RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 27, 2019 No. 2019-P-12/68-4-(NPA)

About approval of the Provision "About Calculation of Coverage Ratio of Liquidity of Commercial Banks"

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. Approve the Provision "About Calculation of Coverage Ratio of Liquidity of Commercial Banks" it (is applied).

2. To systemically significant banks determined by quantitative indices according to the Provision "About Criteria of Systemacity of Commercial Banks and Non-bank Financial Credit Institutions" approved by the resolution of Board of National Bank of the Kyrgyz Republic of June 8, 2017 No. 2017-P-12-12/23-9-(NPA):

- provide to National Bank information on calculation of coverage ratio of liquidity monthly since January 1, 2025;

- provide observance of coverage ratio of liquidity since March 1, 2025.

3. This resolution becomes effective since December 31, 2023.

4. 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.

5. 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, the relevant structural divisions, regional managements, representative offices of National Bank in Batken Province.

6. 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 December 27, 2019 No. 2019-P-12/68-4-(NPA)

Regulations on calculation of coverage ratio of liquidity of commercial banks

Chapter 1. General provisions

This Provision establishes liquidity coverage ratio procedure of payments. The coverage ratio of liquidity is directed to maintenance of stability of banks by providing sufficient inventory of highly liquid assets with them which can be easy and directly are transformed to money for satisfaction of the needs for liquidity during the stressful period proceeding 30 calendar days.

The coverage ratio of liquidity improves capability of bank to transfer the shocks arising from financial stresses and is aimed at maintenance of short-term stability of profile of liquidity risk of banks in the conditions of the considerable stressful scenario.

This Provision extends to systemically significant banks (further - banks) determined by quantitative indices according to  the Provision "About Criteria of Systemacity of Commercial Banks and Non-bank Financial Credit Institutions" approved by the resolution of Board of National Bank of the Kyrgyz Republic (further - National Bank) of June 8, 2017 No. 2017-P-12-12/23-9-(NPA).

Chapter 2. Measurement of level of liquidity and procedure of payments of coverage ratio of liquidity

§ 1. Liquidity coverage ratio

1. The coverage ratio of liquidity is calculated as the relation of highly liquid assets as of settlement date to the general net expected cash outflow on transactions of bank within 30 calendar days following settlement date of coverage ratio of liquidity.

2. The Liquidity Coverage Ratio (LCR) is calculated by the following formula:

3. Level of liquidity of banks is measured by calculation of the Communist Party of Luxembourg for all currencies in equivalent of national currency (further - the Communist Party of Luxembourg) and the Communist Party of Luxembourg on each essential foreign currencies.

4. The currency is considered "essential" to bank if at least 5% of cumulative obligations of bank fall on the obligations expressed in this currency.

5. The Communist Party of Luxembourg shall constitute at least 100%.

6. The Communist Party of Luxembourg and the Communist Party of Luxembourg in essential foreign currency are calculated daily (for each working/operational day).

7. Banks provide calculation of the Communist Party of Luxembourg and the Communist Party of Luxembourg for essential foreign currencies in National Bank for month under report on monthly basis as a part of the periodic regulating bank statement.

8. The National Bank has the right to establish separate value of the Communist Party of Luxembourg for specific bank. At the same time the National Bank has the right to establish cumulative the Communist Party of Luxembourg in national currency and the Communist Party of Luxembourg in foreign currency to bank group or for separate bank, and also to change the coefficients of cash outflow, coefficients of cash inflow and weight of highly liquid assets specified in this Provision.

§ 2. Highly liquid assets

9. For the purpose of calculation of the Communist Party of Luxembourg highly liquid assets (VLA) the assets corresponding to the following conditions are recognized:

1) are at the disposal of bank and provide possibility of immediate receipt of money by means of carrying out transactions with assets (sale, transfer on transactions of repo to providing on the raised funds);

2) are not providing according to obligations of bank and do not include the securities transferred on the transactions of repo made on returnable basis;

3) are in property of bank, including the securities received within the transactions made on returnable basis (transaction of the return repo) or are received as ensuring obligation fulfillment on the placed means and transactions with derivative financial instruments, in case of lack of restrictions of the rights of bank for their sale, transfer within transactions of repo to providing on the raised funds before completion date of obligations on their return.

The securities received by bank for ensuring obligation fulfillment on the placed means, agreements of the return repo or transactions with derivative financial instruments can be included in calculation of VLA only in case of impossibility of the requirement about their early return from the initial seller or the owner in the next 30 calendar few days from settlement date of the Communist Party of Luxembourg;

4) simplicity and reliability of cost assessment;

5) the asset shall have the active market in which it is characterized by low spreads between rates of buyers and sellers, large volumes of purchase and sale, large and various number of participants of the market that reduces market concentration.

10. VLA consist of quick assets of the first level, and also quick assets of level 2A and 2B which are components of quick assets of the second level.

11. VLA of the first and second level shall correspond to the conditions established in Item 9 of this provision.

12. Assets of the first level:

VLA of the first level are recognized the following assets:

1) cash in bank in national and foreign currency, and also the affined measuring ingots emitted by National Bank;

2) the means which are stored on correspondent and other accounts in National Bank (except for the minimum established threshold level of required reserves for settlement date);

3) the means on correspondent accounts in commercial banks having long-term credit rating is not lower than the A-level which is appropriated by Standard and Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks";

4) the securities issued by the Cabinet of Ministers of the Kyrgyz Republic and National Bank of the Kyrgyz Republic including the securities guaranteed by the Cabinet of Ministers of the Kyrgyz Republic and National Bank of the Kyrgyz Republic;

5) the securities of the governments of foreign states and Central Banks of foreign states, international financial institutions, including the securities guaranteed by them and satisfying to each of the following conditions:

a) issuers have long-term sovereign credit rating not lower than the AA-level which is appropriated by Standard & Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks";

b) banks have no obligations to the governments of foreign states and Central Banks of foreign states, international financial institutions or affiliated with them the organizations.

13. Assets of the first level join in calculation of the Communist Party of Luxembourg in full.

14. Level 2A assets:

Assets of level 2A are calculated at fair (market) value using discount coefficient in the amount of 15%.

VLA of level 2A are recognized the following assets:

1) the securities issued by the governments of foreign states and Central Banks of foreign states, international financial institutions, or guaranteed by them, having long-term sovereign credit rating is not lower than the A-level which is appropriated by Standard & Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks" which issuers are not the affiliated organizations in relation to bank;

2) securities which issuers are not the affiliated organizations in relation to bank having long-term credit rating is not lower than the AA-level which is appropriated by Standard & Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks".

15. Level 2B assets:

Assets of level 2B are calculated at fair (market) value using discount coefficient in the amount of 50%.

VLA of level 2B are recognized the following assets:

1) the securities issued by the governments of foreign states and Central Banks of foreign states, international financial institutions, or guaranteed by them and having long-term sovereign credit rating is not lower than "BBB-" which is appropriated by Standard & Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks";

2) securities which issuers are not the financial organizations or the organizations affiliated with them having long-term credit rating from "A+" to "A-" which is appropriated by Standard & Poor's rating agency, or equivalent score which is assigned by one of rating agencies Japan Credit Rating Agency (JCR), Fitch Ratings, Dominion Bond Rating Service (DBRS), Moody's Investors Service and other rating agencies corresponding to criteria, the stipulated in Item 3 Provisions "About the Economic Standard Rates and Requirements Obligatory for Accomplishment of the Kyrgyz Republic by Commercial Banks";

3) ordinary shares of the company which are in free circulation on the international stock exchanges, except for the ordinary shares issued by bank or any subsidiary company of bank.

16. The share of VLA of the second level shall not exceed 40% of total amount of VLA. If the share of VLA of the second level exceeds 40% of cumulative VLA, then VLA of the second level are included VLA in the amount of not exceeding 40% of VLA, after application of necessary coefficient of discount.

17. The share of VLA of level 2B shall not exceed 15% of the total amount of VLA after application of necessary coefficient of discount.

18. If acceptable VLA became unacceptable in accordance with the terms in Item 9 of this provision, and also as a result of the seizure or downgrade appropriated by the international rating agencies, the bank can consider (to hold) such assets as a part of VLA during the additional 30 calendar days. This condition will provide to bank extra time for adjustment of amount of VLA as required or replacements of asset.

19. VLA of bank included in calculation of the Communist Party of Luxembourg cannot be providing according to obligations of bank, shall not be in pledge in National Bank, and also restrictions from National Bank, state bodies shall not be imposed on them, by the contractual commitments or other conditions limiting capability of bank to liquidate, sell, transfer or assign asset.

§ 3. The net expected cash outflow and its calculation

20. The net expected cash outflow is determined as the general expected cash outflow less the general expected cash inflow.

Total amount of the expected inflow which can compensate the expected outflow shall constitute no more than 75% of the general expected cash outflow which shall be calculated according to this Provision.

21. The net expected cash outflow is calculated by the following formula:

ChODS = ODS-Min (PDS; ODS x 0,75);

ChODS - the net expected cash outflow during the next 30 calendar days;

ODS - the expected cash outflow;

PDS - the expected cash inflow (no more than 75% of general cash outflow).

22. The bank has no right to consider twice quick assets when calculating the Communist Party of Luxembourg. If any amount of quick asset is included in the structure of inventory of VLA (which is in numerator) expected the cash inflow connected with this quick asset shall not be considered as part of the general expected cash inflow (which is part of denominator).

23. The cash outflow is calculated as the general expected cash outflow by application of coefficient of outflow to remaining balance of different categories and obligation types and off-balance obligations which execution by bank is expected during calendar month (within 30 calendar days) following settlement date of the Communist Party of Luxembourg.

The expected cash outflow includes obligations to physical persons, individual entrepreneurs, legal entities, on the raised funds which recoverability is provided with assets of bank or without that providing, on derivative financial instruments, contingent obligations and other contractual commitments, and also other expected additional cash outflows.

24. Obligations to physical persons and individual entrepreneurs.

Obligations to physical persons and individual entrepreneurs include obligations according to bank accounts, accounts on bank deposits (deposits), including on metal accounts.

Deposits (deposits) acting as mortgage providing on the credits (guarantees) issued by bank join in calculation according to loan repayment period (guarantee).

25. For the purpose of calculation of the expected cash outflow deposits (deposits) of physical persons and individual entrepreneurs are classified as stable and less stable.

The bank appropriates to stable deposits (deposits) outflow coefficient in the amount of 5%.

It is necessary to understand the deposits of physical persons and individual entrepreneurs guaranteed in the amount of as "stable deposits", established by the Law of the Kyrgyz Republic "About protection of bank deposits (deposits)".

26. The part of contribution (deposit) of physical persons and individual entrepreneurs exceeding the size guaranteed by the Law of the Kyrgyz Republic "About protection of bank deposits (deposits)" shall be considered as "less stable deposit", and the outflow coefficient in the amount of 10% is applied to such deposits.

27. Obligations to legal entities.

Obligations to legal entities include settlement accounts and the attracted deposits (deposits) of legal entities.

Deposits (deposits) of legal entities, consist of operational and not operational deposits (deposits).

28. Operational deposits (deposits) are the deposits placed by legal entities and necessary for conducting their operating activities, connected with transactions on clearing, storage or cash management.

Operational deposits and settlement accounts join in calculation of the expected outflows with coefficient in the amount of 25%.

29. Operational deposits (deposits) shall answer the following conditions:

1) the deposit interest rate does not exceed weighted average interest rate on on-demand deposits of legal entities. Besides, deposits are placed not for the purpose of receipt of interest income;

2) deposits (deposits) which are placed are in bank on separate accounts.

30. At the same time for reference of deposits in category of operational deposits the bank shall provide accomplishment of one of the following criteria:

1) to provide clearing services, and also services in storage and cash management of the client based on bank deposit agreement (deposit);

2) the agreement shall contain regulation according to which the client during the closing or agreement cancelation shall at least in 30 (calendar) days in writing notify on it bank.

31. Not operational deposits (deposits) are the deposits (deposits) of legal entities (except for financial credit institutions) placed for storage and funds accumulation and not intended for settlings with the third parties. The bank appropriates the following coefficients of outflow:

Investors	Outflow coefficient, in %
Deposits (deposits) of the Cabinet of Ministers of the Kyrgyz Republic, local authorities of management (local self-government), state bodies of the power and structures of public sector of foreign states, international financial institutions	40
Deposits (deposits) of legal entities (except for financial credit institutions)	40
Deposits (deposits) of other organizations which are not included in the previous categories	100

32. Deposits (deposits) and other raised funds of the affiliates and persons connected with bank join in calculation of the Communist Party of Luxembourg with outflow coefficient in the amount of 100%.

33. The bank includes in the amount of the expected cash outflow of means on correspondent accounts of corresponding banks with outflow coefficient in the amount of 100%.

34. The bank shall establish outflow coefficient in the amount of 100% for all categories of deposits (deposits) and the other raised funds without providing from the banks, financial credit institutions, the organizations performing transactions with securities, insurance companies, the pension funds, the organizations of special purpose (providing broker services, services of asset management and other financial services as the intermediary) and other organizations which are not included in the previous categories.

35. The raised funds provided with assets of bank and without providing.

The obligations of bank provided with highly liquid assets and other assets of bank belong to borrowed funds which recoverability is provided with assets of bank.

36. The bank calculates the outflow sum for the raised funds on the basis of transaction, but not the cost of mortgage providing.

37. The bank applies the following coefficients to all subjects to payment to transactions on the raised funds which recoverability is provided with assets of bank with repayment periods within 30 calendar days:

Categories of the transactions which are subject to payment on the raised funds on security assets of bank with the coming repayment periods	Outflow coefficient, in %
The obligations provided to VLA of the first level	0
Obligations to National Bank	0
The obligations provided to level 2A VLA	15
The obligations provided to level 2B VLA	50
All other transactions of secure financing with the coming repayment periods which are not specified in the stated above corresponding categories	100

38. The credits and loans of bank without providing attracted from legal entities and/or international financial institutions join in the expected cash outflow using coefficients according to Items 31, 32 this provision.

At the same time, if the agreement contains condition that agreement cancelation can be not earlier than in 30 calendar days after the direction to bank of the notification, the specified credits and loans join in the expected cash outflow according to repayment period within 30 calendar days.

39. Derivative financial instruments.

According to transactions with derivative financial instruments the expected cash outflow joins the amount of excess of obligations over requirements with coefficient of outflow of 100%. In case of excess of requirements over obligations for transactions with derivative tools the amount of exceeding joins in the expected cash inflow with coefficient of inflow of 100%.

40. Contingent obligations on credit lines.

Under contingent obligations on credit lines any are considered irrevocable (that is "obligations") or conditionally revocable agreements on provision of means in the future which can be demanded by clients within 30 calendar days.

41. The bank applies the following coefficients to obligations credit lines:

Partner	Outflow coefficient, in %
Credit lines of physical persons, individual entrepreneurs	5
Credit lines of legal entities (except for financial credit institutions)	10
Credit lines of the Cabinet of Ministers of the Kyrgyz Republic and authorities of the Kyrgyz Republic, international financial institutions	10
Credit lines of commercial banks	40
Credit lines of financial credit institutions	40
Others	100

42. Other contingent obligations.

The bank calculates the expected cash outflow on other contingent obligations according to the following coefficients of outflow:

Category	Outflow coefficient, in %
Certainly revocable (not obligations) credit lines	0
The contingent obligations on financing relating to trade financing	3 - obligations on trade financing
The guarantees and letters of credit which are not relating to obligations on trade financing	10 - amounts of guarantees and letters of credit

43. Other contractual commitments.

The bank establishes outflow coefficient in 100% according to contractual commitments and any other obligations according to which the outflow coefficient is not established, and the cash outflow is expected during the next 30 calendar days.

44. The bank does not include the outflows connected with operating expenses in the amount of cash outflow.

§ 4. Net cash inflow and its calculation

45. Credits.

The bank includes in calculation of the expected means cash inflow for granted loans only for the flows provided by agreements (including interest payments) in the next 30 calendar few days from settlement date of the Communist Party of Luxembourg, except for the credits with overdue debt.

46. Inflow coefficients are determined by the credits of partners as follows:

Partner	Inflow coefficient, in %
Credits of physical persons, individual entrepreneurs	50
Credits of legal entities (except for financial credit institutions)	50
Credits of the Cabinet of Ministers of the Kyrgyz Republic and authorities of the Kyrgyz Republic, international financial institutions	50
Credits of commercial banks and financial credit institutions	100

47. The bank concerning renewable credit lines shall recognize that the term of the operating credit tranche can be extended and from the partner the cash inflow on the credits is not expected. The rest of unused credit line is calculated according to Item of 41 this provision.

48. Secured loans, including the return repo and securities.

The bank shall calculate the expected cash inflow on the credits, secure highly liquid assets and to the transactions made on returnable basis with securities with repayment period within 30 calendar days, using the following coefficients of inflow:

The transactions of secure crediting with the coming repayment periods provided with the following categories of assets	Inflow coefficient, in %
Assets of the first level	0
Level 2A assets	15
Level 2B assets	50

49. The other expected cash inflows:

1) the bank establishes coefficient of inflow to 100% on inflow of means of securities with repayment period within 30 calendar days (for example, payment of the coupon) and to VLA which is not included in amount;

2) to the deposits of bank which are stored in other financial credit institutions for the operational purposes (for clearing, storage and cash management, and also carrying out payments in foreign currency), the coefficient of inflow to 0% is applied;

3) the bank establishes coefficient of inflow to 100% on the deposits which are stored in other financial credit institutions for not operational purposes such as interbank deposits which are subject to repayment during the next 30 calendar days.

50. The conditional cash inflows (expected dividend payout from investments of bank into shares or tools, similar to shares) do not join bank as the expected cash inflow.

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