Financial Sector Development Project - Additional Activities

Project completed

SECO contributes to the stability of the financial sector of the Kyrgyz Republic by supporting the development of a sound legal and regulatory framework, the improvement of the supervisory capacity of the National Bank of the Kyrgyz Republic, and the establishment of clear liquidation procedures for failed banks.

Country/region Topic Period Budget
Economic and financial policy
01.11.2014 - 31.12.2017
CHF 1'995'000
Background Strengthening the financial sector is a key condition to support the economic development of the Kyrgyz Republic. A sound legal, regulatory, and supervisory foundation, along with the necessary tools to implement this framework, is essential to ensure financial sector stability, which, in turn, will assist overall economic growth in the country. Promising first results from the initial stage of the project along with the evident need for support in additional areas of financial supervision have prompted SECO to expand its activities under the current project framework.
Objectives The overall goal of the project is to maintain the stability and increase the crisis resilience of the financial sector in the Kyrgyz Republic by strengthening the legal and regulatory capacity of the National Bank as a financial sector regulator. A strengthened legal and regulatory framework will in turn lead to increased confidence in the financial sector and thus allow for better access to international financial markets.
Medium-term outcomes Banks under supervision of the Debt Restructuring Agency are liquidated: The findings of the audit will speed up the liquidation process of the remaining banks under supervision of the Agency and will increase confidence in the banking sector by assuring failed banks are truly liquidated.Debt Restructuring Agency is dissolved: Ultimately, the liquidation of the banks under supervision of the Agency, together with the audit of the Agency itself, will lead to the dissolution of the Agency.Legislation of the deposit protection system complies with international best practice.Risk-adjusted differential premium system for the Deposit Protection Agency is implemented.Risk-based supervision of the banking sector is implemented.Regulatory framework for payment systems is developed.A Financial Sector Council is established.The National Bank is prepared to supervise an increasing number of Islamic banks.

Expected results:   Audits of the banks under supervision of the Debt Restructuring Agency are conducted.Audit of the Debt Restructuring Agency is conducted.Gap analysis between current legislation of the deposit protection system and international best practice according to the International Association of Deposit Insurers is conducted.New laws and regulations on the deposit protection system are drafted based on gap analysis and submitted to the government.Risk-based supervision framework of the banking sector is tested and adapted.Licensing regime for payment systems operators is developed.Legal and institutional framework for the activities of a Financial Sector Council is developed.Existing regulatory and supervisory framework for Islamic banks is assessed and recommendations for improving the current system are given.

Results from previous phases:  

The time span is too short to assess results achieved under the project, yet there are strong indications for success in different areas. For instance, a risk-based supervision framework has been drafted and is being piloted with several banks, and a diagnostic review of the financial consumer protection regime for banking and microfinance has been conducted, based on which furhter activities in this area will be developped.

Directorate/federal office responsible SECO
Credit area Swiss cooperation with Eastern Europe
Project partners Contract partner
  • World Bank - International Bank for Reconstruction and Development

Budget Current phase Swiss budget CHF   1'995'000 Swiss disbursement to date CHF   0 Budget inclusive project partner CHF   13'035'000
Project phases

Phase 10 01.11.2014 - 31.12.2017   (Completed)