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RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of September 25, 2013 No. 35/13

About approval "Regulations on the minimum requirements on credit risk management when implementing transactions according to the Islamic principles of banking and financing"

(The last edition from 19-06-2019)

1. Approve "Regulations on the minimum requirements on credit risk management when implementing transactions according to the Islamic principles of banking and financing" it (is applied).

2. Determine that operation of this resolution extends to Ekoislamikbank Ltd when implementing of transactions by it according to the Islamic principles of banking and financing within pilot project.

4. This resolution becomes effective after thirty days after official publication.

5. To legal management:

- publish this resolution on the official site of National Bank of the Kyrgyz Republic;

- after official publication to send this resolution to the Ministry of Justice of the Kyrgyz Republic for entering into 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 Chokoyev Z. L.

Chairman of the board

Z.Asankozhoyeva

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of September 25, 2013 No. 35/13

Regulations on the minimum requirements on credit risk management when implementing transactions according to the Islamic principles of banking and financing

Chapter 1. General provisions

1. This Provision extends to commercial banks, including the banks having "Islamic window", and the microfinance companies attracting term deposits and performing transactions according to the Islamic principles of banking and financing (further - banks).

2. The purpose of this provision is forming in banks of adequate management system credit risk when implementing transactions according to the Islamic principles of banking and financing.

2-1. This Provision also extends to other assets bearing in themselves credit risk.

3. The credit risk is risk of non-execution by clients/suppliers/partners (further - the client) the obligations according to terms and terms of the contract that can exert negative impact on the capital of bank or its profit.

The credit risk is present at all types of activity of bank where the positive result depends on accomplishment by the client of the obligations to bank provided by agreements and/or agreements.

The purpose of credit risk management consists in determination of degree of exposure of bank to credit risk, identification of the reasons of its origin and determination of internal and external factors of increase in risk based on which it is possible to predict credit risk and to perform necessary measures for its minimization to acceptable level.

3-1. Refinancing is the conclusion of the relevant new agreement for complete or partial repayment of the operating asset.

Because of the unique characteristics of each asset type bearing in themselves credit risk, optional nature of some agreements, the credit risk shall be estimated separately on each asset type for implementation of the corresponding internal control and risk management.

5. Requirements of this provision, and also other regulatory legal acts of National Bank of the Kyrgyz Republic (further - National Bank) shall be completely reflected in the internal documents of bank regulating credit risk management.

Chapter 2. Policy of bank on implementation of transactions on the Islamic principles of financing

6. All types of products and standard agreements by the Islamic principles of financing which the bank intends to perform shall be originally approved by Sharia council of the bank from the point of view of their compliance to standards of Sharia.

7. Transactions of bank by the Islamic principles of financing are performed according to its domestic policy approved by the Board of directors of bank.

8. The policy of bank on implementation of transactions on the Islamic principles of financing (further - Policy) determines strategy, criteria, parameters and procedures by which bank employees in activities for implementation, execution of transactions, monitoring and risk management shall be guided.

The policy of bank including shall be based on the principles of responsible financing: conscientiousness, transparency, reliability, partnership in relation to clients/partners, accounting of their economic interests and financial opportunities.

9. The following provisions concerning issue of the assets bearing in themselves credit risk shall be reflected in Policy:

1) general provisions, including:

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