RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of June 28, 2019 No. 2019-P-12/34-3-(NPA)

About modification and amendments in some regulatory legal acts of National Bank of the Kyrgyz Republic

According to articles 20 and 68   of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic, banks and banking activity" the Board of National Bank of the Kyrgyz Republic decides:

1. Make changes and additions to the following resolutions of Board of National Bank of the Kyrgyz Republic (are applied):

- "About approval of the Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/2";

- "About approval of the Regulations on the economic standard rates and requirements obligatory for accomplishment of the Kyrgyz Republic by commercial banks of July 21, 2004 No. 18/1";

- "About some regulatory legal acts of National Bank of the Kyrgyz Republic" of August 25, 2005 No. 26/5";

- "About approval of the Instruction "About crediting restrictions" of September 15, 2004 No. 24/4";

- "About approval  of the Provision "About Corporate Management in Commercial Banks of the Kyrgyz Republic" of May 17, 2017 No. 19/12";

- "About approval of the Regulations on the minimum requirements to external audit of the banks and other financial credit institutions licensed by National Bank of the Kyrgyz Republic of June 15, 2017 No. 2017-P-12/25-2-(NPA)".

2. This resolution becomes effective since January 1, 2020.

3. To legal management:

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

- after official publication to send this resolution to the Ministry of Justice of the Kyrgyz Republic for entering into the State register of regulatory legal acts of the Kyrgyz Republic.

4. To management of methodology of supervision and licensing of banks to bring this resolution to the attention of OYuL "Union of Banks of Kyrgyzstan", commercial banks, National bank of development of the Kyrgyz Republic, JSC Finance Company of Credit Unions, the relevant structural divisions, regional managements, representative offices of National Bank in Batken Province.

5. To impose control of execution of this resolution on the board member supervising Management of methodology of supervision and licensing of banks.

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of June 28, 2019 No. 2019-P-12/34-3-(NPA)

Changes and amendments in some regulatory legal acts of National Bank of the Kyrgyz Republic

1. Bring in the resolution of Board of National Bank of the Kyrgyz Republic "About approval of the Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic" of July 21, 2004 No. 18/2 the following changes:

in the Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic approved by the above-stated resolution:

- state Item 2.1.2 in the following edition:

"2.1.2. Own (regulating) capital is the capital of the First level taking into account deductions, stipulated in Item 3.10 these Instructions.";

- state Item 2.2 in the following edition:

"2.2. The coefficients of sufficiency (adequacy) of the capital based on weighing of balance sheet assets and off-balance obligations on risk degree:

a) coefficient of sufficiency of total (adequacy) of the capital (K2.1) shall be at least 12%. It is determined as the relation of the net Total capital to the amount of the balance sheet assets and off-balance obligations weighed on risk degree minus special reserves on covering of potential losses and losses. The net Total capital is determined as capital sum of the First level and the capital of the Second level;

b) coefficient of sufficiency (adequacy) of the capital of the First level (K2.2) shall be at least 6%. It is determined as the relation of the capital of the First level to the amount of the balance sheet assets and off-balance obligations weighed on risk degree minus special reserves on covering of potential losses and losses. The capital of the First level is determined according to Item 3.6 of this instruction;

c) coefficient of sufficiency (adequacy) of the Basic capital of the First level (K2.3) shall be at least 4, %. It is determined as the relation of the Basic capital of the First level to the amount of the balance sheet assets and off-balance obligations weighed on risk degree minus special reserves on covering of potential losses and losses.

The National Bank of the Kyrgyz Republic (further - National Bank) on the basis of risks assessment and the system importance of banks has the right to increase the minimum size of coefficients of adequacy of the capital.";

- the paragraph one of Item 2.3 to state in the following edition:

"Leverazh (K2.4) shall be at least 8%.";

-  state Chapter 3 in the following edition:

"3. Capital structure

3.1. The basis of the capital is constituted by completely paid authorized capital of bank. According to standards of Basel Committee on Banking Supervision, the authorized capital is "crucial element of the capital, general for bank systems in all countries; he is absolutely accurately visible in the reporting published by banks and is base on which market assessment of adequacy of the capital is based; it has crucial importance for measure definition of profitability and competitiveness of bank".

3.2. Only such authorized capital (common and preferred shares) on which there are no obligations on return of investments made by shareholders of bank is equity composition. These means can be received by shareholders only by transfer or sale of shares to the third parties.

3.3. The bank has no right to accept as a deposit own shares.

3.4. For the purposes of banking supervision distinctive sign of components of the capital is its capability to cover losses which can arise in the course of activities of bank. For this reason in case of assessment of adequacy of the capital the equity composition joins some "non-capital" business accounts (for example, "General reserve on covering of potential losses and losses" or "Subordinated bonds and other debt obligations").

3.5. For the purposes of calculation of coefficients of sufficiency (adequacy) of the capital the banking capital is divided into the capital of the First level and the capital of the Second level.

3.6. The capital of the First level is necessary for ensuring absorption of losses during the current activities of bank.

The capital of the First level consists of the following elements:

- Basic capital of the First level;

- Supplementary capital of the First level.

3.7. The structure of the Basic capital of the First level is constituted by the following elements:

1) "common shares" - the issued and completely paid common shares of bank meeting the conditions established by the legislation;

2) "preferred non-cumulative shares" - the issued and completely paid preferred shares of bank meeting the conditions established by the legislation and the dividend distributions which are not demanding from bank.

In the presence of circumstances/conditions when dividend distribution is obligatory, such preferred shares and the capital brought over nominal according to these shares shall be considered in the Supplementary capital of the First level or in the capital of the Second level;

3) "the capital brought over nominal" - difference between selling price of the common and preferred shares included in the Basic capital of the first level and their nominal value by results of issue.

The capital brought over nominal is not subject to distribution to shareholders in the form of dividends and remains in bank.

In the written consent of Natsionalnogo banka capital, brought over nominal, it can be used on increase in the authorized capital only for the purpose of observance of the requirement for the minimum size of the authorized capital;

4) "reserves for future requirements of bank" - the reserves created from profit after the taxation on future and/or unexpected events;

5) "retained earnings (losses) of last years" - remaining balance of net profit (losses) after the taxation of last years after deduction of the announced dividends and distribution to other capital accounts.

3.8. The structure of the Supplementary capital of the First level includes the following elements:

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