RESOLUTION OF BOARD OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of May 30, 2016 No. 144

About establishment of prudential standard rates and other regulations and limits, obligatory to observance, for Islamic banks, their normative values and technique of calculations of prudential standard rates and other regulations and limits, obligatory to observance, for Islamic banks

According to the laws of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan" and of March 19, 2010 "About the state statistics" the Board of National Bank of the Republic of Kazakhstan DECIDES:

1. Establish the following prudential standard rates and other regulations, obligatory to observance, and limits for Islamic banks:

1) minimum size of authorized and own capitals of bank;

2) coefficient of sufficiency of equity;

3) the maximum extent of risk on one borrower;

4) liquidity rates;

5) limits of open foreign exchange position;

6) capitalization of banks to obligations to nonresidents of the Republic of Kazakhstan;

7) coefficient on placement of part of means of banks in internal assets.

2. Establish Normative values and technique of calculations of prudential standard rates and other regulations and limits, obligatory to observance, for Islamic banks according to appendix 1 to this resolution.

3. Recognize invalid regulatory legal acts of the Republic of Kazakhstan, and also structural elements of some regulatory legal acts of the Republic of Kazakhstan according to the list according to appendix 2 to this resolution.

4. To department of methodology of the financial market (Abdrakhmanov N. A.) in the procedure established by the legislation of the Republic of Kazakhstan to provide:

1) together with Legal department (Sarsenov N. V.) state registration of this resolution in the Ministry of Justice of the Republic of Kazakhstan;

2) the direction of this resolution in the republican state company on the right of economic maintaining "The republican center of legal information of the Ministry of Justice of the Republic of Kazakhstan":

on official publication in information system of law of Ad_let within ten calendar days after its state registration in the Ministry of Justice of the Republic of Kazakhstan;

for inclusion in the State register of regulatory legal acts of the Republic of Kazakhstan, Reference control bank of regulatory legal acts of the Republic of Kazakhstan within five working days from the date of its obtaining by National Bank of the Republic of Kazakhstan after state registration in the Ministry of Justice of the Republic of Kazakhstan;

3) placement of this resolution on official Internet resource of National Bank of the Republic of Kazakhstan after its official publication.

5. To management on consumer protection of financial services and external communications (Terentyev A. L.) provide the direction of this resolution on official publication in periodic printing editions within ten calendar days after its state registration in the Ministry of Justice of the Republic of Kazakhstan.

6. To impose control of execution of this resolution on the vice-chairman of National Bank of the Republic of Kazakhstan Smolyakov O. A.

7. This resolution becomes effective after ten calendar days after day of its first official publication.

Appendix 1

to the Resolution of Board of National Bank of the Republic of Kazakhstan of May 30, 2016 No. 144

Normative values and technique of calculations of prudential standard rates and other regulations and limits, obligatory to observance, for Islamic banks

1. These normative values and technique of calculations of prudential standard rates and other regulations and limits, obligatory to observance, (further - Standard rates) are developed for Islamic banks according to the Law of the Republic of Kazakhstan of August 31, 1995 "About banks and banking activity in the Republic of Kazakhstan" (further - the Law on banks) and establish normative values and technique of calculations of prudential standard rates and other regulations and limits, obligatory to observance, for Islamic banks (further - banks).

1-1. In the Management on forming of provisions (reserves) under asset impairment of bank in the form of loans and receivables according to appendix 1 to Standard rates the following concepts are used:

1) book value - the amount on which the loan is recognized the balance sheet after deduction of the provisions (reserves) created on them;

2) uniform loans - group of loans with similar characteristics of credit risk;

3) individual loans - loans on which provisions (reserves) are calculated on each such loan;

4) investment loan (credit) - I will jam (credit), conforming to the following requirements:

the term of loan (credit) constitutes 5 (five) and more years;

terms of the contract of loan (credit) establish prohibition on complete early repayment. Partial repayment of loan is performed in the terms and procedure provided by the business plan of the borrower;

the loan (credit) is granted the legal entity according to its business plan providing realization of complex of the actions directed to creation, expansion and upgrade of production of goods, production and transport infrastructure;

5) unsteady types of pledge - the property and money arriving in the future including under agreements of equity (except for the money arriving under the agreements signed with the companies with the state participation (subjects of the quasi-public sector), insurance contracts (except for "BB+" of Standard & Poor rating agency "s or rating of the Moody agencies" s Investors Service and Fitch (further - other rating agencies is not lower than the insurance contracts containing Items on unconditional and irrevocable obligation fulfillment, concluded with the insurance companies having rating), insurance contracts which conditions are provided in Item 1-2 of Standard rates), guarantees of physical persons or legal entities (except for "BB+" of Standard & Poor rating agency "s or the rating of similar level of one of other rating agencies, guarantees of banks of the second level is not lower than guarantees of the legal entities having credit rating, having credit rating is not lower "In -" Standard & Poor rating agency "of s or other rating agencies, and also guarantees issued by national managing directors of holdings and their affiliated organizations), intangible assets, shares in the authorized capital or the securities which are not included in the official listing of organizers of the biddings of the Republic of Kazakhstan and (or) organizers of the biddings recognized by the international stock exchanges (except for the share accepted in mortgage providing in the authorized capital and (or) securities of legal entities which have relation of debt on the loans issued on the purposes which are not connected with financing of current assets to profit to deduction of expenses on payment of the added remunerations of tax assignments and charged depreciation (EBITDA) constitutes no more 4), paper grain receipts, mortgage providing, being outside the Republic of Kazakhstan (except for the mortgage providing which is in the countries of the Eurasian Economic Union in the presence of the conclusion of legal consultants or specialists of the affiliated organizations of bank according to the right of the said countries confirming proper registration of mortgage providing);

6) loan - implementation of banking loan, leasing, factoring, forfaiting activities by bank, implementation by Islamic bank of the transactions specified in subitems 3), 4), 4-1) and 5) of Item 1 of article 52-5 of the Law on banks, accounting of bills of exchange and receivables on earlier issued bank loans;

7) the borrower - the physical person or legal entity which signed the loan agreement (credit);

8) provisions (reserves) - the reserves created under impairment of loan;

9) the co-borrower - the physical person or legal entity which is signing the loan agreement (credit) together with the borrower and acting according to the loan agreement (credit) as the solidary actionee of obligations on return of the received money.

1-2. The insurance contract signed with the insurance company having rating is not lower than "BB+" of Standard&Poor rating agency "s or other rating agencies, contains exclusively following conditions allowing the insurer to refuse (not to perform) in insurance payment (insurance payment) to the beneficiary (bank):

requirements of the insurer (insured, the beneficiary) about indemnification exceed the size of insurance sum;

the damage or expenses resulted from impact of nuclear explosion, radiation or radioactive infection, military operations, civil war, any national disorders, mass riots or strikes;

the agreement of bank loan is nullified;

introduction of amendments to the agreement of bank loan, the agreement of pledge, the agreement of guarantee or the guarantee agreement without written coordination of such changes with the insurer;

message beneficiary (bank) to the insurer of obviously false data on object of insurance, insurance risk, insured event and its consequences;

receipt of losses by the beneficiary (bank) of full recovery from the face, responsible for losses, or third party;

hindrance by the beneficiary (bank) to the insurer in investigation of circumstances of loss occurrence and in establishment of the size of the caused losses;

refusal of the beneficiary (bank) of the right to claim according to the loan agreement against the insurer, including in judicial or extrajudicial procedure.

In the insurance contract specifying of condition of implementation of insurance payment without taking into account (less) the agreement of the pledge nullified by court is allowed. In this case the insurance contract is considered as providing less the agreement of the pledge nullified by court.

In case of acceptance by bank as providing the insurance contract, this agreement is accepted less the unconditional franchize.

2. Normative values are expressed by number with three signs after comma.

Chapter 1. Minimum size of authorized and own capitals of bank

3. The minimum size of authorized and own capitals for again created bank is established in the amount of 10 000 000 000 (ten billion) tenges, except for the case provided by part two of this Item of Standard rates.

The minimum size of authorized and own capitals for again created bank which is the affiliated organization of the nonresident bank of the Republic of Kazakhstan having the minimum long-term credit rating on the international scale in foreign currency is not lower "And" Standard & Poors rating agency or the rating of other rating agencies, is established in the amount of 5 000 000 000 (five billion) tenges.

4. The minimum size of equity for other banks is established in the amount of 10 000 000 000 (ten billion) tenges.

5. The bank redeems from shareholders own shares provided that such redemption will not lead to violation of any of prudential standard rates and other regulations, obligatory to observance, and limits set by authorized body on regulation, control and supervision of the financial market and the financial organizations (further - authorized body).

Chapter 2. Coefficient of sufficiency of equity

6. The equity is calculated as capital sum of the first level and the capital of the second level.

For the purposes of Standard rates, in addition to long-term credit rating evaluations of the Standard & Poor agency "s, authorized body are also recognized long-term credit rating evaluations of other rating agencies.

For the purposes of Standard rates the following organizations treat international financial institutions:

Asian Development Bank (Asian Development Bank);

Inter-American Development Bank (Inter-American Development Bank);

African development bank (African Development Bank);

Eurasian Development Bank;

European Investment Bank (European Investment Bank);

Development bank of the European Council (Council of Europe Development Bank);

European Bank for Reconstruction and Development (European Bank for Reconstruction and Development);

Islamic corporation on private sector development (ICD);

Multilateral agency of guarantee of investments;

International Centre for Settlement of Investment Disputes;

Islamic development bank (Islamic Development Bank);

Scandinavian investment bank (Nordic Investment Bank);

International Monetary Fund;

International Development Association;

International Bank for Reconstruction and Development (International Bank for Reconstruction and Development);

International Finance Corporation (International Finance Corporation).

7. The capital of the first level is calculated as the amount of fixed capital and the added capital:

1) fixed capital is calculated as the amount:

the paid common shares corresponding to the criteria of financial instruments of fixed capital provided by Criteria for classification of tools within equity of bank according to appendix 1-1 to Standard rates;

supplementary paid-in capital;

retained net profit of last years;

retained net profit of the current year;

the cumulative opened reserve determined as the amount of remaining balance on the balance sheet account 3510 "Reserve capital" of the Standard chart of accounts of financial accounting in banks of the second level, the mortgage organizations, Development Bank of Kazakhstan joint-stock company and branches of nonresident banks of the Republic of Kazakhstan approved by the resolution of Board of National Bank of the Republic of Kazakhstan of January 31, 2011 No. 3, registered in the Register of state registration of regulatory legal acts at No. 6793;

reserves of revaluation of fixed assets and reserves of revaluation of cost of the securities carried at fair value through other comprehensive income;

reserves of revaluation of cost of the loans carried at fair value through other comprehensive income;

minus the following regulatory adjustments:

own redeemed common shares;

intangible assets, including goodwill;

losses of last years and losses of the current year;

deferred tax asset, except for parts of the deferred tax assets recognized concerning deductible temporary differences;

reserves on other revaluation;

the sales returns connected with transactions on securitization of assets. The deferred revenue in connection with the expectation of the complete or partial income in the future received from securitization conditions belongs to such income;

the income or losses from change of fair value of the financial liability in connection with change of credit risk according to such obligation;

the regulatory adjustments which are deductible from the added capital, but in connection with its insufficient level subtracted from fixed capital;

the investments specified in Item 8 of Standard rates;

2) the added capital joins the termless agreements corresponding to the criteria established in Criteria for classification of tools within equity of bank according to appendix 2 to Standard rates as a result of which at the same time there is financial asset at one person and the financial liability or other financial instrument confirming the right to share of the assets of the legal entity which remained later deductions of all its obligations at other person (further - termless financial instruments) and also the paid preferred shares corresponding to the criteria established in Criteria for classification of tools within equity of bank according to appendix 2 to Standard rates.

The size of the added capital decreases by the amount of the following regulatory adjustments:

investments of bank into own termless financial instruments by direct or indirect method;

own redeemed preferred shares of bank;

the investments specified in Item 8 of Standard rates;

the regulatory adjustments which are deductible from the capital of the second level, but in connection with its insufficient level subtracted from the added capital.

If the amount of the added capital of bank is insufficient for implementation of deduction, then the rest is subtracted from fixed capital of bank.

The reserve of revaluation of cost of the acquired government securities of the Republic of Kazakhstan issued by the Government of the Republic of Kazakhstan and National Bank of the Republic of Kazakhstan, and also securities of the issuers of the Russian Federation carried at fair value through other comprehensive income in the form of the negative revaluation which arose after March 1, 2022 joins in calculation of the amount of fixed capital step by step within 12 (twelve) months according to the following conditions:

since March 1, 2022 - in the amount of 10 (ten) percent of the amount of negative revaluation;

since April 1, 2022 - in the amount of 15 (fifteen) percent of the amount of negative revaluation;

since May 1, 2022 - in the amount of 20 (twenty) percent of the amount of negative revaluation;

since June 1, 2022 - in the amount of 25 (twenty five) percent of the amount of negative revaluation;

since July 1, 2022 - in the amount of 30 (thirty) percent of the amount of negative revaluation;

since August 1, 2022 - in the amount of 40 (forty) percent of the amount of negative revaluation;

since September 1, 2022 - in the amount of 50 (fifty) percent of the amount of negative revaluation;

since October 1, 2022 - in the amount of 60 (sixty) percent of the amount of negative revaluation;

since November 1, 2022 - in the amount of 70 (seventy) percent of the amount of negative revaluation;

since December 1, 2022 - in the amount of 80 (eighty) percent of the amount of negative revaluation;

since January 1, 2023 - in the amount of 90 (ninety) percent of the amount of negative revaluation.

since February 1, 2023 - in the amount of 100 (hundred) percent of the amount of negative revaluation.

8. Deduction from the capital of investments of bank into shares (shares in the authorized capital), termless financial instruments, subordinated debt (further - financial instruments) legal entities whose financial reporting are not consolidated in case of creation of the financial reporting of bank according to international accounting standards (further - IFRS) and also deduction of deferred tax assets, are performed in the following procedure:

if investments of bank into financial instruments of the financial organizations in which the bank has less than 10 (ten) percent of issued shares (shares in the authorized capital) in total exceed 10 (ten) percent from fixed capital of bank after application of the regulatory adjustments specified in Item 7 of Standard rates, the amount of excess is deductible from equity;

if investments of bank into common shares of the financial organization in which the bank has 10 (ten) and more percent from issued shares (shares in the authorized capital) in total exceed 10 (ten) percent from fixed capital of bank after application of the regulatory adjustments specified in Item 7 of Standard rates and the paragraph the second this Item, the amount of excess is deductible from fixed capital;

if part of the deferred tax assets recognized concerning deductible temporary differences exceeds 10 (ten) percent from fixed capital of bank after application of the regulatory adjustments specified in Item 7 of Standard rates and the paragraph the second this Item, the amount of excess is deductible from fixed capital;

if investments of bank into common shares of the financial organization in which the bank has 10 (ten) and more percent from issued shares (shares in the authorized capital) and part of the deferred tax assets recognized concerning deductible temporary differences in total exceed 17,65 (seventeen whole sixty five 100-th) percent of difference of fixed capital of bank after application of the regulatory adjustments specified in Item 7 of Standard rates, and the amount which is subject to deduction from fixed capital, specified in paragraphs the second, third and fourth this Item, the amount of excess is deductible from fixed capital;

the excess amount calculated according to the paragraph the fifth this Item decreases on the amounts which are deductible from fixed capital, specified in paragraphs the second, third and fourth this Item;

the deduction of the investments into financial instruments specified in the paragraph the second this Item is performed from appropriate level of equity proceeding from share of investments in the total amount of investments into financial instruments;

deferred tax assets for the purposes of calculation of deduction according to Item 7 and paragraphs the fourth, fifth and sixth this Item decrease on the amount of deferred tax liabilities, except for the deferred tax liabilities recognized concerning intangible assets including goodwill, on pro rata basis between the deferred tax assets recognized concerning deductible temporary differences and other deferred tax assets;

investments of bank into termless financial instruments of the financial organizations in which the bank has 10 (ten) and more percent from issued shares (shares in the authorized capital) are deductible from the added capital;

if the amount of the added capital is insufficient for implementation of deduction, then the amount is subtracted from fixed capital of bank;

investments of bank into subordinated debt of the financial organizations, in which the bank has 10 (ten) and more percent from issued shares (shares in the authorized capital), of the legal entity, are deductible from the capital of the second level;

if the capital sum of the second level is insufficient for implementation of deduction, then the amount is subtracted from the capital of the first level of bank;

The investments which are not subtracted from calculation of equity are weighed on degree of credit risk according to the Table of the assets of bank weighed on degree of credit risk of investments according to appendix 2 to Standard rates.

9. The capital of the second level is calculated as the amount:

subordinated debt minus the redeemed own subordinated debt of bank;

minus the investments specified Item 8 of Standard rates.

The size of the subordinated debt attracted till January 1, 2015, which is not corresponding to the criteria established by Criteria for classification of tools within equity of bank according to appendix 1-1 to Standard rates joins in calculation of the capital of the second level according to the following conditions:

in national currency:

since January 1, 2015 - in the amount of 100 (hundred) percent of the amount of subordinated debt in national currency;

since January 1, 2016 - in the amount of 100 (hundred) percent of the amount of subordinated debt in national currency;

since January 1, 2017 - in the amount of 80 (eighty) percent of the amount of subordinated debt in national currency;

since January 1, 2018 - in the amount of 50 (fifty) percent of the amount of subordinated debt in national currency;

since January 1, 2019 - in the amount of 20 (twenty) percent of the amount of subordinated debt in national currency;

since January 1, 2020 the amount of subordinated debt in national currency is excluded from calculation of the capital of the second level;

in foreign currency:

since January 1, 2015 - in the amount of 80 (eighty) percent of the amount of subordinated debt in foreign currency;

since January 1, 2016 - in the amount of 60 (sixty) percent of the amount of subordinated debt in foreign currency;

since January 1, 2017 - in the amount of 40 (forty) percent of the amount of subordinated debt in foreign currency;

since January 1, 2018 - in the amount of 20 (twenty) percent of the amount of subordinated debt in foreign currency;

since January 1, 2019 the amount of subordinated debt in foreign currency is excluded from calculation of the capital of the second level.

The size of subordinated debt with repayment period as of the January 1, 2015 constituting less than 5 (five) years continues to join in calculation of the capital of the second level in the amount of, included as of December 31, 2014, and annually as of January 1 decreases by 20 (twenty) percent from the amount of subordinated debt.

10. Sufficiency of equity of bank is characterized by the following coefficients:

1) coefficient of sufficiency of fixed capital (k 1):

relation of fixed capital to the amount:

assets, contingent and possible obligations weighed on degree of credit risk;

assets, conditional and possible requirements and obligations calculated taking into account market risk;

operational risk;

2) capital adequacy ratio of the first level (k1-2):

relation of the capital of the first level to the amount:

assets, contingent and possible obligations weighed on degree of credit risk;

assets, conditional and possible requirements and obligations calculated taking into account market risk;

operational risk;

3) coefficient of sufficiency of equity (k 2):

equity relation to the amount:

assets, contingent and possible obligations weighed on degree of credit risk;

assets, conditional and possible requirements and obligations calculated taking into account market risk;

operational risk.

The assets, contingent and possible obligations weighed on the risk degrees taken into consideration of coefficients of k 1, k1-2 and k2 join less the reserves created according to IFRS.

Values of coefficients of sufficiency of equity and Value of capital adequacy ratios taking into account the conservation buffer and the system buffer are established by appendix 3 to Standard rates.

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