RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 15, 2005 No. 37/5

About approval of the Provision "About the Minimum Requirements on Management of Operational Risk in Commercial Banks of the Kyrgyz Republic"

Having considered the project of the Provision "About the Minimum Requirements on Management of Operational Risk in Commercial Banks of the Kyrgyz Republic", being guided by article 7 of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", the Board of National Bank of the Kyrgyz Republic decides:

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

2. To management of methodology of supervision and licensing together with Legal department in accordance with the established procedure to carry out state registration of this resolution in the Ministry of Justice of the Kyrgyz Republic with the subsequent official publication.

3. This resolution becomes effective from the moment of official publication after state registration in the Ministry of Justice of the Kyrgyz Republic.

4. After publication of the registered regulatory legal act to inform the Ministry of Justice of the Kyrgyz Republic on publication source (the name of the edition, its number and date).

5. To impose control of execution of this resolution on the vice-chairman of National Bank Kyrgyz the Republics Dzhanybekova of Page E.

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of December 15, 2005 No. 37/5

Provision "About the Minimum Requirements on Management of Operational Risk in Commercial Banks of the Kyrgyz Republic"

I. General provisions

1.1. This Provision establishes obligatory for observance by commercial banks (further - banks) the minimum requirements to the organization of management of operational risk.

1.2. The provision is additional management for banks concerning the minimum requirements to politicians, procedures and internal control for the purpose of observance of the standards of management of operational risk established by the Provision "About the Minimum Requirements on Risk Management in Banks of the Kyrgyz Republic".

The commercial banks performing transactions according to the Islamic principles of banking and financing are guided by this Provision for the purpose of observance of the standards of management of operational risk established by the Provision "About the Minimum Requirements on Risk Management in the Banks Performing Transactions according to the Islamic Principles of Banking and Financing" approved by the resolution of Board of National Bank of the Kyrgyz Republic (further - National Bank) of July 18, 2018 No. 2018-P-12/30-3-(BS).

1.3. In the Provision terms according to the Provision "About the Minimum Requirements on Risk Management in Banks of the Kyrgyz Republic" are used.

II. Main requirements to the organization of management of operational risk

2.1. In bank it shall be developed and approved by the Board of directors of bank of the politician on management of operational risk, corresponding to the scale, profile of risk, system importance and the size of the capital of bank.

The policy on management of operational risk can be presented in the form of the separate document or can be part of single policy on risk management and at least shall include:

- purposes and tasks of management of operational risk;

- basic principles of management of operational risk;

- main types of operational risks taking into account all activities of bank and the reason of their origin;

- distribution of powers and responsibility on all levels of management and monitoring of operational risk;

- methods of identification, assessment, monitoring, control and minimization of operational risk;

- procedure for provision of the reporting and exchange of information on management of operational risk.

2.2. The basic principles of management of operational risk assume that they shall find reflection in internal documents of bank:

- procedure, rules and procedures of making of banking activities and other transactions;

- functioning of information and other systems;

- the procedure regulating in cases of approach of force majeur circumstances (such, as, natural disasters (floods, earthquakes, storms, the fires and other natural or technogenic catastrophes), technical catastrophic crashes, epidemics, introduction of emergency state, mass riots, marauding, military operations, etc.) procedure for the transfer of work to the reserve center (in the presence), and interaction of personnel of system;

- organization of internal processes, separation of powers, functional obligations;

- order of interaction of divisions and bank employees;

- procedure for submission of the reporting and exchange of information;

- determination of conflict of interest and opportunity to prevent them if transactions concern those who make decisions.

2.3. For the purpose of restriction of operational risk the bank shall have the following documents:

- on carrying out all transaction types performed by bank;

- on physical safety, the including requirements to rooms in which branches, storages, safes, documents and archives, and also measures of physical protection of technologies are located;

- on acceptance, storage and transportation of money and other values;

- on providing with technologies which shall be tested, drawn documentary up before their introduction and which can be updated in case of need;

- on outsourcing. Outsourcing is understood as attraction of services by bank of external suppliers for accomplishment on continuous basis of separate work types and services which in usual conditions would be performed by bank. The bank cannot use outsourcing for carrying out the transactions connected with crediting, attraction of deposits or other banking activity which requires the license;

- the business continuity plans including availability of reserve rooms, external storages for reserve data, processes of recovery and contingency plans for response to destruction or unfitness of key systems.

2.4. The policy on management of operational risk shall be reviewed periodically, once a year suffices, and procedures and other internal documents of bank on management of operational risk shall be reviewed as required, but once in two years taking into account the reached level of management of operational risk in bank suffices and the international experience, completely to be integrated into general risk management process of bank, and also to timely be brought to the attention of all bank employees.

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