Temporary Regulation on Criteria for Selecting a Settlement Agent for the Project Integrating the Elcart National Payment Card Settlement System with National/International Payment Systems of Other Countries

		Appendix to the resolution of the Board of the National Bank of the Kyrgyz Republic dated August 16, 2017 No. 2017-P-14/34-2-(NLA)

TEMPORARY REGULATION on criteria for selecting a settlement agent for the project integrating the Elcart National Payment Card Settlement System with national/international payment systems of other countries

(As amended by the resolution of the Board of the National Bank of the Kyrgyz Republic dated February 26, 2018 No. 2018-P-14/6-3)

Chapter 1. General provisions

1. This Temporary Regulation defines the criteria for selecting a settlement agent for the project integrating the Elcart national payment card settlement system (hereinafter - the Elcart system) with national/international payment systems of other countries (hereinafter - the integration project).

2. The purpose of the integration project is to enter the international payment services market and expand the service network of the Elcart system, as well as to accept cards of national/international payment systems of other countries within the infrastructure of the Elcart system and ensure mutual settlements on them.

3. The settlement agent, within the framework of the agreement on the integration project, ensures timely mutual settlements in any currencies with the settlement agent of the operator of national/international payment systems of other countries.

4. The decision on selecting the settlement agent within the framework of the integration project is made by the National Bank of the Kyrgyz Republic (hereinafter - the National Bank) in accordance with the Policy on supervision (oversight) of the payment system of the Kyrgyz Republic, the Main Directions for the Development of the Payment System of the Kyrgyz Republic for 2015-2017, and the Regulation on the Gross Real-Time Settlement System in the Kyrgyz Republic.

Chapter 2. Criteria for selecting the settlement agent

1. The settlement agent may be a commercial bank holding a license from the National Bank for the right to conduct banking operations for settlements and payments on behalf of clients and correspondent banks and their cash servicing, as well as for the issuance, purchase, payment, acceptance, storage and confirmation of payment documents (checks, letters of credit, bills of exchange and other documents), including credit and payment cards, and meeting the following criteria:

1) has carried out banking activity in the market of the Kyrgyz Republic for at least 5 years;

2) has a rating not lower than 2 under the CAMELS rating system and/or not lower than rating 2 under the risk-based supervision rating system assigned by the National Bank in accordance with the regulatory legal acts of the National Bank;

3) during the last 12 months no violations of the National Bank's economic norms, including mandatory reserve requirements, have been recorded;

4) during the last 3 years no enforcement measures in the form of introducing a special regime have been applied to it by the National Bank;

5) is a direct participant of the Elcart system;

6) is a participant of the Automated Trading System of the National Bank;

7) has existing correspondent relations with the settlement agent of the operator of a foreign payment system (advantage).

Chapter 3. Functions of the settlement agent

1. The settlement agent performs the following functions:

1) establishes and independently maintains correspondent relations with the settlement agent of the national/international payment system of another country integrated with the Elcart system;

2) concludes the relevant agreement with the operator of the national Elcart system;

3) on the instruction of the operator of the national Elcart system, ensures the timely transfer of funds in any currency to the settlement agent of the national/international payment system of another country for transactions of Elcart cards in the infrastructure of national/international payment systems of other countries, and receives reimbursement for the transferred funds in the equivalent in national currency through the Gross Real-Time Settlement System (hereinafter - GRTSS);

4) receives from the settlement agent of the national/international payment system of another country funds for transactions of cards of that system in the infrastructure of the Elcart system and ensures the timely crediting of the corresponding amounts to the correspondent accounts of participants of the Elcart system at the National Bank through the GRTSS.

Chapter 4. Obligations of the settlement agent

1. The settlement agent, within the framework of the integration project, is obliged to:

1) comply with the criteria established in Chapter 2 of this Temporary Regulation for selecting the settlement agent, as well as ensure compliance with all obligations assumed;

2) prevent a shortage of liquidity in the correspondent account at the National Bank, as well as delay and queue of payments in accordance with the requirements of the GRTSS;

3) have a portfolio of government securities and securities of the National Bank with a maturity of at least 3 (three) months (excluding the pledged portfolio), which must be not less than the average monthly value of turnovers in the national Elcart system (the sum of turnovers for each day of the previous month/number of days in the previous month when there were payments);

4) have an effective Business Continuity Plan in terms of ensuring uninterrupted settlements;

5) ensure a primary and backup channel for transmitting messages with the settlement banks of payment systems integrated with the national Elcart system;

6) guarantee timely mutual settlements with the banks participating in the Elcart system, as well as with the settlement agent of the national/international payment system of another country integrated with the national Elcart system;

7) develop and approve a Methodology for calculating sufficient liquidity, a step-by-step Procedure for carrying out mutual settlements with the settlement agent of the national/international payment system of another country integrated with the Elcart system, and participants of the Elcart system;

8) conduct an external audit of the bank's information systems at least once every two years. The settlement agent must conduct an audit of the information system in accordance with the requirements of the Regulation on minimum requirements for external audit of banks and other non-bank financial and credit organizations licensed by the National Bank of the Kyrgyz Republic.

(As amended by the resolution of the Board of the National Bank of the Kyrgyz Republic dated February 26, 2018 No. 2018-P-14/6-3)

Chapter 5. Final provisions

1. If several commercial banks meet the specified criteria and obligations, preference will be given to the commercial bank that fulfills the requirement for an additional capital reserve of the bank (the "capital buffer" indicator) and has the largest volume of own capital, higher indicators of financial stability and/or has passed an audit by an audit company with a recognized international reputation.

2. The National Bank reserves the right to change the settlement agent in case of detection, more than 3 times, of non-compliance with at least one of the criteria specified in Chapter 2 of this Temporary Regulation, non-fulfillment of obligations and deadlines for mutual settlements, as well as detection of complaints from participants of the Elcart system, the national/international payment system of another country integrated with the Elcart system, and/or its settlement agent.

3. The calculation of the average value of turnovers per month is carried out by ZAO "Interbank Processing Center" 1 (one) time per month on the basis of data for the previous month and, before the 5th day of the month following the reporting month, the relevant information is sent to the National Bank and the commercial bank for further use by the commercial bank - settlement agent during the reporting month to comply with the requirement specified in subparagraph 3 of paragraph 1 of Chapter 4 of this Temporary Regulation.

(As amended by the resolution of the Board of the National Bank of the Kyrgyz Republic dated February 26, 2018 No. 2018-P-14/6-3)