Document from CIS Legislation database © 2003-2020 SojuzPravoInform LLC

The document ceased to be valid since June 21, 2017 according to article 6 of the Law of the Kyrgyz Republic of December 16, 2016 No. 207

LAW OF THE KYRGYZ REPUBLIC

of July 29, 1997 No. 60

About banks and banking activity in Kyrgyz the Republics

(as amended on 28-07-2015)

Accepted by General Court of Jogorku Kenesh of the Kyrgyz Republic on June 16, 1997

Approved by the Meeting of national representatives of Jogorku Kenesh of the Kyrgyz Republic on July 2, 1997

Chapter I. General provisions

Article 1. Concept of bank

1. Bank in the Kyrgyz Republic is the financial credit institute created for attraction of deposits of legal entities and physical persons and other money and placement them on its own behalf on the terms of recoverability, the paid nature, urgency and also for implementation of payment under orders of clients.

2. The bank is the legal entity created in the form of joint-stock company and performing the activities according to the legislation of the Kyrgyz Republic based on the license granted by National (Central) Bank of the Kyrgyz Republic (further - Bank of Kyrgyzstan).

3. The term "bank" or the phrase including this term can be used in trade name and the advertizing purposes only by the organizations having the right to making of banking activities according to this Law and the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic".

4. The requirements to bank established by this Law can be shown also to other financial credit institutes licensed by Bank of Kyrgyzstan, according to the procedure, established by the legislation of the Kyrgyz Republic and regulations of Bank of Kyrgyzstan.

Article 2. Concept of the deposit

1. The deposit is the amount of money received by one person from other person on the terms of recoverability (irrespective of, complete or partial recoverability or recoverability of the bigger amount).

Persons which do not have the corresponding license of National (Central) Bank of the Kyrgyz Republic have no right to accept deposits and to use the term "deposit" in the name.

2. The face which is not bank can raise the money which is not deposits only in those cases if these means:

1) are accepted from banks or other persons whose activities is issue of loans;

2) are accepted by one person from other person on terms of loan;

3) are accepted from foreign or international financial institutions;

4) are accepted by insurance companies or social (pension) funds according to the legislation of the Kyrgyz Republic;

5) are accepted by means of issue of securities according to the legislation regulating transactions with securities;

6) are accepted in the presence of the license according to the legislation of the Kyrgyz Republic for the purpose of implementation of the activities directed to investment into securities on behalf of the client by the specialized companies;

7) are brought as advance payment or partial payment according to the sales contract, lease or as a result of other type of representation of property or services and are subject to return only in case the property and services were not actually sold, leased or rendered;

8) are brought as guarantee or pledge according to contract performance or for ensuring delivery or return of any property;

9) are brought by one joint-stock company in another if they are subsidiary companies of the same main (parent) company or if one of them is subsidiary company another;

10) are accepted by one person from other person based on cooperation agreement.

Article 2-1. Basic concepts

For the purpose of this Law the following concepts are used:

Affiliates are:

- considerable members of the legal entity, including banks;

- legal entities in whom other legal entities, including banks, are considerable participants;

- legal entities, including banks in which other legal entities are considerable participants.

The banking group consists of bank and its subsidiary and/or dependent companies and/or bank holding company and its subsidiary and/or dependent companies. Specified persons are members of banking group.

The bank holding company - mother company, subsidiary company or one of subsidiary companies of which is bank.

Subsidiary company - the legal entity controlled by other legal entity (mother company). The subsidiary company of other subsidiary company is also considered as subsidiary company (first) mother company.

The subsidiary bank is the bank controlled by other bank or other legal entity (mother company). The subsidiary bank of subsidiary bank is also considered as subsidiary bank of mother company.

Officials of bank - the chairman and other board members of bank, the chairman of the board, board members of bank, the main bank employees on finance, on the credits. "Official lindens of bank" are also understood as persons who determine policy of bank or have powers to participate or really participate in the main transactions of bank creating policy of bank irrespective of whether these persons on a grant basis work or earn reward. This determination extends also to officials of mother company of bank.

The dependent company - the legal entity in whom any person, solely or together with other person, exercises immediate or indirect possession or control more than twenty of percent of voting shares or equity interests of any legal entity.

Considerable participation - individual or together with other persons:

- immediate or indirect possession or management of ten and more percent of voting shares (any type) of joint-stock company, ten and more percent of the authorized capital of the legal entity which is not joint-stock company;

- or, irrespective of participation in the authorized capital of the legal entity, opportunity to perform considerable influence on management and/or policy of this legal entity based on the agreement or otherwise.

The considerable participant - person performing considerable participation in the legal entity according to this Law.

Insiders (internal persons) of bank - the board members, board members, members of Sharia council, other officials, considerable participants and any other physical persons connected with specified persons common interests.

The company - any legal entity.

Control - individual or together with other persons:

- immediate or indirect possession or management of fifty and more percent of voting shares of the joint-stock company or the authorized capital of the legal entity which is not joint-stock company or

- opportunity to elect, at least, a half of board members (supervisory body) of the legal entity, or:

- irrespective of equity participation of the legal entity opportunity to perform the determining influence on management or policy of this legal entity on the basis of the agreement or otherwise.

The controlling person - person exercising control over the legal entity.

Mother company - the legal entity controlling other legal entity.

Common interests between two and/or more physical persons and legal entity are recognized existing in the presence of any of the following conditions:

- one legal entity or physical person controls other person;

- these persons are affiliated legal entities or insiders;

- one of these persons is the dependent company of other person.

For the purposes of determination of the considerable participant, the dependent company and control:

- the shares which are in ownership of the companies which are the dependent companies of one person or are controlled by one person, are considered as being in indirect possession of this person and unite together with the shares which are in immediate possession of this person in case of establishment of total quantity of the shares belonging to person;

- the shares belonging to person and his close relatives (heirs of the first and second priority according to the civil legislation), are considered as directly belonging to this person.

Persons jointly holding bank shares persons are recognized:

- being close relatives;

- jointly holding shares owing to the signed agreement or otherwise;

- being considerable participants separately or jointly;

- if one of them granted loan (the credit or means equated to it) to other person for share purchase;

- if one of them is official or the representative of other person.

Trust management - for the purposes of this law means that the asset manager of this person has no common interests with this person and:

- in no way it cannot be controlled by this person or depend on it in case of asset management of this person;

- was not and is not the worker of this person or his business partner;

- is not close relative of this person;

- in the agreement on trust management it shall be specified that in case of asset management or property of this person the managing director manages and controls this property and in no way shall not consult and notify this person.

"Islamic bank" - the bank performing the activities according to the Islamic principles of banking and financing in the presence of the corresponding license of Bank of Kyrgyzstan.

The bank having "Islamic window" - the bank providing services according to the Islamic principles of banking and financing within the relevant division ("Islamic window") in the presence of the corresponding license of Bank of Kyrgyzstan.

The Islamic principles of banking and financing - the rule of banking operations according to standards of Sharia according to the procedure, established by regulations of Bank of Kyrgyzstan.

"Islamic window" - the relevant division of bank performing transactions according to the Islamic principles of banking and financing.

Standards of Sharia - set of the rules of implementation of economic or other activity developed and approved by the international organizations establishing standards of conducting Islamic banking (The organization of financial accounting and audit for Islamic financial institutions and Council of Islamic financial services).

Sharia council - body of the bank performing transactions according to the Islamic principles of banking and financing, responsible for compliance of transactions (agreements) of bank to standards of Sharia.

Article 3. Bank system of the Kyrgyz Republic

1. The bank system of the Kyrgyz Republic consists of National (Central) Bank of the Kyrgyz Republic and commercial banks.

Tasks, the principles of activities, legal status and powers of Bank of Kyrgyzstan are determined by the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic". Provisions of this Law are applied to Bank of Kyrgyzstan only in the cases which are directly provided by this Law.

Activities of banks are regulated by this Law, the Law "About National Bank of the Kyrgyz Republic", other legal acts of the Kyrgyz Republic, regulations of Bank of Kyrgyzstan and the charter of bank.

2. On types of activity the bank can be universal or specialized.

The universal bank is the bank performing all types of banking activities including investment.

The specialized bank is the bank performing limited circle of banking activities. Activities of specialized banks are performed based on this Law, and also separate legal acts regulating their activities.

3. On pattern of ownership the bank can be state or private.

The national bank is created based on separate regulatory legal act in the form of post, investment, savings and other, in fact similar to similar banks. The national bank performs the activities according to the bank law of the republic.

4. The interstate bank is created based on the international treaty (agreement) of the Kyrgyz Republic ratified in accordance with the established procedure.

Provisions of this Law taking into account the features provided in the international treaty (agreement) on its creation extend to it.

Article 4. Specialized financial credit institutes

Specialized financial credit institutes: credit unions, financial and credit corporations (companies), loan cash desks, societies of mutual lending and others, in fact similar to similar specialized credit institutes, act on the basis of the licenses of Bank of Kyrgyzstan and are competent to perform separate banking activities.

Specialized financial credit institutes have the right to perform the limited list of transactions (agreements) corresponding to the Islamic principles of banking and financing according to the procedure, established by Bank of Kyrgyzstan.

Activities of such specialized financial credit institutes are regulated by the laws of the Kyrgyz Republic and this Law taking into account the features provided by regulations of Bank of Kyrgyzstan.

Article 5. Differentiation of responsibility of the Kyrgyz Republic and banks

The bank does not answer for obligations the Kyrgyz Republic, as well as the Kyrgyz Republic does not answer for obligations bank, except as specified, when the state itself assumed liabilities of bank.

The bank does not answer for obligations Bank of Kyrgyzstan. The bank of Kyrgyzstan does not answer for obligations banks.

Article 6. Independence of banks in the Kyrgyz Republic

1. Banks of the Kyrgyz Republic will independently organize and perform the activities within the competence provided to them by this Law and other regulatory legal acts of the Kyrgyz Republic.

2. Intervention in any form in the solution of the questions connected with banking activity is forbidden to state governing bodies and their officials.

For violation of these requirements there comes responsibility, stipulated by the legislation the Kyrgyz Republic.

The bank of Kyrgyzstan within the powers conferred to it under this Law and the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic" exercises banking supervision, and also administrative and other regulating functions concerning banks and other financial credit institutes.

3. The Jogorku Kenesh of the Kyrgyz Republic, the President of the Kyrgyz Republic in extreme cases (military operations, natural disasters, the international conflicts) for the purpose of protection of interests of the state can issue the relevant laws and decrees providing restriction or prohibition of certain type of banking activities, completely or concerning certain countries. Action of these regulatory legal acts extends to the term specified in them. For violation of the requirements specified in these laws and decrees there comes responsibility, stipulated by the legislation.

4. Officials of state governing bodies:

1) cannot participate in governing bodies of banks or bank holding companies, except for national banks;

More than ten percent of shares with voting power in bank or in bank holding company cannot own and/or control 2).

Persons owning ten and more percent of shares in bank or bank holding company in case of appointment them as officials in state bodies shall deliver the shares in trust management for stay in public service.

Article 7. Unions and banking associations

1. Banks of the Kyrgyz Republic can create the unions, associations and other associations which can include also foreign banks, for coordination of the activities, protection and representation of common interests, implementation of joint projects and the solution of other general tasks. Activities of such organizations are performed according to their constituent documents and do not require the license of Bank of Kyrgyzstan.

2. Banks have the right to organize bank holding companies which activities are performed based on this Law.

Bank holding companies (managing companies) created only for the purpose of management of the companies entering into banking group shall be created in the form of joint-stock company.

2-1. The unions, associations and other associations of banks shall notify Bank of Kyrgyzstan on the creation within five working days from the moment of implementation of state registration.

3. Banks are forbidden to use the unions, associations and other associations (including holding companies) for achievement of the agreements directed to restriction of the competition in banking and market monopolization of banking activities in questions of establishment of interest rates and the sizes of commission fee, and also any other conditions which cause damage to clients of banks.

4. Observance of the antitrust law concerning banks and other financial institutions regulated according to this Law is controlled by Bank of Kyrgyzstan. For this purpose the Bank of Kyrgyzstan can publish the regulations and instructions obligatory for execution.

5. Banks shall not enter transactions or perform activities, providing them with one or together with other persons the dominant position in capital market, the cash and currency markets determined according to the antitrust law and shall not participate in activities or different transactions which could provide them unfair benefit to themselves or the third parties.

Chapter II. Creation of banks in the Kyrgyz Republic

Article 8. Bank, his founders and shareholders

1. Legal entities and physical persons - residents and nonresidents of the Kyrgyz Republic, and also the Government of the Kyrgyz Republic can be founders and shareholders of bank.

The legal entities registered in offshore zones or having as members of the affiliates registered in offshore zones or the physical persons living in the territory of offshore zones or being shareholders (participants) of the legal entities registered in offshore zones which list is established by Bank of Kyrgyzstan cannot be shareholders (participants) of resident banks of the state.

The transactions connected with acquisition by the legal entities or physical persons registered or living in the territory of the offshore zones determined according to the procedure specified in the paragraph the second this Item, bank shares are invalid and are recognized insignificant.

Founders (participants, shareholders) of bank, and also persons affiliated with it shall submit upon the demand of Bank of Kyrgyzstan to the last the constituent documents, financial and other reportings determining his founders (shareholders, participants) and also data on their financial condition and the performed operations.

2. The bank can be created and be effective only in the form of the joint-stock company (closed or opened).

3. The legal entities who are not engaged in banking and/or financial activities including the activities connected with banking and/or financial activities cannot solely or together with other persons, perform:

- immediate or indirect possession or management more than twenty in percent of voting shares (any type) of bank;

- or, irrespective of participation in the authorized capital of bank to perform considerable influence on management and/or policy of this bank based on the agreement or otherwise.

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