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Ministry of Justice of the Kyrgyz Republic

August 23, 2004

No. 94-04

RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of July 21, 2004 No. 18/2

About approval of the Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic

(as amended on 15-09-2021)

Having considered the project of new edition of the Instruction for determination of standards of adequacy of the capital of commercial banks of the Kyrgyz Republic, being guided by Articles 7, 43 Laws of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", the Law 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 the Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic 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 resolutions of Board of National Bank of the Kyrgyz Republic according to the enclosed list.

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.

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

Chairman of the board

U. Sarbanov

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/2

The list of resolutions of Board of National Bank of the Kyrgyz Republic (separate Items) which voided according to the resolution of Board of NBKR No. 18/2 of July 21, 2004

1. The resolution of Board of National Bank of the Kyrgyz Republic No. 19/3 of August 12, 1998 "About new edition of the Instruction for determination of the standard of adequacy of the capital of commercial banks of the Kyrgyz Republic".

2. Item III of the Changes and amendments in some regulations NBKR approved by the resolution of Board of National Bank of the Kyrgyz Republic No. 24/1 of September 16, 1998 "About modification and amendments in some regulations of National Bank of the Kyrgyz Republic".

3. Item VI of the Changes and amendments in some regulating documents NBKR approved by the resolution of Board of National Bank of the Kyrgyz Republic No. 30/5 of November 17, 1998 "About modification and amendments in some regulating documents of National Bank of the Kyrgyz Republic".

4. Item 5 of the resolution of Board of National Bank of the Kyrgyz Republic No. 44/1 of November 21, 2001 "About modification and amendments in some regulations of National Bank of the Kyrgyz Republic".

5. The resolution of Board of National Bank of the Kyrgyz Republic No. 48/1 of December 26, 2001 "About the project of changes and amendments in the Instruction for determination of the standard of adequacy of the capital of commercial banks of the Kyrgyz Republic".

6. Items 3 and 4 of the Changes and amendments in regulations of National Bank of the Kyrgyz Republic approved by the resolution of Board of National Bank of the Kyrgyz Republic No. 47/5 of December 5, 2002 "About some changes and amendments in regulations of National Bank of the Kyrgyz Republic".

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of July 21, 2004 No. 18/2

Instruction for determination of standards of sufficiency (adequacy) of the capital of commercial banks of the Kyrgyz Republic

1. General provisions

1.1. This Instruction establishes standards of sufficiency (adequacy) of the capital of commercial banks and determines its structure.

This Instruction extends to commercial banks, including, the having "Islamic windows", National bank of development, and also to JSC Finance Company of Credit Unions regarding determination of capital structure, procedure of payments of the minimum size of own (regulating) capital and coefficients of sufficiency (adequacy) of the capital, and also assessment of balance sheet assets and off-balance obligations on risk degree (further - banks).

1.2. The capital of bank is ensuring profitable and strong rise, and serves as the guarantor of customer confidence to bank for covering of the potential losses peculiar to banking.

1.3. For banking supervisor authorities the capital is the means protecting from consequences of excessive risk situations and insolvency (insolvency) of bank. For this reason banking supervisor authorities are interested in that banks had the adequate capital capable to cover possible losses and losses without threat of approach of condition of insolvency.

1.4. The term "sufficiency (adequacy) of the capital" reflects overall assessment of reliability of bank, degree of its risk exposure. The interpretation of the capital as remedies from losses and condition of insolvency, causes direct dependence between the size of the capital and exposure of bank to risk, i.e. the size of the capital shall be adequate to the increasing amount of the banking activities integrated to high risk.

2. Standards of sufficiency (adequacy) of the capital

2.1. Minimum size of the capital:

2.1.1. The minimum size of the authorized capital of banks (including branches of foreign banks).

2.1.2. Own (regulating) capital is the capital of the First level.

2.2. The coefficients of sufficiency (adequacy) of the capital based on weighing of balance sheet assets and off-balance obligations on risk degree:

a) coefficient of sufficiency of total (adequacy) of the capital (K2.1) is determined by formula:

K2.1 = (ChSK / (ChRA + P * Box)) * 100%, where:

ChSK - the net Total capital which is determined as capital sum of the First level and the capital of the Second level.

ChRA - the amount of the balance sheet assets and off-balance obligations weighed on risk degree minus special reserves on covering of potential losses and losses.

П - the established indicator (number, the return to coefficient of total adequacy of the capital) for commercial banks - 8,33 (100%: 12%), for systemically significant banks - 7,14 (100%: 14%);

Box - the size of the capital reserved for covering of operational risks. Calculation of the capital reserved for covering of operational risks with use of the Basic indicative method is performed according to the Procedure for determination of level of the capital necessary for covering of operational risks of banks approved by the resolution of Board of National Bank of the Kyrgyz Republic.;

b) coefficient of sufficiency (adequacy) of the capital of the First level (K2.2) is determined by formula:

K2.2 = (KPU / CHRA) * 100%,

where:

The KPU - the capital of the First level which is determined according to Item 3.6 of this Instruction.

c) coefficient of sufficiency (adequacy) of the Basic capital of the First level (K2.3) is determined by formula:

K2.3 = (BKPU / CHRA) * 100%,

where:

BKPU - Basic capital of the First level.

The National Bank of the Kyrgyz Republic (further - National Bank) on the basis of risks assessment and the system importance of banks has the right to increase the minimum size of coefficients of adequacy of the capital.

2.3. Leverazh (K2.4) is determined by formula:

K2.4 = (KPU / (SA + ZO) * 100%, where:

SA - total assets of bank minus intangible assets and special reserves on covering of potential losses and losses;

ZO - off-balance obligations taking into account the factors of credit conversion determined by this Instruction and also those obligations according to which the bank has the right of unconditional response / cancellation at any time without prior notice of the client, and to which the factor of credit conversion in the amount of 10% of the total amount of such off-balance obligations can be applied. At the same time the amount of reserves on covering of potential losses and losses is subtracted from off-balance obligations (after application of factors of credit conversion) within the amount of the weighed off-balance obligations."

2.4. For the purpose of preserving financial stability of bank and preserving stability of its activities the requirement about support of "additional inventory of the capital of bank" ("capital buffer" index) for dividend payout is established. The "capital buffer" index is determined similar to calculation of coefficient of sufficiency of total (adequacy) of the capital. Value of the "capital buffer" index of banks is established by Committee on supervision of National Bank.

2.5. The bank has no power of decision about dividend payout if the "capital buffer" index calculated taking into account deduction of the amount of dividends planned to payment will constitute value below established by National Bank.

After dividend payout the "capital buffer" index shall constitute value not below established by National Bank.

In case of respect for value of the "capital buffer" index calculated taking into account deduction of the amount of dividends planned to payment, the bank shall get permission of National Bank to payment, except as specified, when for the retained earnings account the bank increases the authorized capital.

2.6. Ceased to be valid according to the Resolution of Board of National Bank of the Kyrgyz Republic of 15.08.2018 No. 2018-P-12/33-6-(NPA)

3. Capital structure

3. Capital structure

3.1. The basis of the capital is constituted by completely paid authorized capital of bank. According to standards of Basel Committee on Banking Supervision, the authorized capital is "crucial element of the capital, general for bank systems in all countries; he is absolutely accurately visible in the reporting published by banks and is base on which market assessment of adequacy of the capital is based; it has crucial importance for measure definition of profitability and competitiveness of bank".

3.2. Only such authorized capital (common and preferred shares) on which there are no obligations on return of investments made by shareholders of bank is equity composition. These means can be received by shareholders only by transfer or sale of shares to the third parties.

3.3. The bank has no right to accept as a deposit own shares.

3.4. For the purposes of banking supervision distinctive sign of components of the capital is its capability to cover losses which can arise in the course of activities of bank. For this reason in case of assessment of adequacy of the capital the equity composition joins some "non-capital" business accounts (for example, "General reserve on covering of potential losses and losses" or "Subordinated bonds and other debt obligations").

3.5. For the purposes of calculation of coefficients of sufficiency (adequacy) of the capital the banking capital is divided into the capital of the First level and the capital of the Second level.

3.6. The capital of the First level is necessary for ensuring absorption of losses during the current activities of bank.

The capital of the First level consists of the following elements:

- Basic capital of the First level;

- Supplementary capital of the First level.

3.7. The structure of the Basic capital of the First level is constituted by the following elements:

1) "common shares" - the issued and completely paid common shares of bank meeting the conditions established by the legislation;

2) "preferred non-cumulative shares" - the issued and completely paid preferred shares of bank meeting the conditions established by the legislation and the dividend distributions which are not demanding from bank.

In the presence of circumstances/conditions when dividend distribution is obligatory, such preferred shares and the capital brought over nominal according to these shares shall be considered in the Supplementary capital of the First level or in the capital of the Second level;

3) "the capital brought over nominal" - difference between selling price of the common and preferred shares included in the Basic capital of the first level and their nominal value by results of issue.

The capital brought over nominal is not subject to distribution to shareholders in the form of dividends and remains in bank.

In the written consent of Natsionalnogo banka capital, brought over nominal, it can be used on increase in the authorized capital only for the purpose of observance of the requirement for the minimum size of the authorized capital;

4) "reserves for future requirements of bank" - the reserves created from profit after the taxation on future and/or unforeseen events;

5) "retained earnings (losses) of last years" - remaining balance of net profit (losses) after the taxation of last years after deduction of the announced dividends and distribution to other capital accounts.

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