RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 23, 2020 No. 2020-P-12/73-11-(NPA)

About modification of 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 to the following resolutions of Board of National Bank of the Kyrgyz Republic (are applied):

- About approval of the Provision "About Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses" of July 21, 2004 No. 18/3;

- "About some regulatory legal acts of National Bank of the Kyrgyz Republic" of June 30, 2010 No. 52/4.

2. This resolution becomes effective after fifteen days from the date of official publication.

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, OYuL "Association of the Microfinancial Organizations", microfinance companies attracting term deposits, JSC Finance Company of Credit Unions, JSC Garantiyny fond, the relevant structural divisions, regional managements and representative office 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 December 23, 2020 No. 2020-P-12/73-11-(NPA)

Changes 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 Provision "About Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses" of July 21, 2004 No. 18/3" the following changes:

in the Provision "About Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses" approved by the above-stated resolution:

- state Item 3.6-1 in the following edition:

"3.6-1. When carrying out classification of the assets provided by bank to the same borrower or group of the connected borrowers it is necessary to consider the classification which is carried out on each credit of the borrower or group of the connected borrowers and to classify these assets by category of the classification appropriated to asset with the greatest debt if this classification is the worst.

Similar approach to classification shall be applied by banks, being members of banking group, that is assets of the borrower or group of the connected borrowers who are residents of the Kyrgyz Republic shall be classified by category of the classification appropriated to asset with the greatest debt if this classification is the worst";

- state Item 4.3.2 in the following edition:

"4.3.2. Characteristic signs in case of which manifestation the asset can be considered asset under observation are:

- incomplete providing the asset for the rest having all characteristics inherent in satisfactory assets, or providing within contractual financing (for example, right to claim under the financed contract, receivables, etc.);

- return prosrochennost on the main amount and/or percent, for the term of no more than 30 (thirty) days;

- impossibility for bank to carry out monitoring of pledge because of insufficient documentation, or because of the absence of experts in its assessment;

- the planned reduction of liquidity of pledge (reduction of prices, fall of currency rate) or emergence of tendency of deterioration in financial condition of the guarantor/guarantor (if the asset is provided with the guarantee/guarantee);

- emergence of tendencies to deterioration in financial condition of the client;

- change of market conditions which can influence return of asset;

- repeated change of terms of the contract on the credit by currency transfer of this credit from foreign currency in national if this credit did not enter category of "the classified credits" and earlier at the same time if this change is not connected with deterioration in financial condition of the client.

In case of initial restructuring the asset which had signs of not classified assets is classified by bank as "asset under observation.";

- the eleventh Item 5.1.2 to state the paragraph in the following edition:

"-pledge reduction in cost, deterioration in its quality, pledge becomes poor-selling or emergence of tendency of deterioration in financial condition of the guarantor/guarantor (if the asset is provided with the guarantee/guarantee).";

- state Item 5.1.5 in the following edition:

"5.1.5. If on the restructured asset which was classified as "asset under observation" there were overdue payments more than for 30 days and/or the asset is restructured the second time during 1 (one), then such asset shall be classified as "substandard".

At the same time, if this "substandard" asset is provided with pledge in the form of the real estate at least for 120% of the asset amount, then the bank can create RPPU in the amount of 15%.

If on this asset the pledge condition in the form of the real estate worsened and/or its cost fell to level below 120% from the amount of asset or on asset there was overdue debt on the main amount and/or percent there are more than 90 days, the bank, at least, shall increase the RPPU size to 25% from the moment of identification of the above-stated facts.";

- to state the paragraph of the seventh of Item 5.2.2 in the following edition:

"-dependence of debt repayment, generally from pledge realization.";

- to state the paragraph of the eighth of Item 5.3.2 in the following edition:

"-provision of assets to subjects of offshore zones.";

- add Chapter 5 with Item 5.3.4 of the following content:

"5.3.4. Assets to which property rights are applicable (right of possession, and/or uses, and/or orders) shall be classified as "loss" if probability of further preserving property right by bank on them very low.";

- state Item 6.1 in the following edition:

"6.1. In certain cases one asset can be classified by two categories of classification, i.e. classification separation can be used.";

- declare Item 6.2 invalid;

- add Item 7.1 with the paragraph of the following content:

"If change of initial terms of the contract on the credit and/or complete or partial refinancing of the credit is not connected with deterioration in financial condition of the borrower, the bank shall specify in the decision of Credit committee / authorized body the reason of changes of terms of the contract and/or refinancings of the credit with appendix of supporting documents and analytical data of bank.";

- add Item 7.3 with paragraphs of the following content:

"In case of each repeated restructuring of asset the bank shall worsen its classification on one category. At the same time the bank in case of repeated restructuring can keep category of the classified asset at the previous level in case of accomplishment of the following requirements:

- the bank carries out careful financial analysis of the borrower (with the corresponding calculations, financial performance), with documentary confirmation of the given calculations;

- the bank can show (on the basis of the reasonable, documentary confirmed financial data) opportunity for the borrower to make payments according to the offered restructuring plan;

- the grace period on repayment of the main amount does not exceed 6 months (9 months - for the credits issued on development of agricultural industry);

- restructuring was not provided to the client earlier or the last restructuring was more than 1 (year) a year ago.";

- state Item 7.4 in the following edition:

"7.4. In case of accomplishment of conditions of Item 7.6 of Polozheniya bank can improve classification of the restructured asset on one category only in consecutive procedure.

For example, the asset classified in category "losses" after restructuring can be transferred only to category "doubtful".";

- state Item 7.6 in the following edition:

"7.6. The bank can transfer the restructured asset to one category of classification towards improvement when all following conditions are satisfied:

- lack of the overdue amounts;

- timely principal payment and the added percent on the schedule within 3 last months - in case of implementation of monthly annuity payments; within 6 last months - in case of implementation of quarter uniform payments on the main amount;

- if according to the schedule term between payments exceeds 3 months - timely payment at least three last payments including uniform repayment of the main amount and the added percent;

- timely principal payment and the added percent on the schedule within the last 12 months from date of restructuring (accomplishment of this condition is obligatory for transfer of assets in category "normal" or "satisfactory");

- the borrower after restructuring extinguishes at least 10% of remaining balance of the main credit amount at the time of decision making about restructuring (accomplishment of this condition is obligatory for transfer of assets in category "substandard" and "doubtful");

- the borrower has no circumstances which can lead to default on obligations of repayment of assets.";

- add Chapter 12 with Item 12.3 of the following content:

"12.3. Off-balance and contingent obligations which can lead to accomplishment of obligations by bank to clients or the third parties in the future, i.e. to cash outflow, owing to the next events belong to "losses":

- internal fraud;

- external fraud;

- damnification to tangible assets of bank (for example, owing to the fire, natural disasters, acts of terrorism, vandalism, etc.).

In process of recovery to bank of the damage caused as a result of the specified events, the bank reduces the size of the off-balance obligation and RPPU on it on compensation amount without change of category of classification.".

2. Bring in the resolution of Board of National Bank of the Kyrgyz Republic "About some regulatory legal acts of National Bank of the Kyrgyz Republic" of June 30, 2010 No. 52/4 the following changes:

in the Provision "About the Minimum Requirements on Credit Risk Management in the Commercial Banks and Other Financial Credit Institutions Licensed by National Bank of the Kyrgyz Republic" approved by the above-stated resolution:

in Item 14:

- in the first offer to replace the words "risk of credit loss" with the words "credit risk";

- the fifth offer to state in the following edition:

"The credit committee submits for consideration of the Board of directors of the sales quotation and to write-off of the credits bearing large risk (2), and also questions of repeated restructuring and provision of payment deferral for more than 12 months when restructuring the credits bearing large risk.";

- seven Item 75 to state the first offer of the paragraph in the following edition:

"When restructuring the credit, the bank needs to carry out qualitative analysis of the current financial status, activities of the borrower and degree of trust of bank to the borrower, and also providing assessment for the purpose of confirmation or review of cost of providing.".

 

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