RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of May 30, 2014 No. 24/8

About approval of "The instruction about procedure for observance of limits of open foreign exchange positions by microfinance companies"

According to Articles 4, "About National Bank of the Kyrgyz Republic" the Board of National Bank of the Kyrgyz Republic decides 7 and 43 Laws of the Kyrgyz Republic:

1. Approve "The instruction about procedure for observance of limits of open foreign exchange positions by microfinance companies" it (is applied).

3. 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.

4. This resolution becomes effective after one month from the date of official publication.

5. To management of methodology of supervision and licensing to bring this resolution to the attention of microfinance companies, Associations of the microfinancial organizations, the relevant structural divisions of National Bank 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.

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of May 30, 2014 No. 24/8

The instruction about procedure for observance of limits of open foreign exchange positions by microfinance companies

1. General provisions

1. This Instruction is developed for the purpose of prevention of currency risks in activities of the microfinance companies (further - IFC) including performing transactions according to the Islamic principles of banking and financing taking into account requirements of standards of Sharia and the special terminology applied by them in case of banking operations.

2. IFC in case of development of domestic policy and procedures for control of observance of limits of open foreign exchange positions shall be guided by requirements of this Instruction.

IFC, the performing transactions according to the Islamic principles of banking and financing, in addition shall be guided by the standards of Sharia approved by the Organization of financial accounting and audit for Islamic financial institutions (AAOIFI).

3. For the purpose of this Instruction the following determinations are applied:

The currency risk is risk of receipt of IFC of losses owing to change in value of requirements (assets)/obligations of IFC expressed in foreign currency in case of adverse change of the currency rate while the IFC has open foreign exchange position on this currency. The foreign exchange position arises when implementing currency transactions and is exponent of exposure of IFC to currency risk.

Currency transactions are transactions on issuance of credits, acceptance of term deposits (deposits) in foreign currency, and also other transactions as a result of which requirements (assets) or obligations expressed in foreign currency change.

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