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RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of March 29, 2019 No. 2019-P-12/17-3-(NPA)

About approval of the Provision "About the Minimum Requirements on Liquidity Risk Management of Commercial Banks 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. Approve the Provision "About the Minimum Requirements on Liquidity Risk Management of Commercial Banks of the Kyrgyz Republic" it (is applied).

2. 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. This resolution becomes effective since October 1, 2019.

5. To management of methodology of supervision and licensing of banks to bring this resolution to the attention of commercial banks, National bank of development of the Kyrgyz Republic, OYuL "Union of Banks of Kyrgyzstan", structural divisions, regional managements and representative office of National Bank of the Kyrgyz Republic 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.

Chairman of the board of National Bank of the Kyrgyz Republic

T. Abdygulov

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of March 29, 2019 No. 2019-P-12/17-3-(NPA)

Regulations on the minimum requirements on liquidity risk management of commercial banks of the Kyrgyz Republic

Chapter 1. General provisions

1. This Provision establishes obligatory for observance of the Kyrgyz Republic by commercial banks (further - commercial banks) the minimum requirements on liquidity risk management.

The provision extends to all commercial banks, including the commercial banks performing transactions according to the Islamic principles of banking and financing including the banks having "Islamic window" taking into account the special terminology applied by them in case of banking operations (further - banks).

2. In the Provision the following determinations are applied:

The indicator of liquidity is indicator which quantitatively determines one or several characteristic risk levels of bank liquidity.

The risk of balance sheet liquidity represents probability of the losses of bank connected with impossibility bank to fulfill the obligations in connection with insufficiency of quick assets or money because the bank is not capable to provide in the effective way the current and/or future demands in cash receipts, without causing damage of daily activities of bank or to its financial condition, i.e. the flowing or expected income and the capital. The risk of balance sheet liquidity is connected with decline in the ability to finance undertaken obligations according to transactions when there come terms of their repayment, to cover with money of the requirement of partners, and also requirements for providing. The risk of balance sheet liquidity is main type of liquidity risk.

Risk of market liquidity - risk in case of which the bank cannot realize quickly asset at the market price because of the insufficient depth of the market and/or because of deterioration in market conditions.

Chapter 2. Obligations of the Board of directors and Bank board in case of liquidity risk management

§1. Cumulative level of acceptance is risk (risk appetite)

3. The board of directors of bank shall determine risk level of liquidity, acceptable for bank, and provide accurate determination and observance by Bank board, and also the relevant divisions / bank employees dealing with issues of liquidity risk management, requirements of the legislation and internal procedures on identification, assessment, monitoring and risk control of liquidity.

4. The board of directors of bank determines the cumulative level of acceptance of risk (risk appetite) of bank taking into account the following factors:

- accurate determination of risk level of balance sheet liquidity which the bank can accept in normal conditions and in stress situation taking into account its business strategy, financial position, and also potential financing. Cumulative level of acceptance of risk (risk appetite) of bank shall correspond to the system importance of bank. The divisions/bank employees dealing with issues of liquidity risk management shall understand and observe accurately risk level of liquidity, acceptable for bank, and also carry out its monitoring;

- obligations of bank to manage the liquidity providently in usual conditions, and also to be capable to sustain the long period of stress, within one month and more;

- cumulative level of acceptance of risks (risk appetite) shall reflect assessment of sources of liquidity risk, taking into account coherence between possible risks and profit.

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