Key Changes
Credit Risk and Monitoring
- The threshold for a number of procedures has been increased from 250,000 to 300,000 soms (regarding files, inspections, and LTV exceptions).
- The procedure for monitoring collateral has been clarified: the use of photo and video recording is allowed, and the frequency of inspections for movable property has been established (at least once a year; for high collateral coverage — every six months).
- For loans up to 500,000 soms without violations/restructuring, payment monitoring is provided instead of annual full monitoring.
- For loans over 300,000 soms, the consent of the borrower's spouse is required.
- The need for assessing the targeted use may be waived for loans up to 300,000 soms and up to 500,000 soms when transferred cashless to the seller.
Transactions with Affiliated Persons
- The limit on certain metrics has been increased from 15% to 20%.
- The threshold for "insignificant" amounts is now set at 300,001 soms.
- LTV for mortgages for related parties — base ≤80%, allowed up to 100% with additional collateral (deposit/property) or property ≥140% of the loan amount.
- Banks with state ownership ≥50% may apply preferential rates for cash management services when working with government agencies (subject to restrictions).
Operational Risk
- Assessment/testing of continuity may be conducted continuously or periodically.
Asset Classification
- Banks are allowed to classify off-balance sheet liabilities as "normal," which can be unconditionally recalled/cancelled without prior notice to the client.
Capital and Adequacy Standards
- Assets guaranteed by microfinance organizations with a rating of no less than "AAA" may be accounted for with a preferential approach (according to certain criteria).
- Some capital/debt instruments may be included in additional Tier 1 capital upon the approval of the National Bank of the Kyrgyz Republic (upon the request of the bank's board of directors).
State Guarantees and Lending Limits
- Requirements with guarantees/endorsements by the decision of the Government of the Kyrgyz Republic (including for national and food security) are exempt from certain restrictions with proper budget documentation; the total volume of such guarantees/endorsements should not exceed 60% of the bank's net capital.
- A similar exemption applies to project financing.
Precious Metals and Virtual Assets
- Assets/funds related to the initial placement of virtual assets by the issuer are excluded from the calculation of limits on transactions with precious metals (in accordance with the Law "On Virtual Assets").
- An escrow account for virtual assets is introduced: a tripartite agreement (VASP–client–bank), blocking funds until conditions are met, after which the funds are transferred to the seller.
Other Changes
- A mandatory report on the implementation of the liquidation plan has been added to the instruction on the liquidation of banks.
- The list of special accounts has been expanded in the instruction on accounts (an escrow account for VA has been added).
Changes
1. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On Asset Classification and Relevant Provisions for Reserves to Cover Potential Losses and Damages" dated July 21, 2004, No. 18/3:
in the Regulation "On Asset Classification and Relevant Provisions for Reserves to Cover Potential Losses and Damages," add:
- paragraph 12.1 is supplemented by a third paragraph as follows:
"The bank has the right to classify off-balance sheet liabilities as "normal," for which it has the right to unconditional recall/cancellation without prior notice to the client."
2. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Minimum Requirements for Operational Risk Management in Commercial Banks" dated December 15, 2005, No. 37/5:
in the Regulation "On Minimum Requirements for Operational Risk Management":
- the sixth paragraph of paragraph 2.3 is supplemented with the words "or periodically."
3. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Transactions of Commercial Banks with Precious Metals" dated August 26, 2009, No. 35/3:
in the Regulation "On Transactions with Precious Metals":
- paragraph 2.6 is supplemented by a paragraph as follows:
"Assets related to the initial placement of virtual assets by the issuer are excluded from the calculation of the maximum volume of assets in precious metals in accordance with the Law "On Virtual Assets."
4. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Certain Regulatory Legal Acts" dated June 30, 2010, No. 52/4:
in the Regulation "On Minimum Requirements for Credit Risk Management":
1) in the twenty-ninth paragraph of paragraph 12, replace the number "250000" with "300000";
2) in the eleventh paragraph of paragraph 25, replace "in the person of" with ", determined by the decision";
3) the third paragraph of paragraph 63-1 is stated in the following wording:
"- at least once a year for other loans, except for loans up to 500000 soms, for which there have been no violations of the loan agreement and/or restructurings in the last year. For loans up to 500000 soms, where the conditions have not been violated, payment monitoring is conducted based on payments.";
4) the tenth paragraph of paragraph 65 is stated in the following wording:
"- assessment of the targeted use of the loan, confirmed by documents (contracts, acceptance acts, invoices, waybills, etc.), except for loans not exceeding 300000 soms and not exceeding 500000 soms when cashless transfer to the seller/supplier's account.";
5) paragraph 68 is stated in the following wording:
"68. To control the safety of pledged property and identify changes in its value, the bank must conduct collateral monitoring, including visiting the storage location and/or using photo and video recording. Monitoring of movable property should be conducted once a year for loans less than 300000 soms, and every six months for loans over 300000 soms, provided that the collateral is more than 30% of movable property.";
6) paragraph 1 of Appendix 1 is supplemented by the eighteenth paragraph as follows:
"- consent of the spouse of the client for obtaining a loan over 300000 soms.";
7) paragraph 16-1 of Appendix 1 is stated in the following wording:
"16-1. A report on the targeted use, confirmed by documents, except for loans not exceeding 300000 soms and loans not exceeding 500000 soms when cashless transfer.";
8. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on Working with Bank Accounts" dated October 31, 2012, No. 41/12:
in the Instruction:
1) paragraph 11 is supplemented by the twenty-seventh paragraph:
"An escrow account for virtual assets - a special account opened based on a tripartite agreement between the virtual asset service provider, the client, and the bank, intended for accounting and blocking funds until the conditions of the contract are fulfilled.";
2) the second paragraph of point 15-1 is stated in the following wording:
"Special accounts may include an escrow account, a targeted reclamation account, a notary deposit.";
9. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction "On Requirements for Bank Transactions with Affiliated Persons" dated May 31, 2017, No. 21/5:
in the Instruction:
1) in the first paragraph of point 7, replace "15%" with "20%";
2) in point 9, replace "from one calculated indicator" with "from 300001 soms";
3) in point 13:
- subparagraph 5 is stated in the following wording:
"5) the maximum loan amount should not exceed 80% of the fair value of the housing. The loan may be issued up to 100% in case of providing additional collateral in the form of a related deposit or property.";
- subparagraph 7 is recognized as invalid;
4) supplement with point 19-1 as follows:
"19-1. Banks with state ownership ≥50% have the right to conduct cash management operations at preferential rates when servicing government authorities.";
5) the first paragraph of point 21 is stated in the following wording:
"21. Each loan issued to an affiliated person must be secured by collateral, the value of which is at least:".
10. Amend the Resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Regulation "On the Liquidation of Banks" dated June 8, 2017, No. 2017-П-12/23-5-(NPA):
in the Regulation add:
- paragraph 25 is supplemented by subparagraph 15:
"15) a report on the implementation of the bank's liquidation plan.";
