RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of May 28, 2008 No. 22/11

About approval of Rules of implementation of supervision of payment system of the Kyrgyz Republic

Having considered the draft of Rules of implementation of supervision of payment system of the Kyrgyz Republic provided by Management of payment systems, the Board of National Bank of the Kyrgyz Republic decides:

1. Approve Rules of implementation of supervision of payment system of the Kyrgyz Republic it (is applied).

2. In accordance with the established procedure to direct to management of payment systems together with Legal department this resolution to state registration in the Ministry of Justice of the Kyrgyz Republic.

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

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

5. To management of payment systems to bring this resolution to the attention of commercial banks of the Kyrgyz Republic, 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 vice-chairman of National Bank of the Kyrgyz Republic Chokoyev Z. L.

 

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of May 28, 2008 No. 22/11

Rules of implementation of supervision of payment system of the Kyrgyz Republic

1. Introduction

According to the Law "About National Bank of the Kyrgyz Republic", one of the main objectives of National Bank of the Kyrgyz Republic (further - NBKR), are ensuring efficiency, safety and reliability bank and payment system of the republic.

NBKR will organize system of supervision over functioning of payment system, activities of legal entities as operators of payment system, members of payment service provider if the operator is not resident of the Kyrgyz Republic, and also other organizations providing services in acceptance and implementation of payments and money transfers.

Increase in role of supervision of payment system is connected with the increasing role of money transfer systems of private sector and need of adjustment of potential failures and risks of market mechanisms, enhancement of systems for the purpose of ensuring consumer protection of services.

In case of general orientation on ensuring financial stability in bank system, supervision of payment system, unlike prudential supervision, is oriented not to separate banks, and in general to money transfer systems. Supervision of payment system concentrates on ensuring stability of bank and financial system in general.

2. General provisions

2.1. These rules of implementation of supervision of payment system in the Kyrgyz Republic (further in the text - Rules) are developed according to:

- Policy on supervision of payment system of the Kyrgyz Republic approved by the resolution of Board of National Bank of the Kyrgyz Republic of 23.03.2006 No. 7/8, registered in the Ministry of Justice of the Kyrgyz Republic on April 28, 2006, No. 48-06 (further - Policy on supervision of payment system of the Kyrgyz Republic);

- Policy on risk management in payment system of the Kyrgyz Republic approved by the resolution of Board of National Bank of the Kyrgyz Republic of May 19, 2005 No. 16/4, registered in the Ministry of Justice of the Kyrgyz Republic on June 27, 2005, No. 91-05.

2.2. The basic concepts and procedure of supervision of payment system of the Kyrgyz Republic are given in these rules. Appendices to these rules contain list of objects of supervision of payment system, forms and rules of filling of the reporting represented to NBKR by operators of payment system or participants if the operator of payment system is not resident of the Kyrgyz Republic (further - the nonresident). Commercial banks represent the reporting within the Periodic regulating bank reporting. The reporting of operators of payment systems, is submitted according to these rules.

2.3. These rules extend to operators of payment systems, participants if the operator the nonresident, providers of services in money transfer system, participants of system of correspondence relations, the involved structural divisions of NBKR.

3. Procedure of supervision of payment system

3.1. Main directions of implementation of supervision

Supervision of payment system of the Kyrgyz Republic (further - PS) is carried out by the structural division of NBKR performing supervision functions on continuous basis in the form of cyclically repeating process in the following main directions:

- monitoring of functioning of PS;

- the analysis and assessment of functioning of each separate type of PS (further - system) on compliance to accepted standards and requirements of regulatory legal acts of NBKR, decision making on efficiency evaluation and risks of system;

- taking measures of impact, directed to enhancement of system.

3.2. Monitoring of functioning of PS

Monitoring of functioning of PS (further - monitoring of PS) is carried out based on information on the job of each separate type of PS got from system in real time from operators of PS or participants if the operator the nonresident and providers of services in money transfer system.

Sources of information are:

- official sources (financial, statistic, audit reports, data on quality characteristics of functioning of systems);

- materials of meetings with leading employees of the operator on discussion of current status of system;

- materials of assessment of conformity of functioning of system to international standards and requirements of regulatory legal acts of NBKR which is carried out by the operator of system;

- materials of official system documentation (the rule of system, the contract and agreement concerning functioning of system, the business plan of the operator, the business continuity plan);

- materials of checks of functioning of system on places at operators of system or participants of system, if the operator the nonresident;

- materials of checks concerning observance of requirements of regulatory legal acts, and also the recommendations of the Target group on financial measures for anti-money laundering (FATF) concerning participation in payment system and carrying out the payments on places made at:

- participants of system, if operator nonresident;

- providers of services in money transfer system.

Monitoring of PS includes:

- monitoring of PS in real time;

- the subsequent monitoring of PS performed by data collection for certain period about quantity characteristics of functioning of each type of PS about use of payment instruments, about failures of PS;

- the periodic monitoring of PS performed by data collection about quality characteristics and these checks of functioning of separate systems on places.

3.2.1. Monitoring of PS in real time

Monitoring of PS is in real time used for grossovy settlement system and system of package clearing of small retail and regular payments. Results of monitoring on each system are represented to management of NBKR as a part of the daily reporting of the division performing functions of supervision of PS.

Monitoring of grossovy settlement system during the operational day is performed based on the electronic information obtained from system:

- about current status of line items of participants;

- about debit and credit turnovers, quantity and the amount of the payment documents registered in queue on each participant;

- about debit and credit turnovers, quantity and the amount of the payment documents registered in queue in system in general;

- about the number of the participants having queue of payment documents;

- according to each payment document of participants;

- about liquidity situation on each participant;

- about timeliness of carrying out calculations of systems of retail payments and systems according to transactions in the financial markets;

- about timeliness of completion of work of grossovy system and data transmission in the Ledger of NBKR.

Based on the obtained data it is carried out:

- control over current liquidity of participants by the analysis of queue of payment documents of participants and its influence on liquidity of other participants. If the queue of one participant influences liquidity of other participants and can cause liquidity risk, the structural division of NBKR performing functions of supervision of PS contacts this participant and they jointly develop package of measures for creation of necessary level of liquidity for carrying out payments in queue. Depending on the created situation the adequate measures provided in regulatory legal acts of NBKR on liquidity risk management in PS are taken:

provision of intra overnight credit on the security of securities;

use of the mechanism of interbank lending;

replenishment of correspondent account in cash;

- management of queue of payments;

- use of other mechanisms (such as possibility of inclusion in system of the mode of offset of counter payments on this participant, etc.);

- examination, in case of violation of regulations of final settlements on any system of retail payments or system according to transactions in the financial markets, together with the operator of system of the reason of this violation and acceptance together with it and participants of the measures necessary for successful completion of calculations and closing of operational day. The regulations and procedure for ensuring final settlements are determined by each of systems by the corresponding internal procedures or bilateral, multi-lateral agreements and agreements.

Monitoring of system of package clearing of small retail and regular payments (further in the text - joint project company) is performed during the operational day based on the following electronic information obtained from system:

- about the current net line item and limits of debit net line items of each participant;

- about debit and credit turnovers on each participant and system in general;

- about quantity and the amount of the payment documents which are in inactive condition on each participant and system in general;

- about the number of the participants having inactive payment documents;

- about the rejected by system and negative payment documents;

- about observance of regulations of system operation.

The acquired information is used for control of ratio of debit net line items of participants with the set limits, information analysis about inactive payments of participants in system and determinations of extent of influence on liquidity of other participants. In case of detection of possibility of risks, owing to excess of debit net line item of the participant over the set limit, the operator of system contacts the participant and the structural division of NBKR performing functions of supervision of PS and they jointly make the relevant decision:

- about increase in liquidity on correspondent account in the way:

provisions of intra overnight credit on the security of securities;

uses of the mechanism of interbank lending;

replenishments of correspondent account in cash;

- and/or about increase in limit of debit net line item of the participant.

In cases of violation of regulations of work of joint project company, the division of NBKR performing functions of supervision of PS together with the operator finds out causes of infringement and together with it and participants takes the measures necessary for successful completion of the present clearing session and closing of clearing day.

3.2.2. Subsequent monitoring

The subsequent monitoring is carried out regularly on the basis of statistical data about quantity characteristics and periodically by data about the quality characteristics of system received from operators of PS or participants if operators of PS are nonresidents (according to appendix of 1 these rules).

3.2.2.1. The subsequent monitoring on daily basis

This monitoring includes monitoring of grossovy settlement system and joint project company and is carried out based on the daily electronic information for reporting day obtained from the operator of system and significant payment system for the beginning of the next day after reporting. Results of monitoring are reflected in daily and weekly reports of division of NBKR performing functions of supervision of PS.

Monitoring of grossovy settlement system is performed based on information:

- about the entering and outgoing number of payments and turnovers on each participant and in general on system (on appendix form 2, tab. 1 of these rules);

- about quantity and amounts of unexecuted payment documents for various reasons (insufficiency of liquidity, rejected by system or withdrawn by the participant, etc.) on each participant and on system in general (on appendix form 2, tab. 2 of these rules).

For the purpose of risk management in grossovy settlement system the division of NBKR performing functions of supervision of PS, daily the next working day after reporting:

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