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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 April 1, 2020;

- provide observance of coverage ratio of liquidity since October 1, 2020.

3. This resolution becomes effective since April 1, 2020.

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, 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. 

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 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:

рис.1 к Пост. от 27.12.2019 г. №12-68-4

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;

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