Resolution of the Board of the National Bank of the Kyrgyz Republic No. 59/5 of 30 September 2015 on Amending and Supplementing the Resolution of the Board of the National Bank of the Kyrgyz Republic of 26 May 2010 No. 36/7 on Approval of the Regulation on Basic Requirements for the Activities of Commercial Banks when Concluding an Agency Agreement for the Provision of Retail Banking Services

NATIONAL BANK OF THE KYRGYZ REPUBLIC

RESOLUTION

of 30 September 2015 No. 59/5

On amending and supplementing the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation of the National Bank of the Kyrgyz Republic "On basic requirements for the activities of commercial banks when concluding an agency agreement for the provision of retail banking services" of 26 May 2010 No. 36/7

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

RESOLVES:

1. To introduce into the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation "On basic requirements for the activities of commercial banks when concluding an agency agreement for the provision of retail banking services" of 26 May 2010 No. 36/7 the amendments and supplements (attached).

2. This resolution enters into force upon the expiry of one month after official publication.

3. To the Legal Department:

• to publish this resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, to send this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Normative Legal Acts of the Kyrgyz Republic.

4. To entrust control over the execution of this resolution to the Deputy Chairman of the National Bank of the Kyrgyz Republic B.Zh. Zheenbayevа.

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

Appendix

AMENDMENTS AND SUPPLEMENTS to the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation "On basic requirements for the activities of commercial banks when concluding an agency agreement for the provision of retail banking services" of 26 May 2010 No. 36/7

To introduce into the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation "On basic requirements for the activities of commercial banks when concluding an agency agreement for the provision of retail banking services" of 26 May 2010 No. 36/7 the following amendments and supplements:

in the Regulation "On basic requirements for the activities of commercial banks when concluding an agency agreement for the provision of retail banking services", approved by the above-mentioned resolution:

• paragraph 1 shall be stated in the following wording:

"1. This Regulation has been developed in accordance with the Civil Code of the Kyrgyz Republic, the Laws "On the Payment System of the Kyrgyz Republic", "On the National Bank of the Kyrgyz Republic", "On Banks and Banking Activities in the Kyrgyz Republic", "On Microfinance Organizations in the Kyrgyz Republic", "On Credit Unions", "On Operations in Foreign Currency", "On Banking Secrecy", "On Combating the Financing of Terrorism and Legalization (Laundering) of Proceeds from Crime" and other normative legal acts of the National Bank of the Kyrgyz Republic (hereinafter - the National Bank).";

• paragraph 4 shall be stated in the following wording:

"4. A bank may engage as a retail agent a legal entity or an individual entrepreneur in accordance with the requirements of this Regulation. In this case, the bank bears responsibility for the performance of obligations by agents within the limits of the agreement.";

• in paragraph 5, after the words "making money transfers", add the words "in national/foreign currencies if the bank has the corresponding license; accepting applications and transferring them to the bank for processing overdraft loans, and if the corresponding terminal is available, issuing cash under this type of loan, distribution and cashing of electronic money, accepting payments and servicing electronic wallets,";

• in paragraph 6, after the words "transferring them to the bank", add the words ", distribution and cashing of electronic money, accepting payments and servicing electronic wallets.";

• add paragraph 6-1 with the following content:

"6-1. The activity of banking retail agents in the distribution, servicing, topping up and cashing of electronic money and wallets is regulated by the Regulation "On Electronic Money in the Kyrgyz Republic", approved by the resolution of the Board of the National Bank of 12 May 2015 No. 27/8.";

• in paragraph 7, replace the word "client" with the word "agent";

• paragraph 10 shall be stated in the following wording:

"10. A retail agent is a legal entity or an individual entrepreneur that has signed an agency agreement with a bank on the provision, on behalf of the bank, of retail banking services, including through the retail agent's network. Retail agents are subdivided into agents providing an expanded range of services and agents providing a limited range of banking retail services.

An agent providing an expanded range of banking retail services is a legal entity holding a license of the National Bank to carry out banking/payment services and exchange operations in accordance with the normative acts of the National Bank. This agent may provide a limited range of services in the event of non-compliance with the requirements for technical security pursuant to paragraph 34 of this Regulation.

An agent providing a limited range of banking retail services is a legal entity or an individual entrepreneur that does not have the right to provide the full range of banking retail services.";

• in paragraph 17, after the words "on the Internet", add the words ", enabling connection with the main processing, generating and sending messages to the bank's payment system network and receiving messages coming from it.";

• add paragraph 17-1 with the following content:

"17-1. A trade and service enterprise (TSE) is a legal entity or an individual entrepreneur which, in accordance with an agreement concluded with an acquirer, accepts cards and electronic money for payment of goods or services and issues cash with the drawing up of documents confirming the performance of operations with cards and electronic wallets.";

• in paragraph 22, after the words "through dynamic client identification", add the words "or by other means ensuring secure data transmission";

• paragraph 23 shall be stated in a new wording:

"23. The provision of electronic banking services via telephone and/or other devices (terminals of various types) without the use of an electronic digital signature and dynamic client identification is permitted on the basis of the application of security procedures established by the bank's internal rules and the agency agreement.";

• in subparagraph 4 of paragraph 24, replace the words "virtual services" with the words "remote banking and payment services";

• paragraph 25 shall be stated in the following wording:

"25. The bank, on the basis of its strategy, guided by the rules of risk management and information systems management, must develop criteria for selecting a retail agent, based on the following categories of agents in accordance with the normative legal acts of the National Bank:

1) Agents providing an expanded range of banking retail services may be legal entities, residents of the Kyrgyz Republic, that have obtained a license of the National Bank for one of the following types of activity:

a) carrying out operations typical of microfinance organizations; attracting funds from the population in deposits and issuing loans;

b) carrying out operations typical of credit unions;

c) providing services for accepting and making payments and settlements for goods and services that are not the result of their own activity, in favor of third parties through payment systems based on information technologies and electronic means and methods of making payments;

d) conducting exchange operations with cash foreign currency.

2) Agents providing a limited range of banking retail services may be legal entities and individual entrepreneurs, residents of the Kyrgyz Republic:

a) having the right to distribute and cash electronic money;

b) or engaged in trade and service servicing and other legal entities/individual entrepreneurs at whose cash desks bank POS terminals for servicing bank payment cards and electronic wallets are installed;

c) or having the right, within established limits, to accept and make payments and repay loans.

Agents providing a limited range of services accept/make payments for goods and services/repay/top up and cash out cash from/to a bank card/to/e-wallets. The provision of an expanded range of services is prohibited.";

• add paragraph 25-1 with the following content:

"25-1. When selecting a retail agent, the bank must take into account the following parameters:

1) the existence of trust in the agent on the part of clients and the stability of its activity in the market segment in which the bank intends to provide banking retail services;

2) convenience of access for clients to banking retail services from the point of view of the location of the retail agent, the availability of qualified personnel, premises, taking into account their technical security;

3) the existence of trust in the retail agent on the part of the bank, verification of credit history, the existence of a policy for accounting for economic activity, quality cash operations and the existence of control over operations with cash at the retail agent;

4) the existence of a bank account at the retail agent, qualified personnel for working with information technologies, the existence or ability to organize the necessary communication channels for interaction with the bank, the existence of premises for creating a point of access to banking retail services;

5) the existence of potential for combining banking retail services with the main activity of the retail agent, openness to carrying out its activity within the framework of co-branding with the bank, on behalf of the bank, as well as the readiness and ability of the agent to increase business volumes.";

• paragraph 26 shall be stated in the following wording:

"26. The bank concludes an agency agreement with a retail agent and, if necessary, opens a settlement account of the retail agent to reflect operations with cash and non-cash funds for operations carried out by clients in accordance with the terms of the agency agreement concluded between the bank and the retail agent. The terms of the agency agreement must unequivocally confirm that the bank bears responsibility to clients for the actions of its retail agents within the limits and in accordance with the agreement signed between the bank and the agent.";

• paragraph 27 shall be supplemented with a second paragraph with the following content:

"27. Limits on cashing out funds through bank payment cards through retail agents must not exceed 150 calculation indicators.";

• paragraph 33 shall be stated in the following wording:

"33. The bank must carry out internal control and systematic verification of the retail agent's activity in fulfilling the terms of the agreement and the quality of banking services provided through the retail agent. The bank bears responsibility to the client in the event of fraud or negligence on the part of the retail agent. The bank appoints a responsible person/unit of the bank to consider client complaints and resolve disputed situations on operations carried out through the banking agency network within the limits and in accordance with the agreement signed with the agent.";

• paragraph 34 shall be stated in the following wording:

"34. When selecting a retail agent for the provision of an expanded range of banking retail services, the bank must be guided by the technical requirements for equipment in accordance with the Instruction "On uniform requirements for the technical security of financial and credit institutions and the procedure for their protection in the Kyrgyz Republic", approved by order of the Ministry of Internal Affairs of the Kyrgyz Republic and the National Bank of the Kyrgyz Republic of 11 February 2010 No. 97/24-0, established for group 5. The conditions for compliance with the requirements of this Instruction on the part of the agent must be enshrined in the agreement between the bank and the agent. These requirements do not apply to agents providing a limited range of banking services specified in paragraph 25 of this Regulation.";

• add paragraph 34-1 with the following content:

"34-1. When selecting a retail agent for the provision of a limited range of banking retail services, the bank must at a minimum take into account the following:

• the existence of a patent for carrying out entrepreneurial activity;

• training of the agent in the provision of banking retail services;

• depending on the limits established for agents at trade and service enterprises, provide for appropriate physical security measures depending on the type of services provided;

• if the agent provides services only in non-cash form, technical equipment and other physical security measures are not required.";

paragraph 38 shall be stated in the following wording:

"38. The retail agent, on the basis of an agency agreement concluded with the bank, carries out activity in providing banking retail services to clients on its own behalf and on behalf of the bank, at the bank's expense and/or at its own expense, through the agency network."

• paragraph 41 shall be recognized as having lost force;

• in paragraph 44, subparagraphs 3, 5, 8 shall be recognized as having lost force;

• paragraph 45 shall be stated in the following wording:

"45. The retail agent issues, at the request of the payer, a cash receipt at the moment of acceptance/issuance of cash as confirmation of the performance of the operation in accordance with the requirements of the legislation of the Kyrgyz Republic. The client has the right to refuse to receive a cash receipt for the completed operation.";

• paragraph 49 shall be stated in the following wording:

"49. Settlements for clients' payments with recipients in whose favor funds were received from payers are made by transferring funds from the retail agent's settlement account to the bank within the timeframes established in the agency agreement concluded between the bank and the retail agent. In turn, the bank undertakes to transfer funds to the recipients within the timeframes established by the agreement with the recipients.";

• paragraph 51 shall be stated in the following wording:

"51. Information on accepted payments is stored in the hardware and software complex and on electronic media of the bank and/or at the retail agent for the period established by the legislation of the Kyrgyz Republic.";

• paragraph 55 shall be stated in the following wording:

"55. Any client operation passing through the banking agency network must be registered in electronic form, both in the bank's system and in the retail agent's system, and reflected in the agent's settlement account at the bank.";

• in paragraph 62, subparagraphs 6 and 7 shall be recognized as having lost force;

• paragraph 66 shall be stated in the following wording:

"66. In order to ensure the security of accepted payments and settlements, the retail agent must comply with the requirements of confidentiality of banking information, and also exclude access to technical means for servicing clients issued by the bank.";

• paragraph 70 shall be stated in the following wording:

"70. The bank must maintain a database of its agents containing at a minimum the following information: the legal name of the agent, the actual address of the agent, the telephone number and the list of services provided, and provide it upon the request of the National Bank, including during inspections carried out within the framework of exercising control and supervision over the payment system of the Kyrgyz Republic.".