RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 28, 2009 No. 51/6

About some regulatory legal acts of National Bank of the Kyrgyz Republic

Within implementation of the Laws of the Kyrgyz Republic "About entering of amendments into the Law of the Kyrgyz Republic "About banks and banking activity in the Kyrgyz Republic" of March 28, 2009 No. 93 and "About entering of amendments into the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic" of March 28, 2009 No. 94, according to articles 7 and 43 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 Classification of Assets and the Corresponding Allocations to Reserve on Covering of Potential Losses and Losses when Implementing Transactions according to the Islamic Principles of Banking and Financing" it (is applied).

2. Ceased to be valid according to the Resolution of Board of National Bank of the Kyrgyz Republic of 23.10.2013 No. 29/8

4. This resolution becomes effective after one month after official publication.

5. After official publication to send to Legal department this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State register of regulatory legal acts of the Kyrgyz Republic.

6. To management of methodology of supervision and licensing to bring this resolution to the attention of commercial banks.

7. To impose control of execution of this resolution on the vice-chairman of National Bank of the Kyrgyz Republic Bokontayev K. K.

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of December 28, 2009 No. 51/6

Regulations on classification of assets and the corresponding allocations to reserve on covering of potential losses and losses when implementing transactions according to the Islamic principles of banking and financing

1. General provisions

1. This Provision extends to the banks performing activities according to the Islamic principles of banking and financing including the banks having "Islamic window" (further - bank).

2. The purpose of this provision is establishment of the minimum requirements on classification of the assets and off-balance obligations which are placed/accepted according to the Islamic principles of banking and financing (further - assets), and also on creation of the corresponding reserves on covering of potential losses and losses (further in the text - RPPU) for the purpose of regulation and supervision.

3. For timely covering of potential losses and losses, and also for the purpose of determination of real financial condition and overall performance, the bank shall carry out quality evaluation of assets on permanent basis (to classify) and create RPPU at the level sufficient for covering of possible losses and losses on assets.

4. Classifications are subject the assets which are requirements to physical persons and legal entities, including to banks, except for requirements to the Cabinet of Ministers of the Kyrgyz Republic and National Bank of the Kyrgyz Republic (further in the text - National Bank).

5. RPPU is created in case of asset impairment, that is in case of decrease in their cost owing to non-execution or improper execution by the client/partner/supplier (further - the client) bank of the obligations on asset provided by terms of the contract or existence of real threat of non-execution (improper execution) of these obligations.

The size of reduction in cost of asset is determined as difference between asset carrying amount (remaining balance of debt on asset) at the time of asset quality evaluation, and its actual (current) cost at the time of assessment made according to the this provision regulations.

6. Basis for adequate assessment of the RPPU size is the classification system of assets which shall be developed by bank according to this Provision. At the same time the necessary amount of contributions to RPPU is calculated from the amount of investments made by bank, both own, and attracted (subject to return to the client in accordance with the terms of the contract between bank and the client).

Activities of bank in case of which the RPPU adequate level is not provided by National Bank will be considered as unreliable and unhealthy banking practice.

7. Classification of assets is expression of various risk degree of losses which varies depending on various factors.

8. The bank shall carry out periodically classification of the assets which treat:

- the assets bearing risk of losses as a result of non-execution or improper execution by the client of terms of the contract;

- investments into the securities issued according to the Islamic principles of banking and financing and/or in the capital of the company (in the form of shares, financial equity participation of the invested company);

- interbank placements;

- off-balance obligations (letters of credit, guarantees, etc.);

- the other property of bank accepted in repayment of asset and/or as compensation of losses of bank;

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