Resolution of the Board

of the National Bank

of the Kyrgyz Republic

of 27 July 2022
No. 2022-П-12/47-4-(НПА)

On Amendments to the Resolution of the Board

of the National Bank of the Kyrgyz Republic

“On Approval of the Regulation ‘On the Special Regulatory Regime’

of 12 August 2020 No. 2020-П-12/45-3-(НПА)

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. To introduce amendments to the Regulation “On the Special Regulatory Regime”, approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic of 12 August 2020 No. 2020-П-12/45-3-(НПА) (attached).
• 2. This Resolution shall enter into force upon the expiry of fifteen days from the day of its 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 the Department of Supervision Methodology and Bank Licensing to bring this Resolution to the attention of commercial banks, the Legal Entity Union “Union of Banks of Kyrgyzstan”, the relevant structural subdivisions of the National Bank of the Kyrgyz Republic, regional departments and the representative office of the National Bank of the Kyrgyz Republic in Batken Oblast.
• 5. To entrust control over the execution of this Resolution to the member of the Board of the National Bank of the Kyrgyz Republic supervising the Department of Supervision Methodology and Bank Licensing.

Acting Chairman Z. Chokoev

Annex
to the Resolution of the Board of the National Bank of the Kyrgyz Republic of 27 July 2022 No. 2022-П-12/47-4-(НПА)

Amendments to the Resolution of the Board

of the National Bank of the Kyrgyz Republic

On Approval of the Regulation “On the Special Regulatory Regime”

of 12 August 2020 No. 2020-П-12/45-3-(НПА)

• 1. To introduce the following amendments to the Resolution of the Board of the National Bank of the Kyrgyz Republic On Approval of the Regulation “On the Special Regulatory Regime” of 12 August 2020 No. 2020-П-12/45-3-(НПА):

in the Regulation “On the Special Regulatory Regime”, approved by the above-mentioned Resolution:

• to restate paragraph 1 as follows:

“1. This Regulation “On the Special Regulatory Regime” (hereinafter – the Regulation) determines the procedure for creating a special regulatory regime for the introduction of innovative banking operations and services/technologies, the procedure for participation and requirements for participants of the special regulatory regime under conditions of the need to adapt new services and technologies that were previously not offered in the banking and payment systems of the Kyrgyz Republic. The requirements of normative legal acts of the National Bank of the Kyrgyz Republic (hereinafter – the National Bank) apply to legal relations concerning the activities of special regulatory regimes taking into account the specifics provided for by this Regulation and decisions of the Supervision Committee/Payment System Committee of the National Bank (hereinafter – the Committee).

Criteria for determining the compliance of operations and services related to banking operations in accordance with the legislation of the Kyrgyz Republic for participation in the special regulatory regime:

• the technologies used in conducting banking operations and (or) providing banking services are fundamentally new for the market;

• operations and services or the use of technologies that are not provided by another entity within the framework of the special regulatory regime;

• the consumer properties of the operations and services are improved compared to existing identical products and significantly increase the efficiency of conducting operations;

• the operations and services were previously not used by entities in the banking market or were restricted by normative legal acts of the Kyrgyz Republic;

• the operations and services are not regulated by normative legal acts of the Kyrgyz Republic and there is no direct prohibition on conducting the operations.

Compliance of the operation and (or) service proposed for testing with the above criteria is mandatory for creating a special regulatory regime.”;

• to restate paragraph 4 as follows:

“4. The creation of a special regulatory regime is carried out on the basis of the principles of voluntariness, publicity, equality of reporting and the introduction of restrictions in relation to all participants of the special regulatory regime, as well as taking into account the recommendations of international standards on banking activities and effective supervision. At the same time, the implementation of the special regulatory regime must not affect any change in the main goal, operations and principles of activity of the National Bank specified in the legislation of the Kyrgyz Republic.

Risk management methods must correspond to the scale of the participant’s activity and the risks associated with the introduction of an innovative banking service or technology within the framework of the special regulatory regime.”;

• to restate paragraph 5 as follows:

“5. Responsibility for compliance with the conditions of the special regulatory regime shall be borne by the Applicant jointly with the Co-applicant (if any).

At the same time, the Applicant/Co-applicant (if any) for entering the special regulatory regime shall be a legal entity registered in the territory of the Kyrgyz Republic, which must meet the following requirements:

• absence of unexecuted enforcement measures in relation to the Applicant (Co-applicant) or its head or founder (shareholder, participant), applied during the last 3 (three) years prior to the moment of submitting the application;

• the applicant must not be in the process of liquidation or bankruptcy, or in a special regime;

• absence of a prohibition in relation to the Applicant (Co-applicant) or its head or founder (shareholder, participant) to engage in this type of activity by a court decision or in accordance with the legislation of the Kyrgyz Republic;

• absence among the founders of the Applicant (Co-applicant) of affiliated persons registered in offshore zones, or individuals residing in the territory of offshore zones or being shareholders (participants) of legal entities registered in offshore zones, the list of which is established by the National Bank;

• the financial condition of the Applicant (Co-applicant) must be satisfactory or the Applicant (Co-applicant) must possess sufficient financial and other resources to create and maintain a special regulatory regime.";

  • in paragraph 6, after paragraph 9, supplement with a paragraph of the following content:

"During the testing, the content of the technical specification must remain unchanged.";

• paragraph 8 shall be stated in the following wording:

"8. The Application includes:

• an application in the form of Appendix 1 to this Regulation, drawn up on the Applicant's letterhead, with a request to create a special regulatory regime in accordance with this Regulation, containing an inventory of the documents attached to the application, signed by the head and certified by the seal of the Applicant and Co-applicant (if any), or electronic equivalents drawn up in accordance with the requirements of the legislation of the Kyrgyz Republic;

• information about the Applicant and Co-applicant (if any) in the form of Appendix 2 to this Regulation and the written consent of the Co-applicant;

• information about the operation, service/technology in the form of Appendix 3 to this Regulation, the testing of which is proposed by the Applicant;

• notarized copies or electronic forms of the constituent documents of the Applicant/Co-applicant (if any) with details for obtaining confirmation from the relevant state bodies, indicating the amount of the declared charter capital;

• duly certified accounting/financial statements of the applicant for the last reporting financial year;

• forecast economic calculations of the results expected from the proposed operation and service.

The requirement to provide constituent documents and accounting/financial statements does not apply to persons supervised by the National Bank acting as the Applicant and Co-applicant (if any).";

• paragraph 9 shall be stated in the following wording:

"9. Information about the operation, service/technology (Appendix 3) must briefly disclose the content and essence of the proposed operation, service/technology. In this case, a detailed description of the operation, service/technology must be additionally attached in free form, including in graphical and schematic forms.";

• paragraph 4 of paragraph 10 shall be stated in the following wording:

"If the documents received by the National Bank do not meet the requirements imposed by the National Bank and/or do not contain information (description) sufficient for their review and decision-making, the calculation of the review period for the documents begins from the date the National Bank receives documents that satisfy the imposed requirements.";

• paragraph 14 shall be stated in the following wording:

"14. A letter refusing the creation of a special regulatory regime, indicating the reasons for refusal, is sent to the Applicant (Co-applicant) if, based on the results of the review of the application, a non-compliance of the Applicant (Co-applicant) with the requirements established by this Regulation is discovered, or the following is identified:

• significant risks regarding violation of the rights and/or interests of consumers of the banking operation and service;

• significant operational risks and risks related to the financing of terrorist activities and legalization (laundering) of criminal proceeds;

• the presence of unreliable data and information in the submitted documents;

• the presence of an identical banking operation or service provided or used in accordance with the legislation of the Kyrgyz Republic;

• recognition of the service/operation proposed for testing as not meeting the criteria specified in paragraph 1 of this Regulation.";

  • paragraph 15 shall be stated in the following wording:

"15. The relevant committee or committees, based on the reviewed documents included in the Application, adopts/adopt the following decisions:

• on the creation or refusal to create a special regulatory regime;

• on the issuance of a license for the right to conduct a limited list of banking operations within the framework of the special regulatory regime;

• on determining the restrictions of the special regulatory regime;

• on approving the criteria for evaluating success based on quantitative and qualitative indicators of the proposed testing;

• on the conditions for providing services and/or full/partial exemption of participants from fulfilling certain requirements of regulatory legal acts of the National Bank during testing;

• on establishing the conditions for termination of the special regulatory regime;

• on authorizing a structural subdivision with responsibility for conducting the special regulatory regime;

• on extending the term of the special regulatory regime;

• on establishing additional requirements for economic standards for the Participant of the special regulatory regime, taking into account the specifics of the proposed operation for testing;

• in case of successful testing, on extending the license term until the relevant amendments are made to the regulatory legal acts of the Kyrgyz Republic.";

  • paragraph 21 shall be stated in the following wording:

"21. If the testing of the banking operation and service according to the technical specification has not begun within 6 (six) months from the moment of obtaining the license, the license expires. A notification of the expiration of the license is sent by the National Bank to the Participant of the special regulatory regime.";

• paragraph 31 shall be stated in the following wording:

"31. No later than 30 calendar days before the expiration of the license or upon achieving the criteria with quantitative and qualitative testing indicators established in the technical specification, the Participant of the special regulatory regime sends to the National Bank a report on the testing results (hereinafter – the report), including:

• information on the quantitative and qualitative indicators achieved during the testing, in accordance with those specified in the terms of reference and the reasons for the discrepancy (if any);

• description of the problems encountered by the Participant of the special regulatory regime during the testing and the measures taken;

• assessment of the demand for the service by consumers;

• indication of the provisions of normative legal acts that may impede the further provision of the service;

• information on consumer complaints related to the provision of the service;

• information on the risks that materialized during the testing and the measures taken;

• the completed form in accordance with Appendix 4 to this Regulation;

• proposals for further normative regulation of the banking operation.».

• Appendix 2 to the Regulation "On the Special Regulatory Regime" shall be set out in the following wording:

«

INFORMATION ABOUT THE APPLICANT

Full name of the organization

Legal and actual addresses of the organization

Details of the certificate of state registration of the organization

Date of issue of the certificate

Taxpayer identification number (TIN)

Website of the organization (if any)

Availability of other permits from other state bodies

Full name and position of the contact person of the Applicant

Email address of the contact person of the Applicant

Telephone of the contact person of the Applicant

INFORMATION ABOUT THE CO-APPLICANT

Full name of the organization

Legal and actual addresses of the organization

Details of the certificate of state registration of the organization

Date of issue of the certificate

Taxpayer identification number (TIN)

Website of the organization

»;

• Appendix 3 to the Regulation "On the Special Regulatory Regime" shall be set out in the following wording:

«

INFORMATION ABOUT THE INNOVATIVE SERVICE/ TECHNOLOGY

Detailed description of the proposed innovative service/ technology (graphic/ schematic form is attached).

Description of the banking operation and service

Description of the business process of providing the innovative service/ implementing the innovative technology

Description of the business process, a graphic description of the business process is also attached

Description of the novelty of the service/ technology for the market. What are the expected positive social and economic effects?

The difference of the proposed banking operation and service from other banking operations and services provided on the market, or the new technology for providing the banking operation and service. Indication of the positive effects from the provision of the service, with indication of quantitative indicators

Description of the provision of identical innovative service/ technology outside the local market (if any) or indication of the absence of such experience

Brief description of the practice of providing identical banking operations and services outside the local market or indication of the absence of such practice

Provisions of normative acts of the National Bank that impede the provision of the innovative service/ technology without the creation of a special regulatory regime.

Excerpts from the relevant normative legal acts with references to normative documents

Other circumstances that impede the provision of the innovative service/ technology without the creation of a special regulatory regime

Indicated if any

Description of the risks associated with the provision/ implementation of the innovative service/ technology

Description of the risk with indication of

• risk level (low, medium, high, critical);

• risk minimization methods.

Each risk must be described separately according to the above structure, while the information security risk must be described with disclosure of the proposed measures for their minimization or elimination.

List of restrictions that may be established within the framework of testing or gaps that are subject to filling.

Description of restrictions that may be established within the framework of testing to reduce potential risks

Description of technical readiness for the provision of the innovative service/ technology

Description of technical readiness and the technology used, taking into account measures to ensure information security

Duration of testing

No more than 12 months

List of criteria for the success of testing

Description of the criteria in accordance with which the assessment of the success of testing may be carried out

Information on the proposed distribution of functions between the Applicant and the Co-Applicant (if any)

Brief description of the functions of the Co-applicant (if any)

Procedure for terminating testing

Procedure for servicing clients or terminating contracts, refunding funds and other actions upon completion of testing

»; - Appendix 6 to the Regulation "On the Special Regulatory Regime" shall be set out in the following wording:

«

NATIONAL BANK OF THE KYRGYZ REPUBLIC

TECHNICAL SPECIFICATION

to the license for the right to conduct testing of banking operations and services within the framework of the special regulatory regime

__________________________________________________________________ (full corporate name of the legal entity, hereinafter – the Participant)

• 1. Name and description of banking operations and services within the framework of the special regulatory regime.

……

• 2. Restrictions within the framework of the special regulatory regime on the right to conduct testing of banking operations

……

• 3. List of obligations introduced in respect of the participant of the special regulatory regime

……

• 4. List of criteria with quantitative and qualitative indicators for assessing the success of testing

……

• 5. Reporting form.

……

• 6. Procedure for actions of the participant of the special regulatory regime upon termination of testing.

This technical specification is an integral part of the license.

Deputy Chairman/ Member of the Board of the National Bank ___________________________ Full name, signature

Seal of the National Bank».