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Date created: 2019-07-03

Annex to the Resolution of the Board of Directors of the National Bank of the Kyrgyz Republic dated June 19, 2019 No. 2019-P-15/32-1-NPA)

RULES for the Registration of Collateral in the Form of Securities Placed through the National Bank of the Kyrgyz Republic in Interbank Credit Operations

Chapter 1. General Provisions

1. These Rules are developed to streamline the process of registering collateral agreements at the National Bank of the Kyrgyz Republic (hereinafter – the National Bank), where the subject matter of collateral consists of government securities issued by the Government of the Kyrgyz Republic and notes of the National Bank, placed through the National Bank and accounted for in the depository at the National Bank in interbank credit operations, as well as actions regarding collateral assets in cases of fulfillment or non-fulfillment of the obligation secured by collateral.

Chapter 2. Terms Used in These Rules

2. For the purposes of these Rules, the following terms are applied:

Securities placed through the National Bank – government securities issued by the Ministry of Finance of the Kyrgyz Republic on behalf of the Government of the Kyrgyz Republic and notes of the National Bank (hereinafter – Securities).

Depository – the National Bank, which carries out depository accounting and storage of Securities, registration of transfer, and confirmation of ownership rights to Securities.

Depository account (Depo-account) – a record (or set of records) created for each Security for accounting and storage purposes.

Collateral sub-account of the "depository" account (collateral sub-account) – a section of the "depository" account of a Direct Participant in the depository, designated for accounting collateral encumbrances on rights to Securities based on law or Agreement.

Investment sub-account of the "depository" account (investment sub-account) – a section of the "depository" account of a Direct Participant in the depository, regarding which no restrictions are imposed on the transfer of Securities.

General sub-account of the "depository" account (general sub-account) – a section of the "depository" account of a Direct Participant in the depository for collectively accounting Securities belonging to its clients – owners of Securities. Transfers of Securities from this sub-account may be carried out only upon instruction from the owners of Securities.

Direct Participant – a commercial bank licensed by the National Bank, having a correspondent/current account in the National Bank, the Social Fund of the Kyrgyz Republic, the State Accumulative Pension Fund under the Social Fund of the Kyrgyz Republic, CJSC "Central Depository", and the Agency for Deposit Protection of the Kyrgyz Republic, having concluded with the National Bank a corresponding agreement on operations in the market for Securities placed through the National Bank.

Authorized Person – a person possessing corresponding powers confirmed by an official letter, power of attorney, or notice.

Collateral Manager – a Direct Participant who is not the Pledgor, acting on the basis of an Agency Agreement as collateral manager on behalf of the Mortgagee who does not have a depository account in the Depository.

Chapter 3. Procedure for Registration of Collateral Agreements

3. Collateral agreements concluded between Direct Participants having depository accounts in the Depository are submitted to the National Bank and registered at the National Bank when transactions are concluded outside the Automated Trading System (hereinafter - ATS).

4. The Creditor (hereinafter - Mortgagee) cannot demand the realization of its statutory rights under an agreement not registered at the National Bank in accordance with these Rules.

5. To minimize risks, collateral agreements are registered at the National Bank before funds are transferred to the account of the Borrower (hereinafter - Pledgor).

6. To register a collateral agreement at the National Bank, the Pledgor submits the following documents:

• A collateral agreement in 3 original copies, signed by authorized persons of the Pledgor and Mortgagee and certified with their seals;
• a copy of the obligation (credit agreement, contract) secured by collateral;
• an agency agreement between the Mortgagee and Collateral Manager in cases specified in paragraph 14 of these Rules;
• an instruction from the Pledgor to transfer pledged Securities from the investment sub-account to the collateral sub-account in the Depository (Annex 1);
• confirmation of payment for the registration of collateral agreements at the National Bank.

7. A collateral agreement must contain mandatory provisions, the list of which is specified in the Standard Collateral Agreement (Annex 2).

8. If the Pledgor submits a complete package of properly formatted documents to the National Bank no later than 17:00, the National Bank registers the collateral agreement on the day of submission. If documents are submitted after 17:00, registration is carried out on the next working day.

9. The National Bank verifies the presence of Securities specified in the submitted collateral agreements on the Pledgor's depository accounts in the Depository. Registration of a collateral agreement is carried out in the ATS, and ATS operations are regulated by a corresponding normative legal act of the National Bank. A record of the registration date and number is entered into the collateral agreement, certified by the signature of the Depository controller. One copy of the collateral agreement remains at the National Bank, while the second and third copies are transferred to the Mortgagee and Pledgor, respectively.

10. The National Bank may refuse registration of collateral agreements if:

• concluded agreements do not meet the requirements stipulated in these Rules;
• Securities specified in the collateral agreements and Pledgor's instruction are not listed on the Pledgor's depository accounts in the Depository;
• an incomplete package of documents is submitted or documents are not properly formatted.

11. Full or partial release of Securities pledged is carried out by the National Bank upon notice from the Mortgagee, submitted in a prescribed form (Annex 3) no later than 17:00. If the Mortgagee submits notice after 17:00, release is carried out on the next working day.

12. The National Bank replaces pledged Securities with Securities of other issuances based on new collateral agreements between the Pledgor and Mortgagee, registered in accordance with these Rules. Additional pledge of Securities and/or their partial release under an existing collateral agreement is carried out based on a Supplementary Agreement to the Collateral Agreement (Annex 5). Replacement of pledged Securities with newly issued Securities on their issuance day is not carried out.

13. A fee of 300 som is charged for registering a collateral agreement at the National Bank.

Chapter 4. Specific Features of Registration of Collateral Agreements

14. If the Mortgagee (legal entity - resident/non-resident) does not have a depository account in the Depository, the National Bank registers the collateral agreement provided that the Mortgagee has concluded an agency agreement with one of the Direct Participants (not being the Pledgor), whereby the latter agrees to act as Collateral Manager. The agency agreement must stipulate that the Mortgagee delegates to the Collateral Manager the right to sign documents related to collateral operations in accordance with these Rules. The original copy of the agency agreement signed between the Mortgagee and Collateral Manager is submitted to the National Bank simultaneously with the documents specified in paragraph 6 of these Rules.

15. In case banks conclude agreements (contracts) on providing credit lines (loans), tranches within intergovernmental agreements, international interbank associations, registration of a collateral agreement for Securities in the Depository is permitted without the participation of a Collateral Manager. Full or partial release of pledged Securities in the above case is carried out by the National Bank upon notice from the Mortgagee, submitted in a prescribed form (Annex 3). The Mortgagee's notice is provided in the state and/or official language.

16. Voluntary transfer of Securities located on the Pledgor's collateral sub-account to the Mortgagee's investment sub-account, or to the Collateral Manager's general sub-account in the Depository for debt repayment may be carried out by the National Bank upon instruction from the Mortgagee or Collateral Manager, agreed with the Pledgor (Annex 4), on the day of its receipt.

17. In case of non-fulfillment by the Pledgor of its obligation to the Mortgagee, enforcement may be levied on the pledged Securities in accordance with the legislation of the Kyrgyz Republic.

18. Transfer of Securities following enforcement by the Mortgagee on pledged Securities in judicial or out-of-court order is carried out by the National Bank based on documents submitted by the Mortgagee (court decision, agreement on out-of-court enforcement of collateral). The National Bank transfers pledged Securities to the Mortgagee's investment sub-account or to the Collateral Manager's general sub-account in the Depository.

19. Upon the maturity of Securities located on the Pledgor's collateral sub-account due to: (1) ongoing judicial or out-of-court proceedings; (2) the fact that the Pledgor and/or Mortgagee or Collateral Manager have not taken action regarding the collateral, the National Bank transfers their nominal value from the account of the Central Treasury under the Ministry of Finance of the Kyrgyz Republic to the correspondent account of the bank specified in the collateral agreement.

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Annex 1 to the Rules for Registration of Collateral in the Form of Securities Placed through the National Bank of the Kyrgyz Republic in Interbank Credit Operations

National Bank of the Kyrgyz Republic
Department ___________________

INSTRUCTION(*) of the Pledgor

In accordance with the Collateral Agreement with _____________________________________________________________________________ (Name of Mortgagee) dated "_" ______ 20 No. _____, I request to transfer _____________________________________________________________________________ (specify type of Securities) of the following issuances from the investment sub-account to the collateral sub-account in the depository.

Registration number of Securities	Quantity of Securities (pcs.)	Nominal value (currency)
Total:

M.P. __________________ _______________ __________________ (Position) (Signature) (Full Name)

Date of operation _________________________________________

(*) Prepared on the letterhead of the Mortgagee.

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Annex 2 to the Rules for Registration of Collateral in the Form of Securities Placed through the National Bank of the Kyrgyz Republic in Interbank Credit Operations

STANDARD AGREEMENT on Collateral

____________________________, hereinafter referred to as the Pledgor, acting on the basis of ______________, represented by ______________________, on one hand, and ___________________________, hereinafter referred to as the Mortgagee, acting on the basis of _____________________, represented by ______________________________, on the other hand, collectively referred to as "the Parties", have agreed as follows:

1. To secure the fulfillment of the obligation under _____________________ dated "_" ___________ 20 year, the Pledgor transfers to the Mortgagee ownership of securities (hereinafter - Securities) of the following issuance(es) in the following volume(s):

Registration number of Securities	Quantity of Securities (pcs.)	Nominal value (currency)
Total:

2. In case of early full or partial fulfillment by the Pledgor of the obligation secured by collateral, _________________________ (specify Mortgagee/Collateral Manager) undertakes to timely notify the National Bank of the Kyrgyz Republic about full or partial release of pledged Securities.

3. The Mortgagee appoints (name of bank) as Collateral Manager, as a representative to exercise its rights as Mortgagee regarding Securities pledged under this Agreement (1).

4. In case of non-fulfillment of the obligation secured by collateral, the Mortgagee has the right to demand transfer of pledged Securities to its investment sub-account (or general sub-account of the Collateral Manager) in the depository at the National Bank of the Kyrgyz Republic.

5. In case of disputes between the Parties regarding fulfillment of the obligation secured by collateral and inability to reach consensus on rights to Securities pledged under this Agreement, the Parties refer to judicial bodies for resolution. Until disputes are resolved and/or a court decision is submitted to the National Bank of the Kyrgyz Republic, pledged Securities continue to remain on the Pledgor's collateral sub-account in the depository at the National Bank of the Kyrgyz Republic.

6. Upon maturity of Securities located on the Pledgor's collateral sub-account in the Depository due to: (1) ongoing judicial or out-of-court proceedings, (2) the fact that the Pledgor and/or Mortgagee or Collateral Manager have not taken action regarding the collateral, the Parties authorized the National Bank of the Kyrgyz Republic to transfer their nominal value from the account of the Central Treasury under the Ministry of Finance of the Kyrgyz Republic to the correspondent account of the bank (name of bank) at the National Bank of the Kyrgyz Republic.

7. The Parties agreed that fees for registering this Agreement at the National Bank of the Kyrgyz Republic are paid by _______________________________________________________________________ (specify Pledgor/Mortgagee).

8. The Parties agreed on the possibility of replacing pledged Securities with Securities of other issuances belonging to the Pledgor, and in this case, the Parties execute a new Collateral Agreement with registration and payment of the registration fee at the National Bank of the Kyrgyz Republic.

9. This Agreement is executed in 3 original copies of equal legal force (2). One copy of the Collateral Agreement remains at the National Bank, while the second and third copies are transferred to the Mortgagee and Pledgor, respectively.

Details of the Parties:

FOR THE PLEDGOR	FOR THE MORTGAGEE
_______________________	_________________________
_______________________	_________________________
_______________________	_________________________

Registered at the National Bank of the Kyrgyz Republic "" ____________ 20 year No. _____ ____________________ _______________ __________________ (Position) (Signature) (Full Name)

(1) this clause is included in the Collateral Agreement if necessary.
(2) The Parties may provide other additional provisions in this Agreement in accordance with the legislation of the Kyrgyz Republic and agreement of the parties.

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Annex 3 to the Rules for Registration of Collateral in the Form of Securities Placed through the National Bank of the Kyrgyz Republic in Interbank Credit Operations

National Bank of the Kyrgyz Republic
Department ___________________

NOTICE(*) (to Collateral Agreement No. _____ dated "" ____________ 20 year)

________________________________________________ requests to release from collateral (Name of Mortgagee) ___________________ , pledged by _________________________________________________ (specify type of Securities) (Name of Pledgor) due to (_______________________________________________________________________). (specify reason)

Registration number of Securities	Quantity of Securities (pcs.)	Maturity date of Securities
Total:

M.P. __________________ _______________ __________________ (Position) (Signature) (Full Name)

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(date)

(*) Prepared on the letterhead of the Mortgagee.

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Annex 4 to the Rules for Registration of Collateral in the Form of Securities Placed through the National Bank of the Kyrgyz Republic in Interbank Credit Operations

National Bank of the Kyrgyz Republic
Department ___________________

INSTRUCTION(*)

___________________________________________________ (Name of Mortgagee/Collateral Manager) In accordance with the agreement between __________________________________________ and (Name of Pledgor) _________________________________________ , registered at the National Bank of the Kyrgyz Republic (Name of Mortgagee) "" ______________ 20 year No. _____________ and in connection with ______________________________________________________ on the rights of Mortgagee, (specify reason) I request to transfer __________________________________________ from the collateral sub-account (specify type of Securities) ______________________________________________________ to the investment sub-account (Name of Pledgor) _________________________________________________ or general sub-account (Name of Mortgagee) ___________________________________________________ (Name of Collateral Manager) in the Depository, pledged by the aforementioned agreement following Securities:

Registration number of Securities	Quantity of Securities (pcs.)	Nominal value (currency)
Total:

M.P. __________________ _______________ __________________ (Position) (Signature) (Full Name)

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(date)

AGREED ( Pledgor )
M.P. __________________ _______________ __________________ (Position) (Signature) (Full Name)

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(date)

(*) Prepared on the letterhead of the Mortgagee.

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