows:

"Classification of group loans is carried out in accordance with the 'Procedure for Applying Special Classification of Loans Meeting Certain Criteria', approved by the Resolution of the Board of the National Bank of March 2, 2006 No. 5/6.';

• add to the eleventh paragraph of paragraph 3.4 after the words "or any other available means" the words "within the framework of the legislation of the Kyrgyz Republic";

• rephrase the second paragraph of paragraph 3.6-1 as follows:

"- the presence of an unpaid debt in other financial and credit institutions for any other loan by a borrower - a physical person, including an individual entrepreneur without legal entity status, with the exception of loans issued under targeted state programs of the Government of the Kyrgyz Republic;";

• rephrase paragraph 5.3 as follows:

"5.3. MFOs create general and special RPPUs for the corresponding classification categories, implementing the following sizes of provisions, indicated as a percentage of the asset amount:

General RPPUs:	Special RPPUs:
Standard - from 0% to 5%	Substandard - 25%
Assets under supervision - 10%	Doubtful - 50%
	Losses - 100%.".

2. Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the 'Temporary Procedure for Applying Special Classification of Loans Meeting Certain Criteria' dated March 2, 2006 No. 5/6:

• in the title and throughout the text, replace the words "Temporary Procedure" in various cases with the word "Procedure" in the corresponding cases;

in the Temporary Procedure for Applying Special Classification of Loans Meeting Certain Criteria, approved by the aforementioned resolution:

• in the title and throughout the text, replace the words "Temporary Procedure" in various cases with the word "Procedure" in the corresponding cases;

• in the first paragraph of paragraph 2-1.2, exclude the words "this or".

3. 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 Credit Risk Management in Microfinance Organizations Not Attracting Deposits (Deposits)' dated September 25, 2013 No. 35/14:

in the Regulation 'On Minimum Requirements for Credit Risk Management in Microfinance Organizations Not Attracting Deposits (Deposits)', approved by the aforementioned resolution:

• in the fifth paragraph of sub-item 3 of paragraph 13:

replace the words "in the temporary regulation" with the words "in the Regulation";

replace the words "in the 'Temporary Procedure'" with the words "in the 'Procedure'".

4. Make the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the New Edition of the Regulation 'On Loan Classification in Credit Unions' dated April 12, 2006 No. 10/6:

in the Regulation 'On Loan Classification in Credit Unions', approved by the aforementioned resolution:

• rephrase paragraph 3.3 as follows:

"3.3. The National Bank establishes general and special categories of loan classification and norms for provisions to RPPU from the remaining principal amount of the loan:

General RPPUs:	Special RPPUs:
Standard - 0%	Substandard - 25%
Assets under supervision - 10%	Doubtful - 50%
	Losses - 100%.";

• rephrase the second paragraph of paragraph 3.4-1 as follows:

"- the presence of an unpaid debt in other financial and credit institutions for any other loan by a borrower - a physical person, including an individual entrepreneur without legal entity status, with the exception of loans issued under targeted state programs of the Government of the Kyrgyz Republic(*).".

5. Make the following amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the New Edition of the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses' dated July 21, 2004 No. 18/3:

in the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses', approved by the aforementioned resolution:

• throughout the text of the Regulation, replace the word "NBKR" with the words "National Bank" in the corresponding cases;

• in paragraph 3.6-2, after the words "or any other available means", add the words "within the framework of the legislation of the Kyrgyz Republic";

• supplement sub-item 4.1.1 with a paragraph of the following content:

"Banks may classify loans in national currency as 'normal assets' if they meet the requirements specified in paragraph 4.2 of this Regulation.";

• supplement sub-item 4.2.2 with a paragraph of the following content:

"- primary restructuring of a loan by converting the currency of this loan from foreign currency to national currency in the event that this loan did not previously belong to the category 'classified loans'.";

• in the ninth paragraph of sub-item 4.3.2, after the words "primary restructuring of a loan", add the words ", with the exception of restructuring specified in sub-item 4.2.2 of this Regulation";

• supplement paragraph 5.3.2 with a paragraph of the following content:

"In case of a delay of 180 days or more in payment of debt on an asset, such asset must be classified as 'losses'.";

• in paragraph 11.1, replace the words "upon issuance are classified as loans under supervision" with the words "the bank must classify at least as 'assets under supervision'.";

• rephrase paragraph 11.2 as follows:

"11.2. In the event that collateral for a loan located outside the Kyrgyz Republic constitutes more than 50% of the total value of collateral, such a loan is classified at least as 'asset under supervision'.".

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

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

• in paragraph 2.3, replace the word "Laverage" with the word "Leverage".

7. Make the following amendment to the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses of Microfinance Organizations Conducting Operations in Accordance with Islamic Principles of Banking and Financing' dated September 24, 2014 No. 42/8:

in the Regulation 'On Asset Classification and Corresponding Provisions to Reserves to Cover Potential Losses and Losses of Microfinance Organizations Conducting Operations in Accordance with Islamic Principles of Banking and Financing', approved by the aforementioned resolution:

• in paragraph 8, replace the words "Temporary Procedure" with the word "Procedure".

8. Make the following amendment 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 Institutions Licensed by the National Bank of the Kyrgyz Republic', approved by the aforementioned resolution:

• rephrase the fourth paragraph of paragraph 61-3 as follows:

"- the bank applies special classification of assets and corresponding provisions to reserves to cover potential losses and losses for group loans in accordance with the Procedure for Applying Special Classification of Loans Meeting Certain Criteria, approved by the Resolution of the Board of the National Bank of March 2, 2006 No. 5/6.".

9. 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 Credit Risk Management in Conducting Operations in Accordance with Islamic Principles of Banking and Financing' dated September 25, 2013 No. 35/13:

in the Regulation 'On Minimum Requirements for Credit Risk Management in Conducting Operations in Accordance with Islamic Principles of Banking and Financing', approved by the aforementioned resolution:

• in the fourth paragraph of paragraph 66, replace the words "Temporary Procedure" with the word "Procedure".

10. (Lost force in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12/23-1)