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RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 23, 2013 No. 52/7

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

(as amended on 31-05-2017)

According to articles 7 and 43 of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", the Board of National Bank of the Kyrgyz Republic decides:

1. Approve "The regulations on the minimum requirements on credit risk management in the credit unions performing transactions according to the Islamic principles of banking and financing" (are applied).

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

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. To management of methodology of supervision and licensing to bring this resolution to the attention of Association of credit unions and cooperatives of Kyrgyzstan, National association of credit unions and JSC FKKS.

5. To impose control of execution of this resolution on the vice-chairman of National Bank of the Kyrgyz Republic Chokoyev Z. L.

Chairman

Z.Asankozhoyeva

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of December 23, 2013 No. 52\7

Provision "About the Minimum Requirements on Credit Risk Management in the Credit Unions Performing Transactions according to the Islamic Principles of Banking and Financing"

Chapter 1. General provisions

1. This Provision extends to the credit unions having the license of National Bank of the Kyrgyz Republic (further - National Bank) on carrying out transactions according to the Islamic principles of banking and financing (further - credit unions).

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

3. In this Provision the determinations stated in the laws of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic, banks and banking activity", "About credit unions" and regulatory legal acts of National Bank are used.

4. The credit risk is risk of non-execution by clients/suppliers/partners of the obligations according to terms and terms of the contract that can exert negative impact on the capital of credit union or its profit.

The credit risk is connected as with delay of payment because of the participant - the client/supplier/partner of credit union (further - the client) owing to its insolvency, and with quality of pledge, the client's type on pattern of ownership, industry accessory, availability and warranty types and reliability of guarantors, assessment of accomplishment of earlier these obligations on financing, the prospects of further development of the borrower, etc.

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

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

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