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RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of November 25, 2020 No. 2020-P-12/67-3-(NPA)

About approval of the Instruction for distribution of profits/losses according to bank accounts, accounts on bank deposits (deposits) according to the Islamic principles of banking and financing

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 Instruction for distribution of profits/losses according to bank accounts, to accounts on bank deposits (deposits) according to the Islamic principles of banking and financing it (is applied).

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

3. To the operating commercial banks performing transactions by the Islamic principles of banking and financing within one year from coming into force of this resolution to bring the automated information system into accord with requirements of the Instruction for distribution of profits/losses for bank accounts, accounts on bank deposits (deposits) according to the Islamic principles of banking and financing (further - the Instruction).

Term on reduction of the automated information system in compliance with requirements of the Instruction can be prolonged based on the written appeal of the banks performing transactions by the Islamic principles of banking and financing.

Before completion of the automated information systems of the operating banks for the purpose of their reduction in compliance with the requirements established by the Instruction, control of pools of portfolios of financing shall be exercised of the division responsible for accounting in banks according to internal procedure of bank.

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 JSC KYRGYZSTAN Commercial Bank, Ekoislamikbank Ltd, JSC BAKAY BANK, OYuL "Union of Banks of Kyrgyzstan", the relevant 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 of the National Bank of the Kyrgyz Republic supervising Management of methodology of supervision and licensing of banks.

Chairman of National Bank of the Kyrgyz Republic

T. Abdygulov

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of November 25, 2020 No. 2020-P-12/67-3-(NPA)

The instruction for distribution of profits/losses according to bank accounts, accounts on bank deposits (deposits) according to the Islamic principles of banking and financing

Chapter 1. General provisions

1. Action of this Instruction extends to the commercial banks performing transactions according to the Islamic principles of banking and financing including the banks having "Islamic window" (further - banks).

2. This Instruction determines procedure of payments and distributions of profits/losses, and also payments of remuneration (hib) for bank accounts, accounts on bank deposits (deposits) (further - deposits) physical persons, individual entrepreneurs and legal entities (further - investors), and also methods of management of the financing pools created on the basis of deposits of investors.

3. The terms and determinations used in this Instruction are understood according to their commonly accepted values in the legislation of the Kyrgyz Republic.

Within this Instruction the following terms and determinations are also applied:

Reserve on equalization of profit - the reserve created according to the solution of the board of directors of bank at the expense of the amounts allocated from net profit before distribution of share of bank (mudarib) for the purpose of maintenance of certain level of profitability on deposits of mudarab.

At the same time the board of directors can authorize responsible body of bank on implementation of the following action for management of reserve on equalization of profit:

- determine and approve the reserve size on equalization of profit;

- make decisions on use of reserve on equalization of profit.

Reserve on covering of risks on investments (in case of that availability) - the amount allocated from profit of holders of investment accounts after distribution of profit share of bank (mudarib) for the purpose of risks mitigation of anticipatory investment damages of investors (holders of investment accounts). The procedure for use of this reserve shall be approved by the board of directors of bank.

Financing portfolio pool - the component of portfolio of bank on financing including financings with similar characteristics and signs, such as:

- types of products (agreements) of financing (murabakh, idzhar, etc.);

- rates of return, to industries and other characteristics, and signs;

- the other property of the client accepted in repayment of the provided financing;

- assets for the subsequent transfer to clients including under agreements of murabakh, istisna, etc.

Remuneration (hiba) - type of the financial incentive paid to the clients of bank who placed money on the terms of agreements kard-hasan, vadia yad daman, and also by other permitted types of deposits.

Chapter 2. Creation of pools of portfolio of financing

4. The bank shall determine transparent and clear structure of distribution of profits/losses and management of financing portfolio pools during creation of one or several pools of portfolio of financing as a part of assets which will be financed by various types of bank accounts, accounts on bank deposits (deposits).

In this structure the placement purposes, investment strategy and inherent risk for each pool, terms, specifics of distribution of remunerations, profit share ratio, surcharges shall be specified. At the same time the bank shall record income/expenses of pools.

5. Pools of portfolio of financing shall be created by bank according to above-mentioned structure based on the submitted documents according to the decision of responsible body of the bank determined by the solution of management of bank. Before completion of development of structure pools of portfolio of financing can be created from approval of the chairman of bank or other authorized head of the management of bank determined by the decision on the basis of the submitted documents.

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