ь Information on the exchange rate of the U.S. dollar relative to the Kyrgyz som  

Since early 2014, the official U.S. dollar exchange rate relative to the Kyrgyz som increased by 9.70% from KGS 49.1984 per 1 U.S. dollar to KGS 53.9590 as of March 03, 2014.  

Significant growth of the U.S. dollar exchange rate relative to the Kyrgyz som since early 2014 was primarily conditioned by external shocks. Firstly, the value of the Kazakh tenge decreased within this period by 20% and one-time devaluation of the Kazakh tenge had short-term impact on the domestic foreign exchange market of the Kyrgyz Republic. Currently, its further impact is not observed.  

Secondly, since the beginning of the year till March 03, the value of the Russian ruble decreased by 10.8%. Moreover, aggravation of the external political situation in the Russian Federation, conditioned by the crisis in Ukraine, public disclosure of the decision made by the Federation Council on bringing the troops into the territory of Ukraine on March 1, as well as the statements about possible economic sanctions imposed by the Western countries against the Russian Federation caused another rapid decrease in the value of the Russian ruble, which, taking into account close trade and economic relations of the Russian Federation and the Kyrgyz Republic, have their impact on the situation in the domestic foreign exchange market.  

Moreover, since the beginning of the year, the RF indices decreased significantly on the background of aggravated foreign political situation when market was opened: MICEX index decreased by 5.8% up to 1.360 points due to non-performance of operations on Friday, RTS index decreased by 7% up to 1.177 points. Since March 03, 2014, the Central Bank of the Russian Federation temporarily increased key interest rate up to 7% due to volatility in the markets.  

In order to smooth sharp fluctuations of the U.S. dollar exchange rate, the National Bank carries out currency interventions on sale of non-cash and cash U.S. dollars, when necessary.  

Moreover, in carrying out supervisory functions, the National Bank conducts regular monitoring of operations performed by the objects of the financial market licensed by the National Bank, including commercial banks and exchange offices. Inspections of their operation carried out in order to verify compliance of such institutions with legislative regulations allows the National Bank to suppress the attempts of speculative actions and feverish demand.  

The National Bank addresses the public to avoid panic and, under the conditions of uncertainty, not to make decisions regarding transactions in foreign currency.  

Measure taken by the National Bank of the Kyrgyz Republic with regard to the financial institutions, which violated procedures on transactions in foreign currency.  

As of March 01, 2014, the National Bank carried out inspections in 334 exchange offices, including inspections conducted together with the State Tax Service and the State Service for Fight against Economic Crime according to the results thereof corresponding minutes were drawn up.  

Based on the results of inspections, prescriptions were forwarded to 69 exchange offices and licenses of 33 exchange offices were arrested for breaching cash discipline, rejection in foreign currency exchange, including currencies of small denominations, improper record keeping of exchange transactions, including transactions falling within the requirements of anti-money laundering and anti-terrorist financing legislation (for the period of 7 days, during which the exchange offices should take measures in order to eliminate violations and submit reports to the NBKR).  

Moreover, the licenses of 6 exchange offices were revoked due to opposition to carrying out inspections, as well as conducting exchange operations during suppression of a license imposed by the National Bank.  

Besides, 61 minutes on administrative offence have been drawn up regarding the facts of conducting exchange operations without license issued by the National Bank.  

ь On the value of the discount rate of the National Bank of the Kyrgyz Republic  

The Board of the National Bank of the Kyrgyz Republic has been examining the report on monetary policy for 2013 and the medium-term outlook since February 25, 2014. Economic Department submitted the report, which reflected information about macroeconomic indicators of the country, the results of the monetary policy, inflation processes, as well as evaluation of economic development in the medium term.  

The report highlighted that during 2013 inflation was within single indicators and corresponded to the landmark that had been identified by the main monetary policy guidelines for 2013-2017. By the end of the year, the growth rate of the consumer price index in annual terms fell to 4.0 percent. GDP growth in real terms was 10.5 percent, excluding enterprises on exploration of "Kumtor" mine, the GDP volume increased by 5.8 percent.  

According to preliminary data, the balance of payments of the Kyrgyz Republic for 2013 formed with a surplus in the amount of USD 143.8 million. Net inflow of transfers increased by 8.6 percent and amounted to USD 2 171.1 million. During the year, the domestic foreign exchange market was balanced. The USD/KGS exchange rate increased by 3.9 percent within the year.  

Money supply in the economy was primarily provided by the public finance sector. The National Bank conducted mainly sterilization interventions. The NBKR notes were the main instruments for withdrawing excess liquidity in the banking system. The monetary base increased during the year by 13.4 percent or KGS 8.6 billion and amounted to KGS 73.1 billion as of the end of December 2013.  

During the discussion, the Board members noted the positive macroeconomic indicators according to the results of 2013. Price situation was stable and facilitated recovery of economic growth, signs of fiscal consolidation were observed, and positive balance of payments was maintained. At the same time, members of the Board emphasized that the quality of economic growth raised main concerns, as it was driven mainly by reduction of the production output at "Kumtor" mine. Moreover, the trade balance raised concerns, deficit thereof increased by 14.7 percent, up to USD 3.1 billion. Growth of imports compared to exports was more rapid. With an increase in the nominal volume of transfers inflow, their growth rates decrease, which is particularly due to slowdown in economic growth in some countries-major trading partners. Board members also discussed the current situation in the foreign exchange market.  

Economic Department presented the forecasts of the main macroeconomic indicators in the medium term. Board members unanimously made a decision to establish a discount rate of 6.0 percent under the new framework for monetary policy, which is focused on strengthening the interest rate channel of the transmission mechanism operation. According to members of the Board, this value of the discount rate will allow maintaining the inflation rates around the ballpark figure.  

ь On the introduction of the interim management of OJSC "Financial Company of Credit Unions" (OJSC "FCCU")  

On February 20, 2014, according to the Resolution of the Board of National Bank of the Kyrgyz Republic, OJSC "Financial Company of Credit Unions" (OJSC "FCCU") introduced interim administration and A. N. Davlesov was appointed an interim manager.  

The prolonged disagreement between the managerial bodies, the lack of internal audit, provision of not reliable reports to the National Bank and systematic failure to comply with the prescriptions of the National Bank and personal appeals of the shareholders of OJSC "FCCU" have become the reasons for the introduction of the interim administration in OJSC "FCCU". Besides, the credit risks due to the presence of a subsidiary loan and budget loan of OJSC "FCCU’ to the Government of the Kyrgyz Republic, which is the guarantor of fulfillment of obligations under the loans of the Asian Development Bank provided to support the development of credit unions, were taken into account.  

Currently, the objective of the interim administration of OJSC "FCCU" is to prevent further deterioration in the financial condition of the company, to ensure that assets are safeguarded and to take measures for the stability of the financial situation of "OJSC "FCCU" in the interests of its shareholders and the main creditor, the Government of the Kyrgyz Republic.  

ь On the meeting of the group of stakeholders with the administration of the National Bank of the Kyrgyz Republic held on February 22, 2014  

At the initiative of individual shareholders of OJSC "FCCU", the annual general shareholders’ meeting of OJSC "FCCU" was scheduled on February 22, 2014. However, the meeting was not held due to lack of quorum, according to the legislation of the Kyrgyz Republic. Shareholders, who initiated the meeting, were not present at the meeting. This fact confirms once again the serious disagreement among the shareholders of OJSC "FCCU".  

Due to this the rest of the shareholders of OJSC "FCCU" initiated the meeting with representatives of the National Bank, which was held on the same day, February 22, 2014, where the issues regarding the reasons for introducing the interim administration were raised. Shareholders of OJSC "FCCU" were informed that according to the law, if there were reasons for introducing the interim administration, the National Bank was entitled and obliged to introduce interim administration in the financial and credit institutions and coordination of this issue with its shareholders is not required.  

In addition, in the course of the meeting, the shareholders of OJSC "FCCU" were informed about the facts of violations of procedures during operations conducted by the Board of Directors and Audit Committee of OJSC "FCCU", which confirms the existence of disagreement among managerial bodies of OJSC "FCCU".  

Based on the results of the meeting, the participants reached an agreement that the shareholders of OJSC "FCCU" would present proposals to the interim administration of OJSC "FCCU" for the subsequent preparation of the materials for consideration by the National Bank in order to resolve the problems existing in the management bodies of the company.  

REFERENCE of NBKR  

OJSC "Financial Company of Credit Unions" is a specialized financial institution, which operates in compliance with the license №002 issued by the National Bank on June 18, 2014.  

The Company is entitled to conduct the following operations:  

- to provide loans to credit unions, including financial leasing, forfeiting and factoring, under the conditions of maturity, repayment and interest payment, from own funds, as well as borrowings from financial organizations and the Government of the Kyrgyz Republic;  

- to conduct operations on financial leasing with involvement of credit unions of the Kyrgyz Republic and with obligatory participation of credit unions financing operations on financial leasing.  

Licenses/certificates have been issued to the following non-bank financial institutions and exchange offices: 

Certificate of accounting registration of LLC MCC "Asia Mix Credit" № 481 dated February 28, 2014 for micro-crediting of individuals and legal entities. Legal address: 126, Kozhomberdiev str., Kara-Balta town, Chui region.  

Certificate of accounting registration of LLC MCC "Ak Karzhy" № 482 dated February 28, 2014 for micro-crediting of individuals and legal entities. Legal address: 32, A. Masaliev str., Osh city.  

Certificates/licenses of the following non-bank financial institutions have been cancelled /revoked: 

License of CU "Kochkor-Ata-Nuru" № 135 dated January 15, 2010 has been cancelled since February 25, 2014 according to the minutes №1 of the general meeting of the СU participants dated February 10, 2014. Self-liquidation. Legal address: 9, Gagarin str., Kochkorata town, Nooken district, Jalal-Abad region.  

License of CU "Alpha-Grand" № 490 dated June 02, 2005 has been cancelled since February 25, 2014 according to the minutes of the general meeting held by CU "Alpha-Grand" on February 19, 2014 and the statement about cancellation of the FC Chairman of the Board dated February 20, 2014. Legal address: w/n, Beshkaram str., Aravan village, A. Anarov aiyl okmotu (village council), Aravan district, Osh region.  

Certificate of accounting registration of LLC MCC "Nasyiat-Bulak" № 294 dated June 02, 2010 for micro-crediting of individuals and legal entities has been cancelled since February 10, 2014 according to the decision of the founder of LLC MCC "Nasyiat-Bulak" dated February 20, 2014. Legal address: 1, Kyzylkiiskaya str., Nookat town, Nookat district, Osh region.  

Interbank payments