RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of July 21, 2004 No. 18/3

About approval of the Provision "About Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses"

Having considered the project of new edition of the Provision "About Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses", being guided by Articles 7, 43 Laws of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", Articles 12, 35 Laws of the Kyrgyz Republic "About banks and banking activity in the Kyrgyz Republic", the Board of National Bank of the Kyrgyz Republic decides:

1. Approve Regulations on classification of assets and the corresponding allocations to reserve on covering of potential losses and losses it (is applied).

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

3. To department of external and public relations to publish this resolution in the official publication of National Bank of the Kyrgyz Republic within 10 days after state registration in the Ministry of Justice of the Kyrgyz Republic.

4. Enact this resolution after 30 days from the moment of its publication.

5. From the moment of enforcement of this resolution to recognize invalid the following resolutions of Board of National Bank of the Kyrgyz Republic:

- No. 20/2 of April 26, 2002 "About Regulations on classification of assets and the corresponding allocations to reserve on covering of potential losses and losses";

- No. 17/1 of June 2, 2003 "About modification and amendments in Regulations on classification of assets and the corresponding allocations to reserve on covering of potential losses and losses".

6. To management of methodology of supervision and licensing to bring this resolution to the attention of regional (regional) managements and the Batken representative office of National Bank of the Kyrgyz Republic, commercial banks, OJSC Raschetno-sberegatelnaya the company, the Kyrgyz Agricultural Finance Corporation, Finance company on support and development of credit unions.

7. To impose control of execution of this resolution on the vice-chairman of National Bank of the Kyrgyz Republic Omurzakova G. M.

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic on July 21, 2004 No. 18/3

Regulations on classification of assets and the corresponding allocations to reserve on covering of potential losses and losses

1. General provisions

1.1. This Provision establishes requirements for classification of assets and off-balance obligations (further - assets), and also on creation of the corresponding reserves on covering of potential losses and losses (further - RPPU) for the purpose of regulation and supervision and extends to all commercial banks and guarantee funds (further - banks).

1.2. Ceased to be valid according to the Resolution of Board of National Bank of the Kyrgyz Republic of 15.06.2017 No. 2017-P-12/25-1

1.3. For timely covering of potential losses and losses, and also for the purpose of determination of real financial condition and overall performance, banks shall carry out constantly quality evaluation of the assets and create RPPU.

1.4. Banks shall support RPPU at the level sufficient for covering of possible losses of assets. Basis for the correct assessment of the size of reserve is the classification system of assets which shall be developed by bank according to this Provision.

Activities of bank in case of which the RPPU adequate level is not provided by National Bank of the Kyrgyz Republic (further in the text - National Bank) will be considered as unreliable and unhealthy banking practice which threatens interests of investors.

1.5. Classification of assets is expression of various degrees of credit risk. All assets bear in themselves certain risk degree of losses which varies depending on various factors.

1.6. The credit risk can be connected with financial condition of the client of bank (further - the client), quality of pledge, the client's type on pattern of ownership, industry accessory, availability and warranty types on assets and reliability of guarantors, assessment of accomplishment of earlier this obligations on assets of banks, the prospects of further business development of the client and other potential factors.

Note: for the purpose of this provision hereinafter in the text understand the legal entity or physical person assuming obligations on return of the assets of bank listed in Item 1.7 of this provision as "client" of bank.

1.7. The bank shall carry out periodically classification of the credit portfolio and other assets. Treat such assets:

- credits;

- the assets received as a result of leasing;

- the debt obligations acquired by means of factoring;

- investments into securities and/or into the capital of the company (in the form of shares, financial equity participation of the invested company);

- interbank placements;

- overdrafts, irrespective of the reason of their origin;

- off-balance obligations (letters of credit, guarantees, any legalized obligation on issuance of credit, and others);

- issuance of credit under condition of the return redemption;

- the other property accepted in repayment of asset;

- any other assets which are not listed above which bear in themselves risk of non-return.

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