RESOLUTION OF BOARD OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of May 27, 2013 No. 137

About approval of Rules of forming by banks of the second level of dynamic reserve and establishment of the minimum size of dynamic reserve, the amount of the expected losses

According to the Code of the Republic of Kazakhstan of December 10, 2008 "About taxes and other obligatory payments in the budget (Tax code)", the Law of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan" the Board of National Bank of the Republic of Kazakhstan DECIDES:

1. Approve the enclosed Rules of forming by banks of the second level of dynamic reserve (further - Rules).

2. Establish the minimum size of dynamic reserve according to Item 2 of Rules and the amount of the expected losses according to Item 3 of Rules.

3. Recognize invalid regulatory legal acts of the Republic of Kazakhstan according to appendix to this resolution.

4. This resolution becomes effective after ten calendar days after day of its first official publication and extends to the relations which arose since January 1, 2013.

Approved by the Resolution of Board of National Bank of the Republic of Kazakhstan of May 27, 2013 No. 137

Rules of forming by banks of the second level of dynamic reserve

These rules of forming by banks of the second level of dynamic reserve (further - Rules) are developed according to the Code of the Republic of Kazakhstan of December 10, 2008 "About taxes and other obligatory payments in the budget (Tax code)", the Law of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan" and establishes procedure and conditions of forming of dynamic reserve of banks of the second level (further – bank).

1. For the purposes of Rules the loan is understood as implementation of banking loan, leasing, factoring, forfaiting activities by bank (except for interbank loans, loans to the organizations performing separate types of banking activities, transactions the return repo), and also accounting of the bill of exchange.

Interbank loans are understood as the loans of banks granted on contractual basis to other banks and the organizations performing separate types of banking activities.

2. The size of dynamic reserve for the end of reporting quarter is calculated by the following formula:

_DRK = DRK-1 + (OP-RSP),

where:

DRK - dynamic reserve for the end of reporting quarter;

DRK-1 - dynamic reserve for the end of the previous reporting quarter. As of January 1, 2013 the dynamic reserve is equal to zero;

OP - the expected losses for reporting quarter;

ATN - assignments for reserves minus the income from recovery of reserves, for reporting quarter, carried on deductions according to Item 1 of article 106 of the Code of the Republic of Kazakhstan "About taxes and other obligatory payments in the budget (Tax code)".

Assignments for reserves - expenses on creation of reserves under loans according to international accounting standards.

Income from recovery of reserves - the income which resulted from reduction of the amount of earlier created reserves under loans, except for case when reduction of reserves results from write-off of loan from balance.

For the purposes of the taxation the size of dynamic reserve is determined as positive difference between the size of the dynamic reserve determined for the end of tax period and the size of the dynamic reserve determined for the end of the previous tax period.

The minimum size of dynamic reserve constitutes at least zero.

2-1. The size of dynamic reserve is determined as follows:

1) the dynamic reserve for the end of the first, second, third, fourth quarter 2014 is determined in the amount of dynamic reserve for the end of the fourth quarter 2013 estimated on formula according to Item 2 of Rules.

For the purposes of calculation of dynamic reserve for the end of the fourth quarter 2014 measure value of ATN determined according to Item 2 of Rules in case of calculation of dynamic reserve for the end of the first, second, third, fourth quarter 2013, is recognized equal to zero if ATN has negative value;

2) the dynamic reserve for the end of the first, second, third, fourth quarter 2015 is determined in the amount of dynamic reserve for the end of the fourth quarter 2014 estimated according to the subitem 1) of this Item.

2-2.  No. 313 is not effective according to the Resolution of Board of National Bank of the Republic of Kazakhstan of 26.12.2016

3. The expected losses for reporting quarter are calculated by the following formula:

where,

PZI – change (surplus/decrease) of portfolio of loans on the loans specified in appendix 1 to Rules, for reporting quarter, reflected at book value, increased by the amount of the created reserves;

PZI – portfolio by the form the loans specified in appendix 1 to Rules, for the end of reporting quarter, reflected at book value, increased by the amount of the created reserves;

i (alpha) – the parameter of credit losses set by appendix 1 to Rules;

i (beta) – the parameter of the hidden losses set by appendix 1 to Rules.

Appendix 1 to Rules is effective till January 1, 2016.

Parameter of credit losses

(alpha) and parameter of the hidden losses

(beta) are established by authorized body in process of accumulating of statistical data, but at least once in three years.

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