The Parliament of Kyrgyzstan approved the report of the National Bank for 2014  

On June 18, 2015, the deputies of the Jogorku Kenesh of the Kyrgyz Republic considered and approved the report on the activities of the National Bank of the Kyrgyz Republic for 2014. The corresponding decision was made at the plenary meeting of the Parliament  

The Chairman of the National Bank Tolkunbek Abdygulov, informed in his report about the main parameters of the monetary policy, the banking system indicators over the last year, and the situation in the Forex market.  

He said that complicated internal and external macroeconomic conditions had a significant impact on development of the economy in the Kyrgyz Republic in 2014. Such situation resulted in decrease of demand for products and reduction of remittances received from migrant workers. Net inflow of remittances from migrant workers decreased by 5.1 %, or USD 107.9 million. Economic growth was 3.6%. Exports fell by 8.1% and amounted to USD 1.9 billion. Imports decreased by 5.8% and amounted to USD 5.3 billion. The average annual inflation rate was 7.5%. The monetary base in 2014 amounted to KGS 64.5 billion.  

According to T. Abdygulov, the monetary policy of the National Bank was focused on supporting inflation rate at the level of 7%, as defined by the National strategy of sustainable development for 2013-2017. “This is our target for the medium-term period. The objective of the NBKR was to keep moderate price growth rates achieved in previous years. In 2014, annual average inflation rate was at the level of 7.5%. Throughout the year, annual average inflation rate varied within the range of 3.6 - 7.5%. Thus, a target of the monetary policy related to inflation rate was achieved”, said the Chairman of the National Bank of the Kyrgyz Republic.  

He reminded that in 2014, the NBKR started transition to a new monetary policy basis. “Existing monetary policy tools were adapted and new ones, such as “overnight” deposits and 7-day loans, were introduced; in the medium term it will contribute to convergence of lending rates in the real sector with the rates of the National Bank. Policy rate was determined by the decision of the Board of the National Bank on a monthly basis. In light of the persistent inflationary pressures discount rate increased during the year to make 10.50% at the end of the year. Accordingly, the rates changed on other monetary policy tools: the rate on “overnight” loan at the end of the year was 11.50%, on “overnight” deposit - to 4.50%”, noted the Chairman of the National Bank.  

In his report, T. Abdygulov also described the situation observed in the domestic market of the country in the past year. The Chairman of the National Bank called such situation complex, noting that the regulator used the advantages of floating exchange rate regime selected in Kyrgyzstan in order to smooth sharp fluctuations of the exchange rate, and in combination with complex of supervisory and regulatory measures to neutralize attempts to put speculative pressure on the exchange rate. “As a result, in 2014, the official USD/KGS exchange rate grew by 19.6%, which is insignificant as compared to the depreciation of the national currencies in the partner countries, for example, Russia and Kazakhstan”, he said.  

In order to smooth exchange rate fluctuations, the National Bank used international reserves to conduct foreign exchange interventions on sale and purchase of US dollars. In 2014, net sales of US dollars in the interbank foreign exchange market made USD 516.3 million. In general, the volume of international reserves fell by less value - USD 280.8 million, and at the end of the year amounted to USD 1.96 billion. Gold and foreign exchange reserves were not only due to external income, but also revenues from management thereof, and due to the fact that the National Bank continued buying gold in the domestic market. The economy of the country additionally received KGS 0.7 billion through such purchases of gold.  

The Chairman of the National Bank reported to the parliamentarians about the status of the financial system of the country in 2014. According to him, the major indicators of banking and non-banking financial sectors continued growing. Financial intermediation rate of the commercial banks or the banks’ assets to GDP ratio increased from 31% to approximately 35%. Total assets increased by 24% and amounted to more than KGS 137 billion; credit portfolio grew by 46% and amounted to approximately KGS 79 billion; depositary base increased by 22% to make KGS 78.0 billion. Increase in deposits of individuals (22%) and of legal entities (24%) had equal impact on the depositary base growth, thereby indicating increased confidence of people in the banking system. NBFI loans increased by 20% and made KGS 23 billion. Weighted average interest rate on the loans provided by the banks in national currency decreased by 1.1 percentage points to 19.6%, in foreign currency down to 16.1% (-0.3% percentage points).  

According to T. Abdygulov, in 2014, requirements to the capital of banks and NBFIs were increased in order to improve the financial system and strengthen public confidence. Currently, there is sufficient margin of safety in the banking system, capital adequacy remains at a fairly high level of 22%, with requirements not less than 12%, which enables commercial banks to further increase lending to the real sector of the economy.  

Having heard the report of the National Bank, the parliamentarians asked a number of questions on topical issues. In particular, people's representatives were interested in such issue as lending to population, including data on troubled loans, as well as ways to solve existing problems of borrowers with banks and microfinance companies, currency exchange rate impact on interest rates, as well as the issue of Islamic financing. Moreover, the deputies asked about the situation in the foreign exchange market, the distribution of the National Bank profit by the Government, the situation in the market of exchange offices, the market of payment systems, etc.  

In general, the deputies noted progress in the development of the banking and financial sectors of the country and outlined the priorities for the work of the National Bank in the current year.  

Deputies of the Jogorku Kenesh considered the draft Banking Code of the Kyrgyz Republic  

 According to the press-service of the Parliament, deputies of the Jogorku Kenesh considered the draft Banking Code of the Kyrgyz Republic during parliamentary session held on the 17th of June.  

 The reporter on this issue was the Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov. According to him, currently, regulations of the banking legislation are largely obsolete, lag behind the world best practices and do not meet the current needs of the participants of banking relationships. “Therefore, the legal framework in this area needs a systemic and holistic review”, he said and announced that in this respect the draft Banking Code would be submitted for consideration of the Parliament.  

 The head of the National Bank emphasized the importance of the document approval, which will be a tool to reform banking laws of the republic and to ensure further sustainable and steady development of the economy in the Kyrgyz Republic and the country as a whole. “Banking Code will define the principles for implementation of banking activities, establish clear legal regulation of relations arising from the implementation and regulation of banking activities, harmonize the procedure of creation, licensing of banks and other entities providing banking services”, he added.  

 Deputies, on asking a number of questions to the reporter, emphasized the importance of improvement of the banking system and the tools used in this sphere. Parliamentarians also focused on the need to improve the legislation and principles of banking activities implementation. The discussion of the draft code was sent to the voting in the first reading.  

Parliamentary hearings were held in Bishkek to discuss the draft Banking Code of the Kyrgyz Republic and the Draft Law On Introduction of the Banking Code of the Kyrgyz Republic  

The event was organized by the Economic and Fiscal Policy Committee of the Jogorku Kenesh of the Kyrgyz Republic in cooperation with the National Bank of the Kyrgyz Republic. The hearings were attended by such deputies as Mr Marat Sultanov, Ms Rosa Aknazarova, Ms Alla Izmalkova and Ms Aynuru Altybaeva. Moreover, the representatives of Union of Banks of Kyrgyzstan LEA, the Association of Microfinance Companies of the Kyrgyz Republic, commercial banks, independent experts and journalists took an active part in the meeting.  

Opening the event, the Jogorku Kenesh Deputy, Mr Marat Sultanov, said that the National Bank has developed and advanced the topical consolidated draft law that combined basic banking laws. “It is encouraging that many of the provisions have been improved and optimized, but at the same time, the gaps exist in the legislation that should be eliminated in compliance with the best international practices”, said the member of Parliament. “When introducing changes to improve the legislation, the main thing is to prevent overshoot. Today, we need to optimize the banking legislation as many things have already become obsolete”.  

“The central bank should be responsible not only for price stability, but for sustainable economic growth in the long term as well, since the currency and monetary policy should cover not only the price stability, but also the economical development as a whole. When considering the draft Banking Code, it should be noted that its provisions must not contravene the fundamental law, that is, the Constitution of the Kyrgyz Republic,” said the Deputy.  

Addressing the participants of the hearings, Mr Tolkunbek Abdygulov, the Acting Chairman of the National Bank of the Kyrgyz Republic, said that the draft Banking Code and the draft law on its carrying into effect were introduced in Parliament more than one and a half years ago. The delay in its consideration was also connected with the linguistic examination that took almost a year. An enormous work to harmonize the terms in the state language has been done.  

“To date, the draft law has been agreed with the profile Committee of the Jogorku Kenesh of the Kyrgyz Republic. There were many comments and suggestions during the article-by-article discussions; many of them were adopted. This week, the draft Banking Code will be considered by the deputies in the first reading,” he added.  

Regarding the reasons for which the National Bank has initiated the new draft law, the NBKR Chairman noted that the necessity of reforming the banking legislation has appeared long since. “Kyrgyzstan is characterized by the liberal banking legislation, which was adopted in the late 1990s and early 2000s. But now it is time to make changes to be in line with up-to-date requirements and challenges. The provisions of 5 laws underlie the proposed Banking Code. The work on the project has lasted for 2 years, during which 7 versions of the document have been developed. The banks and microfinance organizations have provided more than 500 comments and proposals, of which three quarters have been adopted. As he informed, “the project has undergone a broad public discussion as well as has been coordinated with the banking sector, the ministries and the departments”.  

Mr T. Abdygulov emphasized that the Banking Code is intended to define the fundamental principles of banking activity; establish a clear legal regulation of relationships arising in the process of implementation and regulation of banking activities; harmonize the procedure of establishing and licensing banks and other entities that provide bank services. The new provisions will prescribe clear rules, obligations and responsibilities of all participants of the banking relationships in their interaction with each other and external stakeholders as well as ensure timely and effective banking supervision including that on a consolidated basis. The Banking Code provisions are also focused on protecting the rights of consumers of bank products and services as well as on securing their rights and legal interests. “Adoption of the Banking Code is expected to increase confidence of the population, and domestic and foreign investors in the banking system as well as investment attractiveness of the country. We hope you support these draft laws”, concluded the National Bank Chairman.  

The National Bank put into Circulation a New Collectible Silver Coin Drofa  

On June 15, 2015, the National Bank of the Kyrgyz Republic put into circulation a new collectible silver coin Toodak (Drofa) of the Red Book of Kyrgyzstan Series with denomination of Som 10.  

Ms Medina Ashyralieva, the Acting Head of the Cash Management Department, noted at a press conference devoted to presentation of the National Bank’s new commemorative coin that the new coin Toodak will replenish the collection of the Red Book of Kyrgyzstan Series. The coin was circulated in a number of 3,000 copies and minted in Kazakhstan Mint. Sale price of the coin made Som 2,000.  

The main plot of the coin head represents the image of bustard with the name of coin Toodak in the Kyrgyz language and the Latin name of the Otistarda type, while reverse side of the coin presents a stylized images of the animal world of Kyrgyzstan including the type, the name of the Kyrgyzstandyn Kyzyl Kitebi Series, the national emblem and the year of issue. According to the expert, the National Bank continues applying advanced coin production technology. For instance, to give a special expression in the image of bustard, the oxidation technology was applied on the coin head; while the vegetation around the bird was made applying the local gilding technology.   

“The main purpose of issuing collectible coins of the National Bank is to promote Kyrgyzstan, its nature as well as rich flora and fauna,” said Ms M. Ashyralieva.  

Emil Kurmanaliev, the Leading Specialist of the Cash Management Department, informed that since 1995 the National Bank has issued only 51 collectible coins including 10 copper-nickel, one nickel silver, 3 gold, and 37 silver coins. This year the silver collectible coins 70 Years of the Great Victory of the Historical Events and Drofa Series within the Red Book of Kyrgyzstan Series have been issued.   

“The interest in numismatic coins is growing from year to year in the country. On the average, the circulated silver coins are sold out from one and a half week to three years; whereas, the copper and nickel coins are sold from a week to two months,” he added.  

Collectible Coin Specification:   

The coin constitutes a legal tender in the territory of the Kyrgyz Republic. Each coin is placed in an acrylic capsule and packed in a separate box with the certificate attached.  

Licenses/certificates have been issued to the following NBFIs and exchange offices 

1. Certificate of accounting registration № 488 for micro-crediting of individuals and legal entities has been issued to “BAIZAMAN” MCC on June 10, 2015. Legal address: 122/2, Manas Street, Talas city, Talas region.  

2. “Tysiacha melochei Musa” LLC (license № 5304 dated June 08, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3302. Legal address: 23/4, Shymkentskaya station, “Dordoi” shopping and entertainment center, Bishkek city.  

3. “Kut plus” LLC (license № 5305 dated June 08, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3303. Legal address: 150/10, Abdrakhmanov Street, Bishkek city. 

4. “Nurislam-B” LLC (license № 5306 dated June 11, 2015 for carrying out foreign exchange operations in cash). Legal address: w/n, Kolhoznaya Street, Kochkor-Ata town, Nookenskii district, Jalal-Abad region (landmark: “Marzhanbak” market, central market). 

5. “Lux Liudmila” LLC (license № 5307 dated June 12, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3304. Legal address: № 17 “Т”, shymkentskaya station, “Dordoi” shopping and entertainment center, Bishkek city.  

6. “Sultan odin” LLC (license № 5308 dated June 15, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3307. Legal address: “Sultan” foreign exchange bureau, 150, Abdrakhmanov Street, Bishkek city.  

7. “Ar-Bat finance” LLC (license № 5309 dated June 15, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3308. Legal address: 144, Abdrakhmanov Street, Bishkek city.  

8. Security agency “Elnur security” LLC (license № 5310 dated June 15, 2015 for carrying out foreign exchange operations in cash). Registration number of exchange office № 3309. Legal address: 132-18, Ahunbaev Street, Bishkek city.  

9. “Mariam-M” LLC (license № 5311 dated June 17, 2015 for carrying out foreign exchange operations in cash). Legal address: w/n, N. Aitmatova Str., Jalal-Abad city, Jalal-Abad region (landmark: “Mariam” footwear market, central market). 

10. “Milan-A.Sh.” LLC (license № 5312 dated June 17, 2015 for carrying out foreign exchange operations in cash). Legal address: w/n, N. Aitmatova Street, Jalal-Abad city, Jalal-Abad region (landmark: “Mariam” footwear market, central market). 

It should be noted that letters of additional exchange offices registration were issued to the following legal entities:  

1) “Amina plus” LLC № 3304 dated June 11, 2015. Legal address: 98, Chui Avenue, Bishkek city.  

2) “Time out” LLC № 3305 dated June 12, 2015. Legal address: 57, Baitik-Baatyr Street, Bishkek city.  

Licenses of the following exchange offices have been cancelled 

1. License of “Vasilii Pavlovich Korchagin” IE № 5034 dated August 08, 2012, for carrying out foreign exchange operations in cash has been cancelled. Legal address: central market, w/n, Gagarin Street, Pulgon village, Kadamjaiskii district, Batken region.