Resolution of the Board of the National Bank of the Kyrgyz Republic No. 39/8 of October 23, 2013 on Amendments to Resolution No. 51/6

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of October 23, 2013 No. 39/8

On Amendments and Additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 51/6 of December 28, 2009 "On Some Regulatory Legal Acts of the National Bank of the Kyrgyz Republic"

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

RESOLVES:

1. Approve the attached amendments and additions to the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 51/6 of December 28, 2009 "On Some Regulatory Legal Acts of the National Bank of the Kyrgyz Republic".

2. Establish that the action of the Regulation "On the classification of assets and corresponding allocations to reserves to cover potential losses and damages in the implementation of operations in accordance with Islamic principles of banking and financing", approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 51/6 of December 28, 2009, extends to JSC "EcoIslamicBank" in the implementation of its operations in accordance with Islamic principles of banking and financing within the framework of a pilot project.

3. Recognize as invalid paragraph 2 of the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 28, 2009 No. 51/6 "On Some Regulatory Legal Acts of the National Bank of the Kyrgyz Republic".

4. This Resolution enters into force after the expiration of fifteen days after its official publication.

5. 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.

6. The Department of Supervision and Licensing Methodology shall bring this Resolution to the attention of commercial banks.

7. Control over the implementation of this Resolution shall be entrusted to the Deputy Chairman of the National Bank of the Kyrgyz Republic Z.L. Chokoev.

Chairman		Z. Asankhozhayeva

		Approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2013 No. 39/8

AMENDMENTS AND ADDITIONS to the Resolution of the Board of the National Bank of the Kyrgyz Republic No. 51/6 of December 28, 2009 "On Some Regulatory Legal Acts of the National Bank of the Kyrgyz Republic"

Make the following amendments and additions to the Regulation on the classification of assets and corresponding allocations to reserves to cover potential losses and damages in the implementation of operations in accordance with Islamic principles of banking and financing, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 28, 2009 No. 51/6:

1. In paragraph 1, replace the words "Islamic banks and banks having an 'Islamic window'" with the words "banks, microfinance companies having the right to attract deposits and carrying out activities in accordance with Islamic principles of banking and financing".

2. Rephrase paragraph 2 as follows:

"2. The purpose of this Regulation is to establish minimum requirements for the classification of assets and off-balance sheet obligations placed/accepted in accordance with Islamic principles of banking and financing (hereinafter - assets), as well as for the creation of corresponding reserves to cover potential losses and damages (hereinafter - PLD) for the purposes of regulation and supervision."

3. In paragraph 5, after the word "client", add the words "/partner/supplier (hereinafter - client)".

4. In paragraph 16, replace the words "One or a set" with the word "Set".

5. Supplement Chapter 3 with paragraphs 17-1 and 17-2 of the following content:

"17-1. When classifying assets of a banking group provided to the same client or a group of related clients, it is necessary to take into account the classification of these assets carried out by each participant of the banking group and classify these assets according to the worst of the classification categories carried out by each participant of the banking group for these assets.

17-2. When classifying assets by a bank, it must be taken into account whether the client complies with the terms of the contract for any other asset carrying credit risk/credit, in case the client has an outstanding debt to other financial and credit institutions. In this regard, it is necessary to monitor the presence of other assets carrying credit risk/credits in other financial and credit institutions at the time of reviewing the application, using information obtained from the client, through the credit information bureau, or by any other available means within the legislation of the Kyrgyz Republic. Further, in the process of monitoring the asset, it is necessary to take into account information obtained from the client regarding the presence of assets carrying credit risk/credits obtained in other financial and credit institutions, as well as information on compliance with the terms of the contract for these assets. The financing contract/credit contract must provide for the obligation of the client to provide this information no less than once every six months during the term of the contract. At the same time, all financial and credit institutions are obliged to provide within 3 working days upon the client's request information on the receipt of an asset carrying credit risk/credit and on the client's compliance with the contract terms for its provision to another financial and credit institution."

6. Supplement paragraph 23 with the twelfth paragraph of the following content:

"- the presence of the first restructuring of the asset".

7. Supplement paragraph 24 with the tenth and eleventh paragraphs of the following content:

"- non-compliance by the client - a natural person, including an individual entrepreneur without forming a legal entity, of the contract terms for more than 30 days for any other asset carrying credit risk, with the exception of assets financed under targeted state programs of the Government of the Kyrgyz Republic in this bank and/or another financial and credit institution;

• non-compliance by the spouse, parents and children of the client - a natural person, including an individual entrepreneur without forming a legal entity, of the contract terms for more than 30 days for assets carrying credit risk, to this bank and/or other financial and credit institutions, with the exception of assets financed under targeted state programs of the Government of the Kyrgyz Republic, provided that the source of repayment of all the above assets is the same. At the same time, the same source of repayment of assets carrying credit risk is understood as the aggregate income of the above persons, accounted for by the financial and credit institution when making a decision on issuing the asset, including income from entrepreneurial activity.

Note: The signs specified in the tenth and eleventh paragraphs of this paragraph do not apply to overdrafts within salary projects."

8. Rephrase the title of Chapter 5 as follows:

"5. Separate cases of classification".

9. Supplement Chapter 5 with paragraph 27-1 of the following content:

"27-1. In the event that the client - a natural person, including an individual entrepreneur without forming a legal entity, has several assets carrying credit risk in the bank, then all his assets are subject to the classification assigned to his asset with the largest debt, if this classification is the worst."

10. In paragraph 33, replace the word "Restructured" with the words "Re-restructured".

11. In paragraph 33, replace the word "borrower" with the word "client".

12. Supplement the Regulation with Chapter 10-1 of the following content: "10-1. Classification of cross-border assets and assets secured by collateral located outside the Kyrgyz Republic

43-1. Cross-border assets and assets secured by collateral located outside the Kyrgyz Republic, upon their issuance, are classified as assets under observation.

43-2. Assets under observation are also classified as assets for which the collateral located outside the Kyrgyz Republic is not the only security, but the quality and value of the collateral, including its ratio to the size of the asset carrying credit risk, within the territory of the Kyrgyz Republic, do not meet the corresponding requirements of the National Bank of the Kyrgyz Republic and internal bank policies."

13. Rephrase the fourth sentence of paragraph 50 as follows:

"The check can be carried out both at the expense of the bank's internal resources and with the help of attracted external experts."