RESOLUTION OF BOARD OF NATIONAL BANK OF TAJIKISTAN

of April 13, 2016 No. 50

About the Instruction No. 215 "About procedure for forming and use of reserve and fund of covering of possible losses for the credits"

According to article 28 of the Law of the Republic of Tajikistan "About banking activity" and article 24 of the Law of the Republic of Tajikistan "About the microfinancial organizations", the Board of National Bank of Tajikistan decides:

1. Approve the Instruction No. 215 "About procedure for forming and use of reserve and fund of covering of possible losses for the credits" it (is applied).

2. In accordance with the established procedure to provide this Resolution to the Ministry of Justice of the Republic of Tajikistan for state registration and to enact after state registration and official publication.

3. Cancel Resolutions of Board of National Bank of Tajikistan of July 27, 2011 No. 153 "About approval of the Instruction No. 177 "About procedure for forming and use of reserve and fund of covering of possible losses for loans", of June 3, 2014 No. 107 "About entering of amendment into the Instruction No. 177 "About procedure for forming and use of reserve and fund of covering of possible losses for loans", of June 25, 2015 No. 116 "About approval of changes in the Instruction No. 177 "About procedure for forming and use of reserve and fund of covering of possible losses for loans" which were registered by the Ministry of Justice of the Republic of Tajikistan of September 2, 2011 No. 558 "a", 30 of June, 2014 No. 558 "b" and 4 of August, 2015 No. 558 "v".

4. Authorize Department of banking supervision in case of state registration of this resolution in the Ministry of Justice of the Republic of Tajikistan if necessary to make the changes and additions of editorial nature in the text of appendix of this resolution which are not changing it content.

5. To assign execution of Item 2 of this Resolution to Department of banking supervision, Legal department, department of the press and the translation.

6. To impose control of execution of this Resolution on the vice-chairman of National Bank of Tajikistan Ikromi S. S.

Approved by the Resolution of Board of National Bank of Tajikistan of April 13, 2016 No. 50

The instruction No. 215 "About procedure for forming and use of reserve and fund of covering of possible losses for the credits"

The instruction No. 215 "About procedure for forming and use of reserve and fund of covering of possible losses for the credits" (further - the Instruction) is developed according to article 28 of the Law of the Republic of Tajikistan "About banking activity" and article 24 of the Law of the Republic of Tajikistan "About the microfinancial organizations" for the purpose of management and supervision of quality of assets in banks, 190 non-bank credit institutions and the microcredit deposit institutions (further - credit institutions) and establishes single procedure for forming and use of reserve of credit risks and Fund of covering of possible losses on the credits.

Chapter 1. General provisions

1. The concepts used in this Instruction:

- reserve of credit risks - the amount intended for covering of potential losses on credit risks determined according to the normative requirements established by National Bank of Tajikistan and in addition to Fund of covering of possible losses for the credits;

- fund of covering of possible losses for the credits (further - Fund) - the amount intended for covering of possible losses on the credits according to requirements of this Instruction and international accounting standards;

- the connected person - person recognized in this quality according to the Law of the Republic of Tajikistan "About banking activity";

- the credits - are implied the credits, the overdraft, financial leasing, unused credit lines of clients, guarantees issued by credit institution, interbank credits, urgent placements, the received pledges for sale and other assets;

- the overdraft - the transaction arising based on the contract between credit institution and the client in case of temporary shortages of money on the customer account with provision to the client of possibility of use of money of credit institution under certain conditions;

- restructuring of the credit - review of conditions of the credit agreement (the agreement, the transaction);

- depreciation of cost of the credit is inventory of movement of future money according to the changed condition which is determined by means of use of initial interest rates and comparison of the discounted cost from the current asset carrying amount;

- the unattended credit - the credit, the main amount and (or) percent of which are not settled according to requirements of the agreement and belongs to one of group of the non-standard, shaky and hopeless credits;

- the general fund - the amount which is created on the standard credits and the credits under observation (active);

- special fund - the amount which is created on the non-standard, shaky and hopeless credits.

2. Fulfillment of requirements of this Instruction is obligatory for credit institutions.

3. For maintenance of liquidity of credit institution, assistance in protection of interests of its shareholders and clients, the credit institution needs timely identification of the unattended credits for acceptance of necessary measures for prevention of the related losses.

4. The credit institution shall have the corresponding management structure for identification, measurement, monitoring and control of credit risk of banking activities.

5. If reasons to believe are had that the credit, including the principal debt and the added percent, will not be extinguished according to the credit agreement and (or) the financial position of the client is bad, the unattended credits are classified as "non-standard", "doubtful" and "hopeless".

6. Credit institutions shall develop rules and processes for identification and management of the unattended credits in which acceptance of the following measures shall be provided:

- assessment and classification of the credits;

- regular consideration of the unattended credits;

- timely creation of proper and reliable levels of Fund;

- write-off of the credits and reflection of real repayment of the credits and recovery of expectation taking into account market and macroeconomic conditions.

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