APPROVED Edict of the President of the Republic of Belarus No. 164 dated May 13, 2020

REPORT

of the National Bank of the Republic of Belarus for 2019

Minsk

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Contents Introduction

Chapter 1. Economic and financial situation in the Republic of Belarus

1.1. Macroeconomic conditions of monetary policy implementation and banking sector development

1.2. The balance of payments and gross external debt

1.3. Financial sector

1.3.1. Banking sector

1.3.1.1. Institutional characteristics

1.3.1.2. Sustainability and efficiency of the banking sector

1.3.2. Non-banking sector

1.3.2.1. Institutional characteristics

1.3.2.2. Key indicators of the non-credit financial organizations’ activities

1.3.3. Financial market

1.3.3.1. Foreign exchange market

1.3.3.2. Interbank credit market

1.3.3.3. Credit and deposit market

1.3.3.4. Trust management carried out by banks

1.3.3.5. The National Bank’s securities market

Chapter 2. The National Bank’s activities

2.1. Monetary policy

2.1.1. Monetary policy target

2.1.2. Monetary policy implementation

2.1.3. Key monetary indicators

2.2. Supervision of banks’ activities

2.2.1. Streamlining regulatory legal framework for banking supervision

2.2.2. Off-site supervision

2.2.3. Audits of banks

2.3. Control of activities of the non-credit financial institutions

2.3.1. Off-site control

2.3.2. Audits of the non-credit financial institutions

2.4. Regulation of separate banking operations

2.4.1. Regulation of credit and deposit operations , operations on the current (settlement) bank accounts, and financing against the assignment of a monetary claim (factoring)

2.4.2. Regulation of non-cash settlements

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2.5. Formation of credit histories and provision of credit report

2.6. Regulation of activities of the non-credit financial institutions

2.6.1. Regulation of leasing activities

2.6.2. Regulation of the microfinance organizations’ activities

2.6.3. Regulation of the activities in the OTC Forex market

2.7. Foreign exchange regulation and foreign exchange control

2.8. Macroprudential regulation

2.9. Accounting and reporting

2.10. Cash circulation

2.11. Payment system

2.11.1. Payment system management

2.11.2. Functioning and development of the ASIS

2.11.3. Development of the system for non-cash settlements of retail payments

2.11.4. Functioning and development of the interbank identification system

2.11.5. Introduction of international standards

2.11.6. Development of the single settlement and information space

2.12. Protection of the rights of financial service consumers

2.13. Financial literacy

2.14. Research activities

2.15. International Cooperation

2.16. Staffing and staff training

2.17. Internal audit

Chapter 3

Annual financial statements

Forms of the annual financial statements of the National Bank for 2019

Notes to the annual financial statements of the National Bank for 2019

Conclusion

Attachments to the Report of the National Bank of the Republic of Belarus for 2019

1.1 – 1.10. Tables, figures, and schedules to Chapter 1.

2.1 – 2.12. Tables, figures, and schedules to Chapter 2.

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Introduction

The Report of the National Bank for 2019 was prepared in accordance with Article 46 of the Banking Code of the Republic of Belarus (hereinafter – the “Banking Code”).

In 2019, the monetary policy of the Republic of Belarus as part of the unified economic policy was implemented in line with the Monetary Policy Guidelines of the Republic of Belarus for 2019 approved by Edict of the President of the Republic of Belarus No. 484 dated December 20, 2018, having regard to the current macroeconomic situation.

The National Bank’s activities in 2019 were aimed at attaining its main targets and performing the functions of the central bank assigned thereto by legislation.

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Chapter 1 Economic and financial situation in the Republic of Belarus

1.1. Macroeconomic conditions of monetary policy implementation and

banking sector development* The situation in the economy of the Republic of Belarus in 2019 was

characterized by maintenance of macroeconomic and financial stability. In the year under review, the volume of Gross Domestic Product

(hereinafter – “GDP”) amounted to BYN132 billion in current prices. In comparable prices the volume of GDP went up by 1.2% versus 2018 (in 2018, by 3.1%) (Attachment 1.1).

Retail turnover (in comparable prices) went up in 2019 by 4.2% compared with 2018 (in 2018, by 8.3%).

Households’ real wages (excluding small and microorganizations) grew up in 2019 by 7.3% compared with 2018 (in 2018, by 11.6%); real disposable money income went up by 6% (in 2018, by 7.9%).

Investment in fixed capital increased in 2019 (in comparable prices) by 5.6% (in 2018, by 6%). The annual volume of investments in fixed capital totaled BYN27.8 billion; their share in GDP – 21.1% (in 2018, 20.4%).

In the technological structure of investment in fixed capital the expenditures for construction and installation works (50.1%) were dominating, while investments in assets (machinery, equipment, and vehicles) amounted to 39.8% and other works and costs – 10.1% of the total volume of capital investments.

Industrial output increased in 2019 by 1% versus 2018 (in 2018, by 5.7%).

Finished industrial stock at the enterprises’ warehouses amounted as at January 1, 2020 to BYN5.1 billion, having risen by 14.9% since the beginning of the year. With respect to the monthly average volume of production, it amounted as at January 1, 2020 to 66.3% compared with 60.9% as at January 1, 2019.

Financial condition of non-financial organizations in 2019 compared with 2018 (Attachment 1.2) improved to a slight degree:

- revenues from the sale of products, goods, works, and services amounted in 2019 to BYN240.1 billion, having grown in nominal terms by 8% compared with 2018; and

                                                            *This section was prepared based on the National Statistical Committee’s data.

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- profit from the sale of products totaled BYN16.9 billion, a 0.1% decline (in nominal terms) versus 2018. Profit before tax went up by 64.3%; net profit – by 84.2%.

The return on sales decreased from 7.6% in 2018 to 7% in 2019; return on sold products – from 9.4% to 8.7% respectively.

In the year under review, the number of loss-making organizations went down from 1,127 organizations in 2018 to 920 organizations in 2019. The share of loss-making organizations in the total number of organizations decreased from 16% to 13.1%. In 2019, the amount of net loss per one organization in the red in the country on average totaled BYN1.9 million (in 2018, BYN3.9 million).

Budgetary policy in 2019 remained well-balanced. According to the data of the Ministry of Finance, in 2019 the Government

ran a consolidated budget surplus of BYN3.1 billion, or 2.4% of GDP (3.8% of GDP in 2018).

In 2019, consolidated budget revenues went up by 3.9%, amounting to BYN39.1 billion, or 29.7% of GDP (30.8% of GDP in 2018) (Attachment 1.3). Consolidated budget expenses amounted to BYN36 billion, or 27.3% of GDP (in 2018, 27.1% of GDP).

According to the data of the Ministry of Finance, in 2019 the republican budget ran a surplus as well in the amount of BYN3.1 billion, or 2.4% of GDP (in 2018, 3.8% of GDP). Republican budget revenues went down in 2019 compared with 2018 by 0.5% and totaled BYN24.3 billion, or 18.4% of GDP (19.9% of GDP in 2018). Republican budget expenses totaled BYN21.1 billion, or 16% of GDP (16.1% of GDP in 2018).

According to the data of the Ministry of Finance, as at January 1, 2020, the Government debt of the Republic of Belarus amounted to BYN44.8 billion, declining compared with early 2019 by BYN0.6 billion, or by 1.3%.

As at January 1, 2020, the Government domestic debt totaled BYN8.8 billion (6.6% of GDP), having dropped over 2019 by BYN0.1 billion (adjusted for the currency translation differences), or by 1.5%.

In 2019, domestic government bonds for legal and natural persons denominated in foreign exchange worth USD771.2 million were placed. In the year under review, government bonds for legal and natural persons denominated in foreign exchange and in Belarusian rubles worth USD604.3 million and BYN227.2 million, respectively, were retired.

The Government external debt amounted as at January 1, 2020 to USD17.1 billion (27.1% of GDP), having increased over 2019 by USD0.2 billion (adjusted for the currency translation differences), or by 1.4%. In 2019, the Government attracted external loans in the amount equivalent to USD1,643.6 million; repaid – USD1,511.3 million.

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1.2. The balance of payments and gross external debt In 2019, a positive impact on the balance of payments of the Republic of

Belarus was made by attraction of portfolio investments and reduction of payments under the financial account liabilities on the background of growing current account deficit.

In 2019, the deficit of the current account of the balance of payments totaled USD1.2 billion, or 1.8% of GDP, versus a surplus worth USD0.02 billion, or 0.04% of GDP, in 2018 (Attachment 1.4).

In the year under review, the deficit of foreign trade in goods and services totaled USD0.3 billion (in 2018, there was a surplus worth USD0.9 billion).

According to the balance of payments, in 2019 the balance of foreign trade in goods amounted to minus USD4.1 billion (in 2018, USD2.5 billion). The balance of foreign trade in energy goods worsened by USD0.2 billion, amounting to minus USD3.6 billion. The balance of foreign trade in non-energy goods totaled minus USD0.5 billion, compared with USD0.9 billion in 2018.

In 2019, exports of goods decreased by 3.3%, or by USD1.1 billion, amounting to USD32.3 billion. A decline in the value of exports was, mainly, caused by the decrease in the delivery of mineral commodities by 18.9% compared with 2018. Deliveries from the Russian Federation of oil contaminated by chlorides at early 2019 led to subsequent decline in the export of oil, oil products and other related commodities of the petrochemical industry.

Imports of goods increased in 2019 by 1.3%, or by USD0.5 billion, amounting to USD36.4 billion. An increase in the imports of non-energy commodities by USD1.5 billion, or by 6.1%, was, mainly, responsible for the growth in imports. At that, the consumer imports went up by USD0.7 billion (primarily, due to the increase in the households’ real income), the imports of investment goods – by USD0.2 billion. The imports of intermediate goods went down by USD0.6 billion, including that of energy goods – by USD1.1 billion.

A trade in services made a positive impact on the improvement of the foreign trade balance. The balance of foreign trade in services in 2019 totaled USD3.8 billion, a 10.3% increase versus 2018. The exports of services grew by 8.8%, totaling USD9.6 billion. The imports of services went up by 7.9%, amounting to USD5.8 billion.

The balance of primary income improved by USD0.2 billion and stood at minus USD1.9 billion, that was caused by a decline in the volume of investment incomes accrued for payment to non-residents.

The balance of secondary income totaled USD1 billion against USD1.2 billion in 2018.

According to the financial account data (excluding transactions with reserve assets), net attraction totaled USD2.5 billion versus net lending worth

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USD0.3 billion in 2018.

Attraction of financial resources at the expense of foreign direct investments amounted in 2019 to USD1.3 billion (in 2018, USD1.4 billion). The inflow of foreign direct investments (excluding reinvested incomes) remained at the level of 2018 – USD0.6 billion.

Net attraction of portfolio investments in 2019 totaled USD0.5 billion versus net outflow in 2018 worth USD0.5 billion.

Within transactions with other investments, the Government and the National Bank repaid in 2019 USD0.1 billion on net basis. Net attraction of financial resources by the banking sector totaled USD1.3 billion. At the same time, there was an outflow worth USD0.6 billion under the transactions of other sectors.

As a result of carried out foreign trade transactions, the international reserve assets went up in 2019 by USD1.8 billion (in 2018, declined by USD0.1 billion).

As at January 1, 2020, gross external debt of the Republic of Belarus amounted to USD40.8 billion, or 64.5% of GDP, increasing since the beginning of the year by USD1.5 billion (Attachment 1.5).

As at January 1, 2020, the external debt of the government agencies sector of the Republic of Belarus totaled USD17.1 billion, having dropped over 2019 by USD0.3 billion, or by 1.6% (with long-term credits and loans accounting for 87.3% of liabilities of this sector).

The National Bank’s external debt totaled USD1 billion as at January 1, 2020, having increased over 2019 by USD0.2 billion, or by 24.9%. Special drawing rights (51.1%) and long-term credits and loans (36.8%) accounted for the major part of the National Bank’s debt.

The deposit organizations’ liabilities (excluding intercompany financing) went up over 2019 by USD0.1 billion, or by 2.3%, amounting to USD5 billion as at January 1, 2020. The liabilities grew at the expense of increase in the short-term external liabilities by USD0.1 billion, or by 8.4%, of which the growth of foreign exchange in cash and deposits totaled USD0.2 billion.

Debt of the other sectors (excluding intercompany financing) amounted to USD15.2 billion as at January 1, 2020, having increased over 2019 by USD1.2 billion, or by 8.4%. The liabilities grew at the expense of placed eurobonds worth USD0.6 billion.

External liabilities on debt instruments between the direct investors and enterprises involved in direct investment (intercompany financing) totaled USD2.4 billion.

Over the recent years, a stable trend towards switching from the short-term to the long-term borrowing has been observed in the Republic of Belarus. As at

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January 1, 2020, long-term borrowings accounted for 75% of the total volume of external borrowings.

1.3. Financial sector

1.3.1. Banking sector

1.3.1.1. Institutional characteristics

As at January 1, 2020, the banking activities in the Republic of Belarus were carried out by 24 banks and three non-bank financial institutions. Three banks underwent liquidation (JSC “Delta Bank” (bankruptcy), CJSC “BIT-Bank” and JSC “Eurobank”). The total number of banks’ and non-bank financial institutions’ organizational units (branches, banking services centers, settlement and cash centers, and exchange offices) in the country dropped over 2019 by 6.7%, amounting as at January 1, 2020 to 3,265.

As at January 1, 2020, there were five representative offices of foreign banks* in the Republic of Belarus, including those of the Russian Federation (representative offices of two banks), the People’s Republic of China, and the Federal Republic of Germany, as well as a representative office of the Interstate Bank. Belarusian Banks had four representative offices abroad.

Foreign capital participated in the authorized capital of 19 banks. At 14 banks the share of foreign investors in the authorized capital exceeded 50% (of which four banks were wholly-foreign owned). Capital from Russia, Cyprus, Austria, Switzerland, Poland, Kazakhstan, United Arab Emirates, Georgia, Great Britain, Germany, and other countries participates in the authorized capital of Belarusian banks.

As at January 1, 2020, the banks’ aggregate registered authorized capital amounted to BYN5.5 billion, having increased over 2019 by 1.6%.

Institutional development of the banking sector in 2019 was characterized by an insignificant redistribution of shares in the aggregate authorized capital of the banking sector between the groups of banks by the form of ownership:

- the share of state-owned banks went down from 77.6% to 77%, with the share of the above-mentioned banks in the banking sector’s assets declining from

                                                            * For the purposes of this report: - state-owned banks are banks in which the state owns more than 50% of shares (equity interest) in the authorized

capital; - foreign banks are banks in which the share of foreign investors in the authorized capital exceeds 50%; and - private banks are banks other than foreign and state-owned banks.

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64.9% to 63% and in the banking sector’s authorized capital slightly increasing – from 60.0% to 60.2%;

- the share of foreign banks decreased from 20.1% to 19.8%. The share of

such banks in the aggregate authorized capital went down from 35.8% to 35.3%, while in the banking sector’s assets it increased from 32.2% to 33.7%; and

- the share of private banks in the aggregate authorized capital of the banking sector went up from 2.3% to 3.2%. The share of these banks in the banking sector’s assets and aggregate regulatory capital increased from 2.9% to 3.3% and from 4.1% to 4.5% respectively.

1.3.1.2. Sustainability and efficiency of the banking sector In 2019, the banking sector maintained sustainability. As at January 1, 2020, banks’ regulatory capital* totaled BYN11.2 billion,

having increased over 2019 by 4.6% in nominal terms. The main source of the regulatory capital growth in the banking sector was an increase in the registered authorized capital and in the funds established at the expense of banks’ profit. The regulatory capital/GDP ratio was 8.5%.

In the year under review the banking sector’s income had the following structure**: interest income – 61.2%, commission income – 23.7%, other banking income – 11.6%, other operational income – 3.4%, and receipts under written-off debts – 0.1%.

In the structure of expenditures** the interest expenses totaled 31.5%, other operational expenditures – 36.8%, commission expenses – 9.7%, and other banking expenditures – 7.3%. Net allocations of special provisions to cover potential losses under assets exposed to credit risk and transactions, which are not reflected in the balance sheet (hereinafter – the “special provisions”), totaled 11.8% in banks’ expenditures.

The banking sector’s profit* went up in nominal terms compared with 2018 by 7.2% and totaled BYN1.2 billion. The profit grew, primarily, due to the reduction in net allocations to reserves and increase in net commission income. The volume of net allocations to reserves amounted to BYN0.8 billion, having dropped over the year by 11.2%. At that, the trend towards worsening of the banks’ assets quality slowed down. Net commission income of operating banks went up by 14.6%, mainly, due to carrying out transactions with cheques, bank

                                                            * The data prior to confirmation by the audit organization. ** Are reduced by the volume of incomes and expenditures under transactions between the branches within a

bank and adjusted by the balance of incomes from reduction of provisions and expenditures under allocations to reserves.

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payment cards (hereinafter – the “cards”), electronic money, as well as documentary transactions.

Over 2019, the return on assets (in annual terms) went down from 1.56% to 1.52%, while the return on regulatory capital (in annual terms) increased from 10.72% to 10.92%.

Over 2019, the growth of the banking sector’s assets exposed to credit risk, which amounted as at January 1, 2020 to BYN58.9 billion (as at January 1, 2019 – BYN55.7 billion) was observed.

As at January 1, 2020, the share of non-performing assets at banks totaled 4.6% (as at January 1, 2019, 5%). At that, the volume of non-performing assets was BYN2.7 billion, having dropped by BYN61.9 million, or 2.2%, over the year. The volume of restructured debt totaled 92.5% of the amount of non-performing assets.

Despite a decline in net allocations to reserves, the amount of special provisions to cover potential losses went up over the year under review and totaled BYN3.7 billion as at January 1, 2020 (BYN3.5 billion as at January 1, 2019). The extent of coverage of assets exposed to credit risk by special provisions changed insignificantly: from 6.3% as at January 1, 2019 to 6.2% as at January 1, 2020.

Banks met the National Bank’s requirements as to the amount and adequacy of regulatory capital, including with account of the values of the conservation buffer. The regulatory capital adequacy ratio totaled 17.8% as at January 1, 2020, with the prescribed minimum requirement for an individual bank being 10% (with account of the conservation buffer – 12.5%). With a view to reducing the level of systemic risks of the banking sector and preventing their occurrence, additional requirements to the core banks’ capital were implemented and are complied with.

Banks met the major secure functioning requirements with regard to liquidity. The Liquidity Coverage Ratio (LCR) in operating banks, as a whole, totaled 155.6% as at January 1, 2020 (as at January 1, 2019, 167.6%), with the prescribed requirement being no less than 100%. The Net Stable Funding Ratio (NSFR) in the operating banks, as a whole, totaled 129.6% as at January 1, 2020 (as at January 1, 2019, 120.4%), with the prescribed requirement being no less than 100%.

1.3.2. Non-banking sector

1.3.2.1. Institutional characteristics As at January 1, 2020, 108 leasing organizations were in the Register of

Leasing Organizations. In 2019, the number of leasing organizations in the

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Register increased by eleven (15 organizations were included and four organizations were struck off).

Foreign capital participated in the authorized capital of 31 leasing organizations. At that, in 26 leasing organizations the share of foreign investors’ participation in the authorized capital totaled 50% and more (of which 12 organizations were wholly-foreign owned). Capital from Cyprus, Estonia, Russia, Latvia, Lithuania, Luxemburg, Italy, Germany, Austria, the Great Britain, Greece, Israel, the UAE, and Azerbaijan participated in the authorized capital of leasing organizations. One foreign organization, the place of activities of which was the building ground of the Belarusian nuclear power station, carried out leasing activities in the Republic of Belarus through its permanent representative office.

Banking capital participated in the authorized capital of 12 leasing organizations.

The leasing organizations’ aggregate authorized capital totaled BYN703.4 million as at January 1, 2020, having increased over 2019 by 8.3%.

The volume of the leasing organizations’ leasing portfolio, including under the residential property leasing agreements, and its share in GDP went up over 2019. As at January 1, 2020, the ratio of the aggregate price of the concluded leasing agreements to GDP totaled 2.9%.

As at January 1, 2020, 94 microfinance organizations (four consumer cooperatives, four funds, and 86 legal persons engaged in lombard activities) were on the Register of Microfinance Organizations. In 2019, the number of microfinance organizations in the Register went down by 10, with five organizations being included therein and 15 organizations being excluded therefrom.

The aggregate authorized capital of the profit-making microfinance organizations (lombards) totaled BYN5.7 million as at January 1, 2020, having grown over 2019 by 14%. Capital from Russia, Latvia and Ukraine participated in the lombards’ authorized capital.

The activities of microfinance organizations (lombards) in 2019 were characterized by the growing volume of provided monetary funds, the number of microloan agreements and the number of borrowers. The trend towards increase in the amounts of authorized capital of the organizations is still in place.

As at January 1, 2020, 14 organizations were in the Register of Forex Companies. In 2019, their number in the Register went up by four forex companies (five organizations were included therein and one organization was excluded therefrom).

In the authorized capital of all 14 forex companies participated foreign capital from such countries as Russia, Ukraine, Cyprus, Poland, Saint Vincent and the Grenadines, the Commonwealth of Dominica, Panama, Mauritius, Liechtenstein, China, Cayman Islands, and the Republic of the Marshall Islands.

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At that, the share of foreign investors in the authorized capital of 13 forex companies totaled 100%.

As at January 1, 2020, the aggregate authorized capital of forex companies totaled BYN8.5 million, having grown 1.3 times over 2019.

Save the forex companies, the JSC “MTBank” and the JSC “Technobank” carried out activities involving transactions initiated by natural and legal persons with non-deliverable over-the-counter financial instruments (activities in the over-the-counter forex market).

In 2019, the number of clients of forex companies and banks increased 2.3 times and the share of non-resident clients – 1.4 times. As a result, the number of transactions carried out by the clients grew up, the amounts of monetary funds in foreign exchange placed thereby with a view to opening and/or maintaining their open foreign exchange position went up and other indicators of activities in the over-the-counter forex market increased.

1.3.2.2. Key indicators of the non-credit financial organizations’ activities

As at January 1, 2020, the aggregate leasing portfolio* totaled BYN5.1

billion (a growth by 21.4% over 2019), or 24.4% of the economic entities’ debt owed to banks under the long-term credits (as at January 1, 2019 – 20.6%).

The volume of new business (the aggregate value of the agreements entered into by the leasing organizations) stood in 2019 at BYN3.8 billion, being by 11.8% higher than the value of this indicator in 2018. The volume of the leasing companies’ new business totaled 23.9% of the volume of the long-term credits issued by banks to the economic entities.

Over 2019, about 377 thousand items of leasing in the total amount of BYN2.7 billion were passed to lessees, a decline by 31.3% versus 2018, with their value being higher by BYN0.4 billion.

The aggregate net profit of the leasing organizations in 2019 stood at BYN0.1 billion.

Financial leasing operations accounted for more than 99% of the leasing organizations’ leasing portfolio. Liabilities under agreements entered into in the national currency amounted to 94.6% of the leasing portfolio.

As at January 1, 2020, the share of the lessees’ overdue liabilities under leasing payments totaled 2.3% of the total volume of their liabilities under financial lease (leasing) agreements (as at January 1, 2019 – 3.6%).

                                                            * An amount of the lessees’ debt to lessors under leasing payments and surrender value as at the reporting date.

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Five leasing organizations established with participation of banks’ capital (OJSC ”Promagroleasing“, ”АSB Leasing“ LLC, ”Raiffeisen - Leasing“ JLLC, ”VTB Leasing“ JLLC, and OJSC ”Agroleasing“) accounted for about 70% (BYN3.5 billion) of the aggregate leasing portfolio.

As at January 1, 2020, the export leasing operations* accounted for 1.1% of the total leasing portfolio. The majority of export operations was carried out by OJSC “Promagroleasing” (64.3%) and ”АSB Leasing“ LLC (30.5%).

As at January 1, 2020, three organizations (”АSB Leasing“ LLC, OJSC ”Agroleasing“ and ”Raiffeisen - Leasing“ JLLC) carried out leasing activities with residential property. As at January 1, 2020, the volume of the leasing portfolio under the residential property leasing agreements totaled BYN155.6 million, having grown over 2019 by BYN71.3 million, or by 84.5%. Over 2019, 240 agreements worth BYN108.9 million, under which the subject of leasing was residential property, were entered into with natural persons. Under 233 agreements of this kind (97%) the subjects of leasing were apartments; under seven agreements (3%) – detached houses.

According to the reports as at January 1, 2020, the microfinance organizations’ assets totaled BYN34.6 million, own capital – BYN22.3 million, liabilities – BYN12.3 million, and net profit obtained over the year – BYN6.1 million. Compared with January 1, 2019, the microfinance organizations’ assets grew by BYN4.5 million (15%), own capital – by BYN5.7 million (34.3%), while liabilities declined by BYN1.2 million (8.9%). Net profit of the microfinance organizations went up over 2019 by BYN5.2 million (6.7 times).

The amount of microloans granted in 2019 totaled BYN131 million, an increase by BYN20 million, or by 18%, compared with 2018.

Consumer cooperatives granted BYN2 million (an increase by BYN0.8 million, or by 59.9%, compared with 2018). The whole amount was allocated to natural persons for the purposes of developing business and entrepreneurial activities. In 2019, the average annual rate on microloans totaled 16.9%.

Funds granted BYN0.7 million (a decline by BYN2.1 million, or by 74.9%, compared with 2018), of which 99.5% were provided to natural persons for the purposes of developing business and entrepreneurial initiative (in 2018, BYN2.6 million, or 92.9%). In 2019, the average annual interest rate on microloans stood at 9.9%.

Lombards granted BYN128.3 million (an increase by BYN21.4 million, or by 20%, compared with 2018). In 2019, the average daily interest rate on microloans amounted to 1.1%.

According to the reports, as at January 1, 2020, the forex companies’ assets totaled BYN35.5 million, own capital – BYN7.6 million, and liabilities –                                                             

* . International leasing, where a lessor and a seller (deliverer) of an item of leasing are entities of the Republic of Belarus, while a lessee is an entity of other state.

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BYN27.9 million. As compared with January 1, 2019, the forex companies’ assets went up by BYN17.5 million (2 times), own capital – BYN2.3 million (1.4 times), and liabilities – BYN15.2 million (2.2 times).

The amount of funds in foreign exchange invested by the clients of forex companies for the purpose of opening and/or maintaining their open position (the amount of marginal security) totaled USD14.8 million as at January 1, 2020. With a view to meeting their liabilities to clients on repaying marginal security in the unconditional manner, the forex companies, in line with legislation, build up and place secured capital, the amount of which totaled USD3.9 million as at January 1, 2020, on current (settlement) bank accounts with a special functioning regime, which are opened with no less than two banks or non-bank financial institutions.

In 2019, the number of clients of forex companies, including the JSC “MTBank” and the JSC “Technobank”, totaled 26,000. The clients of forex companies and the above-mentioned banks initiated in 2019 over 3.7 million transactions worth USD52.5 billion (having regard to the leverage). About 63% of transactions brought about a positive financial result for clients.

In line with Edict of the President of the Republic of Belarus No. 231 “On Carrying Out Activities in the Over-the-counter Forex Market” dated June 4, 2015, the National Forex Center establishes a guarantee fund at the expense of forex companies’, banks’, and non-bank financial institutions’ contributions, for the purpose of discharging their obligations to clients involving repayment of marginal security. The functions of the National Forex Center are assigned to the JSC “Belarusian Currency and Stock Exchange”. As at January 1, 2020, the guarantee fund of the National Forex Center amounted to USD1.7 million.

1.3.3. Financial market In 2019, the financial market was developing, on the whole, in line with the

Strategy of Development of the Financial Market of the Republic of Belarus till 2020, approved by Resolution of the Council of Ministers and the National Bank of the Republic of Belarus No. 229/6 dated March 28, 2017.

1.3.3.1. Foreign exchange market In 2019, the volume of the domestic foreign exchange market totaled

USD77.7 billion, an increase by 6.5% versus the level of 2018. The stock market volume amounted to USD8.2 billion (an increase by 0.6%) and the over-the-counter market volume stood at USD55.2 billion (an increase by 7.6%). The cash

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foreign exchange market turnover totaled USD14.3 billion, having grown by 5.7% versus 2018.

In the year under review, resident economic entities sold foreign exchange worth USD22.4 billion, an increase by 11.7% (by USD2.3 billion) compared with 2018, and purchased foreign exchange in the amount of USD21.8 billion, an increase by 5.5% (by USD1.1 billion) compared with 2018 (Attachment 1.6).

As a result, net supply of foreign exchange by resident economic entities in 2019 stood at USD0.5 billion (net demand in 2018 totaled USD0.7 billion).

Foreign exchange purchased by resident economic entities in the domestic foreign exchange market in 2019 was, mainly, used to repay credits (USD5.2 billion or 23.7% of the total volume purchased over the year), place with banks on current and other accounts (USD4.2 billion or 19%), procure raw products and materials (USD3 billion or 13.6%), and purchase equipment and components (USD2.4 billion or 10.7%). A total of 67% of the foreign exchange purchased by resident economic entities was used for the above-mentioned purposes.

In 2019, households were, mainly, net sellers of foreign exchange. Households sold over 2019 USD0.6 billion on a net basis (in 2018, USD1.1 billion). At that, net supply under operations involving foreign exchange in cash totaled USD1.4 billion; net demand under operations involving non-cash foreign exchange amounted to USD0.8 billion (Attachment 1.7).

The operations involving the US dollars dominated the foreign exchange market (49.1%). The share of this currency in foreign exchange operations went up by 0.1 percentage point compared with 2018, with the share of euro increasing from 25.9% to 26% and the share of the Russian ruble declining from 24.6% to 24.4%. The volume of operations involving other foreign currencies remained insignificant (0.5%).

The official exchange rate of the Belarusian ruble increased over 2019 versus the US dollar by 2.6% (up to BYN2.1036/USD1), the euro – by 4.9% (up to BYN2.3524/EUR1), and declined versus the Russian ruble by 9.4% (up to BYN3.4043/RUB100).

The real effective exchange rate of the Belarusian ruble calculated using consumer price index (REER) grew up by 3.7% in December 2019 compared with December 2018.

1.3.3.2. Interbank credit market

In 2019, unsecured interbank credits in the national currency continued to be one of the main instruments regulating banks’ liquidity.

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Compared with the previous year, the volume of transactions carried out by banks in the interbank market reduced almost twice (from BYN20.8 billion to BYN10.9 billion) on the background of the liquidity surplus accrual.

The structure of the interbank market by terms saw, practically, no changes. While in 2018 the intraday interbank credits accounted for 84.4% of the aggregate interbank market, in 2019 such credits stood at 82.7%. At that, the share of transactions concluded for the term of 2 - 7 days dropped over the year from 11.4% to 6.4%, the share of transactions concluded for the term of 8 days and more went up from 4.2% to 10.9%.

At the same time, the banks continued in 2019 to attract/place resources in the national currency in the interbank market through repo and swap transactions. The share of such operations in the turnover of the interbank market between the resident banks totaled 13.8% and 6.4% respectively.

The average weighted rate for residents in the intraday interbank market had been decreasing over the year following the refinancing rate from 9.97% per annum in January 2019 to 9.04% per annum in December 2019. At that, the interest rates in the intraday ruble interbank market were within the interest rate band of the National Bank formed by the rates on standing facilities designed to regulate banks’ liquidity and came close to its upper bound (Attachment 1.8).

1.3.3.3. Credit and deposit market

The credit market. The claims of banks and the JSC “Development Bank of the Republic of Belarus” on the economy increased by 10.2%, or by BYN5.3 billion, amounting as at January 1, 2020 to BYN57.9 billion, including in Belarusian rubles they went up by 14.4%, or by BYN3.9 billion, amounting to BYN31 billion, and in foreign exchange (in dollar terms) they grew up by 8.5%, or by USD1 billion, amounting to USD12.8 billion. The share of claims of banks and the JSC “Development Bank of the Republic of Belarus” in Belarusian rubles totaled 53.6%.

In 2019, the loans granted on the long-term basis accounted for the major part of the portfolios of banks and the JSC “Development Bank of the Republic of Belarus”. The share of such loans in the total amount of debt under credit totaled 72.9% as at January 1, 2020.

The major part of loans granted by banks and the JSC “Development Bank of the Republic of Belarus” was aimed at providing credit support to the economic entities. As at January 1, 2020, the debt under such credits totaled BYN36.7 billion, having increased by BYN2 billion, or by 5.6%.

In the structure of debt under credit by the types of economic activity the loans granted to the processing enterprises prevailed, the amount of debt of which

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totaled BYN18.8 billion, or 51.2% of the total debt under credit, as at January 1, 2020. They are followed by wholesale and retail trade, vehicles and motorcycles maintenance (BYN5.4 billion, or 14.6%), other types of economic activities (BYN3.5 billion, or 9.4%), and agriculture, forestry and fishery (BYN3 billion, or 8.2%).

According to the information of banks and JSC “Development Bank of the Republic of Belarus”, in 2019, under government programs and measures following the decisions of the President and the Council of Ministers of the Republic of Belarus credits worth BYN3.3 billion were granted (by banks – BYN2 billion and by the JSC “Development Bank of the Republic of Belarus” – BYN1.3 billion), including within Resolution of the Council of Ministers of the Republic of Belarus No. 969 “On Lending Under Government Programs and Measures in 2019” dated December 28, 2018 – BYN979.9 million (by banks – BYN177.7 million and by the JSC “Development Bank of the Republic of Belarus”– BYN802.2 million), or 99.6% of the amount of limits of directed lending approved for 2019.

Debt under credits issued by banks and the JSC “Development Bank of the Republic of Belarus” under government programs and measures totaled BYN16.1 billion as at January 1, 2020, having dropped over 2019 by BYN104.9 million, or by 0.6%. At that, the debt under credits issued by banks amounted to BYN11.9 billion (a drop by BYN395.7 million, or by 3.2%) and the debt under credits granted by the JSC “Development Bank of the Republic of Belarus” totaled BYN4.2 billion (an increase by BYN290.9 million, or by 7.5%).

As at January 1, 2020, the share of debt under these credits in the claims of banks and the JSC “Development Bank of the Republic of Belarus” on the economy stood at 27.8%, having dropped versus January 1, 2019 by 3 percentage points.

In 2019, banks granted credits worth BYN977.8 million for house construction within implementation of Resolution of the Council of Ministers of the Republic of Belarus No. 987 “On Measures on Fulfilling the Assignments for 2019 on Housing Construction, Volumes of Putting into Operation and Financing Housing Construction and Objects of Engineering and Transport Infrastructure in 2020” dated December 29, 2018. Soft credits were issued in the amount of BYN90.2 million. Credits granted under banks’ terms and conditions within implementation of Edict of the President of the Republic of Belarus No. 240 “On Providing the Government Support to Citizens for Housing Construction (Reconstruction)” dated July 4, 2017 stood at BYN887.6 million.

Deposit market. As at January 1, 2020, funds attracted from natural persons (including bank deposits, deposits in precious metals, saving certificates and bonds) totaled BYN25.4 billion in the equivalent, having grown over 2019 by BYN1.4 billion, or by 5.9%:

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- funds attracted from households in the national currency stood at BYN8.2 billion, having increased by BYN1.4 billion, or by 20.9%; and

- funds attracted from households in foreign exchange totaled BYN17.2 billion in the equivalent, having increased by BYN9.7 million in the equivalent, or by 0.1%.

Bank deposits were the most popular banking instruments with natural persons for saving temporary free funds. They grew over the year under review by BYN1.8 billion, or by 8.3%, amounting as at January 1, 2020 to BYN24 billion (94.6% of the total volume of attracted natural persons’ funds).

As a result of creation of more attractive conditions on bank deposits in the national currency, the share of such deposits in the total volume of bank deposits went up in 2019 from 30.5% to 34%.

Natural persons’ bank deposits in the national currency grew over 2019 by BYN1.4 billion, or by 20.6%, amounting as at January 1, 2020 to BYN8.2 billion, of which bank time deposits and deposits in escrow went up by BYN1.1 billion, or by 27.9%, amounting to BYN5.1 billion.

Natural persons’ bank deposits in foreign exchange (in dollar terms) increased by USD405 million, or by 5.7%, amounting to USD7.5 billion. Time deposits and deposits in escrow grew by USD118.5 million, or by 1.9%, amounting to USD6.2 billion.

The bulk of the natural persons’ deposits was placed with the banks of the Group of Systemic Importance I – JSC “JSSB Belarusbank”, JSC “Belagroprombank”, “Belinvestbank” JSC, “Priorbank” JSC, BPS-Sberbank, Bank BelVEB OJSC, and Belgazprombank – the share of which in the natural persons’ deposit market amounted as at January 1, 2020 to 85.6% (BYN20.6 billion).

In 2019, the legal persons’ bank deposits grew by BYN3 billion, or by 19.4%, amounting to BYN18.3 billion in the total amount in the ruble equivalent as at January 1, 2020.

The legal persons’ bank deposits in the national currency grew by BYN2 billion, or by 30.5%, amounting as at January 1, 2020 to BYN8.6 billion.

The legal persons’ deposits in foreign exchange (in dollar terms) increased by USD556.7 million, or by 13.8%, amounting as at January 1, 2020 to USD4.6 billion.

As at January 1, 2020, the legal persons’ time deposits and deposits in escrow (in ruble terms) totaled BYN10.1 billion, or 55.3% of the legal persons’ total deposits.

An improvement in the structure of the banks’ deposit portfolio was observed throughout 2019, which was accompanied by the increased share of the natural and legal persons’ irrevocable and long-term irrevocable deposits.

The share of irrevocable deposits in the total volume of the average balances of the natural and legal persons’ time deposits and deposits in escrow in

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Belarusian rubles went up from 64.4% in December 2018 to 65% in December 2019. The share of the long-term component in the natural and legal persons’ irrevocable deposits in Belarusian rubles went up as well from 60.6% in December 2018 to 69.8% in December 2019.

Interest rates of the credit and deposit market. In 2019, the interest rates in the economy were still maintained at the positive level in real terms. At that, the level of interest rates ensured the growth in lending and dynamics of money supply in the volume, which did not create risks for the price stability (Attachments 1.9 - 1.10). Interest rates on the households’ deposits in the national currency continued to ensure the safety of savings and were more attractive compared with deposits in foreign exchange.

The average interest rate on the natural persons’ fresh time bank deposits in the national currency amounted to 9.72% per annum in December 2019, having dropped by 0.04 percentage point versus December 2018. The average interest rate on the natural persons’ fresh time bank deposits in foreign exchange totaled 0.69% per annum, a decline by 0.51 percentage point compared with December 2018.

The average interest rate on the legal persons’ fresh time bank deposits in the national currency stood at 6.95% per annum in December 2019, having increased by 0.03 percentage point versus December 2018. The average interest rate on the legal persons’ fresh time bank deposits in foreign exchange totaled 0.72% per annum, having dropped by 0.56 percentage point compared with December 2018.

The average interest rate on fresh bank credits* in the national currency issued to legal persons amounted to 10.76% per annum in December 2019, having dropped by 0.3 percentage point versus December 2018. The average interest rate on fresh bank credits* issued to natural persons in the national currency amounted to 9.42% per annum, having dropped by 0.52 percentage point versus December 2018.

The average interest rate on fresh bank credits in foreign exchange issued to legal persons totaled 4.23% per annum in December 2019, having dropped by 0.63 percentage point compared with December 2018.

1.3.3.4. Trust management carried out by banks

In 2019, ten banks worked as trust managers: Alfa-Bank, “Priorbank” JSC,

BPS-Sberbank, JSC “JSSB Belarusbank”, JSC “Belagroprombank”, Bank BelVEB OJSC, Belgazprombank, and OJSC “Paritetbank”, as well as JSC “BSB                                                             

* Excluding soft credits granted pursuant to decisions of the President and the Government of the Republic of Belarus at the expense of the republican and local government agencies.

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Bank” and “Bank Dabrabyt” JSC, which started to provide the functions involving trust management on March and August 2019 respectively.

The volume of monetary funds and securities held by banks in trust management declined over 2019 by 0.07%, amounting as at January 1, 2020 to BYN848 million (as at January 1, 2019 – BYN848.5 million).

Two banks were involved in trust management of securities in 2019. Securities placed in trust management are, mainly, represented by:

- the shares owned by government employees, which are placed thereby in trust management of JSC “JSSB Belarusbank” for the time of government service in line with Article 20 of the Law of the Republic of Belarus No. 305-З “On Combating Corruption” dated July 15, 2015; and

- the shares of the JSC “Asset Management Agency” placed in trust management of JSC “Belagroprombank” in December 2016 on the basis of Edict of the President of the Republic of Belarus No. 268 “On Establishment and Activities of the JSC “Asset Management Agency”” dated July 14, 2016.

As at January 1, 2020, securities worth BYN446.3 million were placed in trust management.

Monetary funds placed by obligees in trust management, including bank management funds, decreased over 2019 by 6.4%, amounting as at January 1, 2020 to BYN363 million.

Investment in securities still accounted for the major part in the structure of investment of monetary funds placed in trust management. Investment in securities went up from 71.3% as at January 1, 2019 to 83.5% as at January 1, 2020. As at January 1, 2020, the share of interbank credits totaled 7.5% (as at January 1, 2019 – 0%), while the share of deposits declined over 2019 from 25.8% to 5%.

As at January 1, 2020, two bank management funds of the trust manager “Priorbank” JSC (“Raiffeisen - Conservative - USD” and “Raiffeisen - Assets Portfolio - EUR”) were in operation. The value of the funds’ net assets totaled USD300.7 thousand and EUR456.3 thousand (as at January 1, 2019 – USD446.3 thousand and EUR597.7 thousand).

90 natural persons were obligees of the above-mentioned funds as at January 1, 2020 (125 natural persons as at January 1, 2019).

In 2019, the level of yield of the bank management funds’ was positive (“Raiffeisen - Assets Portfolio – USD” – 7.54% per annum and “Raiffeisen - Assets Portfolio - EUR” – 12.53% per annum.

1.3.3.5. The National Bank’s securities market In 2019, the National Bank placed bonds denominated in Belarusian rubles

worth BYN79 billion at placement value, or worth BYN79.2 billion at face value,

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with BYN79.1 billion being repaid at face value. Over 2019, the volume of the National Bank’s circulating bonds denominated in Belarusian rubles increased by 22.7%, totaling BYN0.5 billion as at January 1, 2020.

In 2019, the National Bank also placed bonds denominated in the US dollars worth USD306.9 million at actual value, or worth USD318.1 million at face value, with USD0.7 billion being repaid at face value. Over 2019, the volume of the National Bank’s circulating bonds denominated in the USD dollars dropped by 52.7%, totaling USD0.3 billion as at January 1, 2020.

In 2019, the National Bank did not place bonds denominated in euro. At that, EUR0.2 billion was repaid at face value. As at January 1, 2020, there were no bonds of the National Bank denominated in euro in circulation.

As at January 1, 2020, the volume of banks’ investments in debt and equity instruments of the securities market totaled BYN12.6 billion in the equivalent*, of which the National Bank’s securities accounted for BYN0.7 billion in the equivalent, or 5.8%.

In 2019, 1,814 transactions worth BYN1.3 billion in the equivalent were carried out with the National Bank’s bonds in the secondary regulated securities market on the floor of the JSC “Belarusian Currency and Stock Exchange”, an increase by BYN1.5 billion (by 53.4%) versus 2018. At that, all transactions were carried out with the National Bank’s bonds denominated in foreign exchange.

The share of repo transactions in the total volume of the secondary regulated stock market of the National Bank’s bonds totaled 50.9%, or 1,376 transactions worth BYN0.7 billion in the equivalent.

In 2019, in the unregulated over-the-counter securities market the volume of purchase/sale deals involving the National Bank’s bonds denominated in hard currency totaled BYN38 million in the equivalent, dropping by BYN175.2 million in the equivalent versus 2018.

                                                            * According to the data of banks’ balance-sheets, excluding the incomes planned to be received in the form of interest.

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Chapter 2

The National Bank’s activities

In 2019, the National Bank’s activities were aimed at maintaining price stability, ensuing stability of the banking system of the Republic of Belarus, and ensuring efficient, reliable and secure functioning of the payment system. The work on developing the financial market, liberalizing foreign exchange relations, strengthening confidence in the national monetary unit and decreasing the amount of foreign exchange in the economy continued.

2.1. Monetary policy

2.1.1. Monetary policy target

Limiting inflation to no more than 5% was the major monetary policy target. In

the year under review, the inflation target was attained. According to the National Statistical Committee’s data, the consumer prices grew in 2019 by 4.7% versus 5.6% in 2018 (Attachment 2.1).

Consumer prices and tariffs grew to the utmost in the sphere of services (by 6.9%) (in 2018, by 8.1%). In the commodities market the prices for food products and non-foods grew by 4.3% and 3.7% respectively (in 2018, by 5.7% and 3.8% respectively).

In 2019, the core inflation stood at 3.5% (4.8% in 2018) and, according to the National Bank’s estimates, led to the increase in consumer prices by 2.5 percentage points (the share of this factor totaled 52.8% in 2019 against 60.8% in 2018).

According to the National Bank’s estimates, regulated prices and tariffs grew over 2019 by 7.5% (in 2018, by 9%), contributing to the growth in the consolidated consumer price index by 1.8 percentage points (the share of this factor was 39.4% against 40.1% in 2018).

The prices for fruit and vegetable products in the year under review increased by 8.9% (in 2018, went down by 0.9%), ensuring the consumer prices growth by 0.4 percentage point (the share of this factor amounted to 7.8% against minus 0.9% in 2018).

The implemented monetary policy, low inflation background in the countries - trade partners, mainly, in the Russian Federation, a more moderate increase in regulated prices and tariffs compared with the previous years, as well as termination of impact of the temporary pro-inflationary factors, which led to the acceleration of inflation at the end of 2018 – early 2019, contributed to the slowing down of consumer prices growth.

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Industrial producers’ prices rose in 2019 by 4.4% compared with 6.4% in 2018, with prices for investment goods increasing by 2.4%, for intermediate goods – by 4.7%, and for consumer goods – by 3%.

2.1.2. Monetary policy implementation

In the year under review, the monetary policy was still implemented in the

monetary targeting regime, where control over the monetary supply is the main instrument in achieving the final target on curbing inflation.

Over 2019, the increase in the broad money supply, which was defined as an intermediate monetary policy target, stood at 11.4% (December 2019 on December 2018), with the forecast being 9 - 12%.

The exchange rate policy was conducted in the exchange rate floating regime. The dynamics of the Belarusian ruble exchange rate was, for the most part, formed under the impact of market forces.

The exchange rate policy complied with the current economic situation and was aimed at establishing conditions constraining inflation and contributing to supporting business and investment activities in the country. With a view to strengthening the functioning of the interest rate channel the National Bank was shrinking the interest rate band, determined by the rates on standing transactions, ensuring its symmetry versus the level of the refinancing rate. In the year under review, the refinancing rate dropped from 10% to 9% per annum, the rate on standing and bilateral transactions designed to provide current liquidity (the upper limit of the interest rates band) – from 11.5% to 10% per annum. The rate on standing transactions designed to withdraw liquidity (the lower limit of the interest rates band) had been increased over 2019 up to 8.5% per annum, but at year-end totaled 8% per annum.

The average interest rate on intraday interbank credits in the national currency (operational target) was close to the refinancing rate in December 2019 and totaled 9.2% per annum, decreasing by 1.6 percentage points versus December 2018.

The National Bank made an impact on the short-term money market, mainly, by means of changing the volume of its transactions designed to regulate banks’ liquidity.

In the year under review, under the conditions of a considerable surplus of the banking system’s liquidity the National Bank carried out, mainly, liquidity withdrawal transactions. The main liquidity regulation instruments were open market operations, which are carried out every week in the form of auction on placement of the National Bank’s bonds denominated in Belarusian rubles for the term of seven days in line with the quarterly approved schedule of transactions.

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The National Bank took a decision to switch on November 20, 2019 from using auctions on placement of bonds to carrying out deposit auctions for the term of seven days as a key instrument of excess liquidity withdrawal. In December 2019, the National Bank placed bonds denominated in Belarusian rubles for the terms of 3 an 12 months. In addition, the banks used standing facilities designed to regulate liquidity (credits and overnight deposits).

Under the average liquidity surplus in 2019, amounting to about BYN2.1 billion, the auction transactions involving placement of the National Bank’s bonds (the average surplus totaled BYN1.5 billion) and attraction of deposits (the average surplus totaled BYN0.3 billion) accounted for the major share in the total volume of surplus under the National Bank’s liquidity regulation transactions. In 2019, the average daily surplus of the position of standard liquidity regulation instruments totaled BYN1.8 billion (in 2018, BYN0.3 billion).

In 2019, the ratio of required reserves in respect of the attracted funds in Belarusian rubles was preserved in the amount of 4%; in respect of the attracted funds in foreign exchange – 17%.

2.1.3. Key monetary indicators As at January 1, 2020, the broad money supply (M3) amounted to BYN48.5

billion, having increased by BYN5.3 billion, or by 12.2%, over 2019. As at January 1, 2020, foreign exchange component of the broad money supply in the dollar equivalent totaled BYN12.8 billion, having increased by BYN0.6 billion, or by 5.2% (Attachment 2.2).

The share of foreign exchange constituent in the broad money supply decreased, amounting to 55.6% as at January 1, 2020 (as at January 1, 2019 – 60.9%).

As at January 1, 2020, the ruble money supply (M2*) totaled BYN21.5 billion, having increased over the year by BYN4.6 billion, or by 27.4%. Among the main constituents of the ruble money supply, other legal persons’ deposits accounted for the largest growth (in relative and absolute terms), increasing in the year under review by BYN1.4 billion, or by 40.9%.

Over 2019, the ruble money base increased by BYN1.4 billion. The main factors of its growth were the National Bank’s transactions in foreign exchange worth BYN4.7 billion. The shrinkage of the ruble money base was due to the increase in the volume of the National Bank’s transactions designed to withdraw excessive liquidity in Belarusian rubles from the banking system, that manifested itself in the growth in the National Bank’s liabilities to banks under short-term bonds and deposits in the national currency by BYN2.2 billion, and the decline in

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the National Bank’s net ruble claims on the Government of the Republic of Belarus by BYN1.1 billion.

As of January 1, 2020, international reserve assets amounted to USD9.4 billion (2.7 months of the goods and services import), a USD2.2 billion increase in the year under review.

In 2019, the gold and foreign exchange reserves were replenished, mainly, at the expense of the non-debt sources:

- purchase by the National Bank of foreign exchange worth USD2.2 billion at the JSC “Belarusian Currency and Stock Exchange”; and

- receipts from collection of export duties on oil and oil products, taxes and duties and receipts of other net revenues in foreign exchange to the accounts of the Ministry of Finance worth USD1.5 billion.

The positive impact on the level of gold and foreign exchange reserves was also made by:

- the receipt of funds from the sale of bonds denominated in foreign exchange worth USD1.1 billion by the National Bank and the Ministry of Finance in the domestic market;

- the attraction by the Ministry of Finance of external government loans worth USD 0.7 billion; and

- the increase in the value of monetary gold by USD0.5 billion. In 2019, the Government and the National Bank of the Republic of Belarus

repaid the external and domestic liabilities in foreign exchange worth USD4.2 billion. Over the year, foreign exchange liabilities of the National Bank under credits, loans and securities decreased by USD0.7 billion.

2.2. Supervision of banks’ activities

2.2.1. Streamlining regulatory legal framework for banking supervision

In 2019, the work on streamlining regulatory legal framework governing banking supervision and bringing it into line with international standards having regard to the experience of practical application was continued (Attachment 2.3).

Within the framework of introducing Basel III international standards the approaches to determination of credit risk value for calculation of regulatory capital adequacy at banks and JSC “Development Bank of the Republic of Belarus” were adjusted.

The approaches to limiting credit risk on credits provided under excessively high interest rates were changed. Also, the composition of the debtor’s financial instability features taken into account when creating special provisions to cover potential losses on assets and operations not reflected in the balance sheet was specified.

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With the purpose of improving supervision procedures, updated approaches to the execution by the National Bank of the banking supervision functions using the early warning system designed to reveal and prevent the problems in the activities of banks, JSC “Development Bank of the Republic of Belarus” and non-bank financial institutions at an early stage were introduced.

Requirements to the state registration of banks and non-bank financial institutions and licensing of banking activities, as well as qualification requirements and those to business reputation applied to the officials of the banks, JSC “Development Bank of the Republic of Belarus” and non-bank financial institutions were updated with account of the current practice of application.

Requirements to business plans (strategic development plans) of banks, JSC “Development Bank of the Republic of Belarus” and non-bank financial institutions were streamlined.

With the aim of improving the risks management system under the conditions of digital economy development, the banks, JSC “Development Bank of the Republic of Belarus” and non-bank financial institutions were given recommendations defining the approaches to organization of cyber risk management and peculiarities of cyber risk management with account of the current requirements to organization of a risk management system at banks, JSC “Development Bank of the Republic of Belarus”, non-bank financial institutions, banking groups and bank holding companies.

The National Bank initiated as well the conduct of IT audit by the banks of the Group of Systemic Importance I. For this purpose, the terms of reference defining the minimum requirements to the conduct of such audit, contents of the report based on its results, as well as to the audit company and consultants were submitted to the mentioned banks.

In 2019, the work on integration of FATF* international standards into the legislation was continued: the procedures and measures of internal control were established for participants of a banking/financial group (holding company).

In November 2019, the plenary meeting of the Eurasian group on combating money laundering and terrorism financing adopted the report on international assessment of the Belarusian system of combating money laundering and terrorism financing and financing the proliferation of weapons of mass destruction as to its compliance with the FATF requirements, in the preparation and advocacy of which the National Bank took an active part. The given system was highly appraised by the international experts. They noted a deep understanding of the risks in the given sphere by the banking and financial sectors, viability of the strategies and legislation acts aimed at eliminating such

                                                            * FATF (The Financial Action Task Force) is an inter-governmental body establishing the standards and

developing the policy in the sphere of combating money laundering and terrorism financing.

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risks, significant degree of effectiveness of preventing illicit activities and carrying out international cooperation.

2.2.2. Off-site supervision

In 2019, within the framework of the off-site supervision of banks (bank holding companies), non-bank financial institutions and the JSC “Development Bank of the Republic of Belarus” (hereinafter for the purposes of this section – the “banks”), the main tasks of the National Bank were aimed at ensuring their stable and safe functioning, protecting the interests of their depositors and other creditors, including by means of minimizing and limiting the risks accepted by banks, as well as preventing bankruptcy of the banking sector’s participants.

During the year under review, the indicators of the banks’ performance efficiency, levels of risks assumed thereby (including the assets quality review and analysis of the liquidity state), as well as compliance with the secure functioning and other prudential requirements, were monitored on a permanent basis, including within the framework of the early warning system.

The early and (or) supervisory response measures, particularly those aimed at increasing banks’ capitalization, eliminating the liquidity deficit, improving corporate governance and excluding participation in non-core activities, were taken with respect to banks when violations and drawbacks in the banks’ activities were revealed. Further, the assessment of the fulfillment of the mentioned measures was conducted, and additional supervisory actions were taken if necessary.

Strategic plans of development were considered with the purpose of assessing the ability of banks to ensure financial reliability and sustainability in the long-term perspective within the framework of implementation of the submitted strategic plans, as well as issuance of licenses for banks’ participation in the authorized capital of other legal entities was considered taking into account the effectiveness and expediency of such investments.

2.2.3. Audits of banks

In 2019, the National Bank conducted 11 audits, of which four unscheduled

audits were carried out on the initiative of the National Bank and one unscheduled audit was conducted under the order of the Investigation Committee Department for the Brest Region.

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The supervisory audits at banks were aimed at identifying and assessing risks in a timely manner, establishing their real financial state directly on-site, and revealing situations threatening the interests of creditors and depositors. 

Particular emphasis was placed on the quality of banks’ assets, compliance of the amount of established reserves with the level of risks being taken, efficiency of functioning of the corporate governance, internal control, organization of internal procedure of capital adequacy assessment and risk management systems, and remedying the violations revealed in the course of the previous audits.

In connection with the active digitalization processes in banking activities, during the audit of the operational risk a special attention was given to the issues of ensuring cyber security, quality of cyber risk-management, including the assessment of measures aimed at maintaining confidentiality of information with limited dissemination and (or) provision, including the cases of transfer of various functions and processes to the third party (risk associated with outsourcing).

Based on the results of the performed audits, the instructions to remedy identified violations and prevent them from happening in the future were directed to the banks, as well as the recommendations on the actions to be taken to prevent emergence of conditions conducive to committing violations, and (or) creating the situation threatening secure functioning of a bank, interests of its depositors and other creditors, or stability of the banking system.

2.3. Control of activities of the non-credit financial institutions

2.3.1. Off-site control

In 2019, the National Bank implemented off-site control over the timeliness and urgency of the reporting submitted by leasing and microfinance organizations, as well as reporting related to the activities in the OTC Forex market, compliance with the financial regulations and requirements applied to the consumer cooperatives and forex companies, and authenticity of data provided by the microfinance organizations to the Credit Register.

The National Bank monitored on a permanent basis the official sites of leasing, microfinance organizations and forex companies in the Internet for the purpose of checking the availability of information specified by legislation, as well as monitored the Internet with respect to availability of the undue advertisement of the economic entities that are not included in the corresponding registers of the National Bank. As a result of such work, and by the initiative of the National Bank, the competent agencies took decisions on limiting the access to the correspondent websites (over 2019, the access to eight websites of such institutions was limited).

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The control over the timeliness and authenticity of the information submitted for inclusion into the registers of leasing and microfinance organizations and forex companies was carried out.

In the course of consideration of citizens’ appeals, the measures designed to protect the financial services consumers’ rights and satisfy the well-reasoned complaints of the citizens were taken.

In case of revealing violations in the activities of leasing and microfinance organizations, as well as non-compliance with legislation regulating the order and conditions of carrying out operations with the non-deliverable financial instruments (activities in the OTC Forex market) initiated by natural and legal persons, corresponding warnings were sent, and administrative sanctions were imposed against those responsible for the violations.

2.3.2. Audits of the non-credit financial institutions

In 2019, the inspection control over compliance of leasing and microfinance organizations and forex companies with legislation was exercised in the form of selective audits.

Six leasing organizations were audited as to their compliance with requirements of the legislation on leasing activities, 14 microfinance organizations – with requirements of the legislation regulating the procedures of providing and attracting microloans, and two forex companies – with requirements of the legislation regulating activities in the OTC Forex market. Control was exercised over the organizations’ compliance with the legislation on combating money laundering and terrorism financing and financing the proliferation of weapons of mass destruction.

Based on the results of the selective audits, the explanatory work was conducted on the procedure of compliance with requirements of the legislation, the instructions on remedying the revealed violations were made, as well as the orders on imposing administrative penalty in the form of a warning or a fine were issued with respect to the officials, the actions of which led to administrative violation.

2.4. Regulation of separate banking operations In 2019, with a view to increasing sustainability of the banking sector and

developing it, regulation of banking operations was further improved.

2.4.1. Regulation of credit and deposit operations, operations on the current (settlement) bank accounts, financing against the assignment of

a monetary claim (factoring)

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In 2019, the work on the legal regulation of credit and deposit operations, operations on the current (settlement) bank accounts, financing against the assignment of a monetary claim (factoring) continued.

Improving the quality of banking services and ensuring their transparency had traditionally been the priorities of streamlining the legislation and working out relevant recommendations to banks.

Based on the results of the analysis of the contracts concluded by banks and their clients and information published on the banks’ websites in the Internet, as well as based on the foreign experience presented within the Twining project “Strengthening the National Bank of the Republic of Belarus”, the approaches to the definition of the banks’ actions (omissions) recognized as unfair practices were formulated. The Board of the National Bank worked out and adopted recommendations to banks on preventing unfair practice when carrying out retail operations. Examples of such actions (omissions) were communicated to the banks and the Association of the Belarusian Banks, as well as placed on the National Bank’s website in the Internet.

In the year under review, the recommendations and examples of unfair practices were updated in the process of consideration of the citizens’ appeals obtained by the National Bank and sent to banks.   Within the framework of improvement of the institutional conditions of lending, suggestions were made to adjust the legislation on the following issues:

- financing against the assignment of a monetary claim (factoring) in terms of changing the parties;

- assessing creditworthiness of natural persons; - introducing the unified form of submitting information on debt under the

loan agreement; - enshrining the right of the borrower to claim from a bank a confirmation

of the fulfillment of liabilities under the loan agreement in full in the written form; and

- enshrining in the loan agreement the right of a borrower being a natural person to repay the loan upon expiration of three months from the day of his/her notification by the bank of the need to repay a loan prior to the maturity date in case of non-fulfillment or inappropriate fulfillment of liabilities under the loan agreement.

The work on prolongation of the family capital program from January 1, 2020 till December 31, 2024 was carried out. The approaches to granting and using the funds of the family capital were changed: since January 1, 2020, the funds of the family capital have been provided in Belarusian rubles and the possibilities for their early use have been increasing. These approaches have been enshrined in Edict of the President of the Republic of Belarus No. 345 “On the Family Capital” dated September 18, 2019.

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The National Bank coordinated Edict of the President of the Republic of Belarus No. 465 “On the Measures Ensuring Residential Accommodation for Families with Many Children in Minsk” dated December 17, 2019, which was adopted with the purpose of continuing provision of the long-term government support to such families in furtherance of Edict of the President of the Republic of Belarus No. 345 dated September 18, 2019, which envisages expansion of the ways of provision of residential accommodation to citizens from large families in need of housing improvement.

The National Bank considered 305 drafts of the legal acts on the issues of granting loans to the economic entities, attracting funds of the international financial organizations with a view to implementing investment projects, as well as determining the measures of government support and the ways of ensuring fulfilment of obligations under loan agreements and mechanisms of their repayment, financial recovery of economic entities, including restructuring of the debt under loans.

Within the framework of a comprehensive system aimed at stimulating export, the National Bank was involved in drafting Edicts of the President of the Republic of Belarus No. 31 “On Amending and Modifying Edict of the President of the Republic of Belarus” dated January 29, 2019 and No. 161 “On Modifying the Edict of the President of the Republic of Belarus” dated April 29, 2019. The changes were designed to expand the types of financing exporters and the list of the types of the economic entities entitled to obtain the government support within the framework of the mentioned edicts, as well as to apply a flexible approach to establishing the term of lending and its purpose-oriented use.

In the year under review, the National Bank gave its consent for signing and implementation of the international agreements on financing:

- the project “Modernization of the Education System of the Republic of Belarus” (according to Edict of the President of the Republic of Belarus No.109 “On Attracting External Government Loan” dated March 22, 2019);

- the second stage of the Program on the Water Sector in the Republic of Belarus (according to Edict of the President of the Republic of Belarus No. 271 “On Implementing International Treaty” dated July 16, 2019); and

- the project “Improving Effectiveness And Quality Of Utility Services” (according to Edict of the President of the Republic of Belarus No. 435 “On Adopting International Treaties And Their Implementation” dated December 4, 2019).

With the purpose of intensifying long-term financing of large investment projects and decreasing the volumes of directed lending, Edict No. 261 “On Establishing Open Joint Stock Company “Development Bank of the Republiс of Belarus”” dated June 21, 2011 was modified by Edict of the President of the Republic of Belarus No. 467 “On Amending the Edicts of the President of the

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Republic of Belarus” dated December 19, 2019, according to which the list of tasks of the JSC “Development Bank of the Republiс of Belarus” was extended. Thus, financing of the investment projects that are chosen by the JSC “Development Bank of the Republiс of Belarus” itself, infrastructure projects based on the principles of public-private partnership, provision of financial support to the SMEs for investment purposes and replenishment of the working capital were added to these tasks. With a view to expanding the sphere of application of the tools designed to provide financial support to export and ensuring equal conditions of access to export credits supported by the state to enterprises, the minimal amount of the export credit provided by the JSC “Development Bank of the Republic of Belarus” was decreased from USD1 million to USD200 thousand.

In 2019, the National Bank participated in drafting and coordinating the following regulatory legal acts aimed at ensuring financial recovery of enterprises in various branches of the economy:

- Edict of the President of the Republic of Belarus No. 126 “On Opening Special Accounts” dated March 29, 2019, envisaging peculiarities of opening and functioning of special accounts for enterprises of the construction industry;

- Edict of the President of the Republic of Belarus No. 181 “On the Organizations of the Cement Industry” dated May 16, 2019;

- Edict of the President of the Republic of Belarus No. 505 “On Organization of Production of Woolen Cloth in the OJSC “Kamvol”” dated December 31, 2019; and

- Edict of the President of the Republic of Belarus No. 507 “On Modernization of Production Facilities” dated December 31, 2019, aimed at increasing efficiency of the Republican Unitary Enterprise “Newsprint Paper Plant”.

2.4.2. Regulation of non-cash settlements In 2019, the work was going on to streamline the regulatory legal acts,

governing the execution of non-cash settlements (Attachment 2.4). With the purpose of developing non-cash settlements, the National Bank in

concert with other involved state bodies took actions aimed at establishing and putting into operation the automated information system for execution of monetary obligations, envisaged by Edict of the President of the Republic of Belarus No. 414 “On Improving Non-cash Settlements” dated October 16, 2018. Since January 1, 2020, functioning of the automated information system for execution of monetary obligations was ensured. Its operation procedure is governed by Resolution of the Council of Ministers of the Republic of Belarus

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and the National Bank of the Republic of Belarus No. 432/11 “On Automated Information System for Monetary Obligations Execution” dated June 28, 2019.

Requirements to formalization of payment orders while conducting instant payments were defined by Resolution of the Board of the National Bank No. 273 “On Amending Resolution of the Board of the National Bank of the Republic of Belarus No. 66 dated March 29, 2001” dated June 28, 2019.

Within the framework of creating the segment of electronic banking guarantees and implementing measures on introducing the mechanism of circulation of electronic banking guarantees between banks and customs bodies, on December 10, 2019, the National Bank and State Customs Committee concluded Agreement on information interaction in the sphere of banking guarantees.

For the purpose of implementing industry-specific projects and events of state significance, the National Bank took part in establishing regulatory legal framework providing for application of the institute of special accounts as an effective mechanism of retaining monetary funds from encumbrances and using them exclusively for intended purposes.

2.5. Formation of credit histories and provision of credit reports

In 2019, the National Bank continued to form credit histories of natural and legal persons and provide the users of credit histories and subjects of credit histories with credit reports.

As at January 1, 2020, 4.89 million credit histories were formed in the Credit Registry, including 4.84 million credit histories of natural persons and 0.05 million credit histories of legal persons. Credit histories contain information on 27.1 million credit transactions, of which 8.62 million credit transactions are the current ones.

In 2019, in addition to the data on credit contracts, loan agreements and accessory contracts, the data on the concluded leasing contracts and the contracts on financing against the assignment of a monetary claim (factoring) were included in the Credit Registry. As at January 1, 2020, 0.81 million leasing contracts were concluded, a 55% increase versus January 1, 2019, and 0.07 million factoring contracts, a 17% increase compared with January 1, 2019.

Banks, JSC “Development Bank of the Republic of Belarus”, leasing and microfinance organizations were the sources of formation of credit histories. As at January 1, 2020, 90 microfinance organizations and 92 leasing organizations were connected to the Credit Registry as the sources of formation of credit histories.

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In the year under review, the main users of credit histories were banks and mobile operators. As many as 4.55 million requests for credit histories were submitted by banks to the Credit Registry (of which credit reports were presented on 4.16 million of them), 0.72 million requests for credit histories were submitted by the mobile operators (of which credit reports were presented on 0.59 million of them). In addition to banks and mobile operators, the users of credit histories included 116 legal persons, among which there are 18 microfinance organizations, 63 leasing companies, 15 trading organizations, insurance companies, credit brokers and other users.

In 2019, natural persons sent 95.7 thousand requests via web-portal of the Credit Registry in the online mode, a 93.4% growth compared with 2018. Credit reports in the electronic form were presented on 89.5 thousand requests.

With the purpose of ensuring the possibility to build a full-fledged remote service of rendering financial services, to decrease the costs of the organizations carrying out financial operations, and the costs of their clients, as well as creating conditions for growth of competitiveness in the country’s market of financial and banking services, the microfinance and leasing organizations and forex companies were given the possibility to receive the consent of the credit history subjects for the provision of credit histories by the National Bank remotely in the form of the electronic document by means of using information systems, relevant hardware, software, and technologies (Resolution of the Board of the National Bank No. 379 “On Adopting Instruction on the Use of Hardware, Software, and Technologies” dated September 19, 2019).

With a view to increasing the effectiveness of using data of the credit histories by the National Bank while supervising the activities of banks, monitoring financial stability, analyzing the non-financial sector of the economy, and exercising control over complying with legislation on leasing and microfinance activities, the new types of credit, statistical and analytical reports were developed and introduced on the basis of the information and analytical complex of the Credit Registry.

2.6 Regulation of activities of the non-credit financial institutions

In 2019, the National Bank continued the work on improving regulatory legal acts regulating the activities of leasing and microfinance institutions, as well as activities in the OTC Forex market (Attachment 2.5).

2.6.1. Regulation of leasing activities

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In order to develop leasing activities, increase protection of rights and legal interests of lessees and leasing organizations, Edict of the President of the Republic of Belarus No. 394 “On Providing and Attracting Loans” dated October 23, 2019 was adopted, which establishes the limit on concluding the leaseback contracts. Since April 27, 2020, only a vehicle, a flat and a one-flat dwelling house may be the leasing item under the financial rent (leasing) contract, where a natural person is simultaneously the lessee and the seller (supplier) of the leasing item.

Introduction of this restriction will make it possible to create conditions for prevention of unfair practice of the lenders that advertise their services as provision of a loan, while, in fact, they conclude contracts on sale/purchase of the movable property possessed by citizens (household appliances and computers, mobile phones) and simultaneously the sale-and-leaseback contracts, the item of which is the same property. Within the framework of regulation of leasing activities and with the purpose of ensuring equal conditions of taxation of lessors and legal persons, involved in sale of goods (works, services), the National Bank participated in amending Edict of the President of the Republic of Belarus No. 280 “On Including Insurance Premiums on Voluntary Insurance Other Than Life Insurance into the Costs of Manufacture and Sale of Goods (Works and Services)” dated May 19, 2008. These amendments provide for the inclusion by lessors of the costs associated with insurance of the property transferred to financial rent (leasing), which has been occurring since January 1, 2019, into their expenses. For the purpose of improving the government regulation of leasing activities, ensuring stability of the financial system, the work was carried out to reduce the risks of leasing organizations, to strengthen the stability of the leasing market, including by means of formation of requirements to the risk management system in the leasing organizations.

In order to prevent (cease) the violations of the rights of consumers of financial services rendered by the non-credit financial organizations, the natural and legal persons’ appeals were considered.

2.6.2. Regulation of the microfinance organizations’ activities

With a view to establishing a more efficient, transparent and competitive market of microfinancing, Edict of the President of the Republic of Belarus No. 394 dated October 23, 2019 was adopted, according to which Edict of the President of the Republic of Belarus No. 325 “On Attracting and Providing Loans and Activities of Microfinance Organizations” dated June 30, 2014 ceased to be in force. With the aim of ensuring financial stability and procedures for the microfinance organizations functioning:

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- the approaches to formation of the lombards’ authorized capital were changed (by means of depositing monetary funds in the amount of no less than the minimum amount of the authorized fund established by the National Bank);

- the list of the types of activities that lombards are entitled to carry out (provision of microloans to the citizens against the pledged vehicles without an obligation to transfer the collateral item (vehicle) to the lombard, carrying out commission trade, storage of items and their purchase with the purpose of further sale) was extended;

- the right of non-profit-making microfinance organizations established in the form of a fund to provide microloans was excluded;

- the amount of interest due to the microfinance organization, which is charged under the microfinance agreement, may not exceed the double amount of the microloan provided by the microfinance organization, while the forfeit (fine, penalty) amount may not exceed the halved amount of the provided microloan;

- the amount of the borrower’s liability due to the microfinance organization includes the amount of the provided microloan, the amount of interest for using the microloan, calculated for the period of its actual use, as well as the amount of the forfeit (fine, penalty) under the microloan agreement (if any);

- it is prohibited to include into a microloan agreement the conditions on charging by the microfinance organization from the borrower of the increased interest for using the microloan in case of non-fulfillment (improper fulfillment) of liabilities under the microloan contract;

- the right to provide a microloan versus the pledge of movable property is granted to the state-owned legal persons rendering domestic services to population and registered in the rural area, as well as legal persons purchasing precious metals and precious stones to replenish the State Fund of Precious Metals and Precious Stones of the Republic of Belarus; and

- the natural persons manufacturing agricultural products and (or) carrying out types of activities requiring payment of a single tax, as well as the SMEs’ entities may become members of consumer cooperatives of mutual financial assistance (to receive financing of their activities).

In order to further increase the economic effectiveness and develop the infrastructure of microfinancing, the work on establishing the legal framework for new types of microfinancing with the use of financial technologies is conducted.

2.6.3. Regulation of the activities in the OTC Forex market

In 2019, the National Bank studied further the international experience of streamlining the methods and approaches used in regulation of activities in the

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OTC Forex market. Taking into account the innovations in the European legislation that came into force at early 2018 (Directive 2014/65/EU of the European Parliament and of the Council of the European Union of 15 May 2014 “On Markets in Financial Instruments” (MiFID II) and Regulation (EU) No. 600/2014 of the European Parliament and of the Council of the European Union of 15 May 2014 “On Markets in Financial Instruments” (MiFIR), the work on comprehensive adjustment of the legislative acts of the Republic of Belarus was carried out with respect to the issues of further development of the OTC Forex market in the Republic of Belarus.

With the purpose of the planned development of the OTC Forex market in the country, the National Bank took part in drafting and coordinating Edict of the President of the Republic of Belarus No. 503 “On Taxation” dated December 31, 2019, in which the National Bank’s proposals on exemption from the income tax of the natural persons’ revenues from carrying out operations with the non-deliverable over-the-counter financial instruments. At the same time, the tax rate on revenues from the activities involving conduct of transactions with non-deliverable over-the-counter financial instruments for forex companies of the National Forex Centre was increased from 18% to 25%.

Within strengthening of measures aimed at protecting clients of the forex companies and banks operating in the OTC Forex market, Resolution of the Board of the National Bank of the Republic of Belarus No. 433 “On Amending Resolutions of the Board of the National Bank of the Republic of Belarus No. 761 dated December 22, 2015 and No. 153 dated April 2, 2018” dated October 23, 2019 was adopted, providing for the improvement of procedures of maintaining the register of forex companies and optimization of the contents and procedures for compiling and submitting reports by forex companies and the National Forex Center.

2.7. Foreign exchange regulation and foreign exchange control

In 2019, the National Bank continued to implement the measures aimed at stimulating the use of the Belarusian ruble in the Republic of Belarus while conducting settlements and expressing monetary liabilities between residents. These activities resulted in enshrining of the measures on excluding the use of foreign exchange in the domestic economy in the Plan of Actions on Dedollarization of the Economy No. 39/520-233/220/31-02/10924, approved by Sergei Rumas, Prime-Minister of the Republic of Belarus, and Pavel Kallaur, Chairman of the Board of the National Bank of the Republic of Belarus, on December 4, 2019.

On March 1, 2019, Resolution of the Board of the National Bank of the Republic of Belarus No. 612 “On Certain Issues of Carrying out Foreign Exchange

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Transactions” dated December 19, 2018 came into force, which cancelled the requirements to acquire permission of the National Bank by resident natural persons when opening current (settlement) bank accounts in foreign banks, as well as by resident legal persons when conducting foreign exchange transactions associated with the movement of capital. In addition, the cases of foreign exchange use between residents, including under residents’ corporate bonds denominated in foreign exchange, were shrank, and the possibility of obtaining individual permissions for carrying out settlements in foreign exchange between residents was cancelled.

On November 19, 2019, the Draft Law of the Republic of Belarus “On Amending the Laws on the Issues of Foreign Exchange Regulation and Foreign Exchange Control” specifying the list of exceptional cases of using foreign exchange in the Republic of Belarus was passed in its first reading in the Chamber of Representatives of the National Assembly of the Republic of Belarus.

In 2019, the Board of the National Bank adopted decisions aimed at improving foreign exchange regulation and foreign exchange control:

- with a view to improving the conditions of carrying out business in the sphere of foreign trade for economic entities, the list of cases when settlements involving import may be carried out from the accounts other than the accounts of importers was expanded. Residents are entitled to conduct settlements under the foreign trade contract envisaging the rendering by nonresidents of services on accepting payments in favour of the given resident by withholding their remuneration from the amounts received from natural persons for the goods sold by this resident, works performed, and services rendered in the Republic of Belarus;

- the procedures for submission by the resident legal persons of the reports (information) on the foreign exchange transactions associated with the capital flow were switched from permission-based to registration-based ones. In the year under review, the National Bank monitored the external accounts receivable of the economic entities on the ongoing basis. According to the National Statistical Committee’s data, during 2019, the external accounts receivable increased by 5.1% (from BYN9,008.7 million up to BYN9,463.8 million as at January 1, 2020); overdue debt increased by 3.7% (from BYN890.2 million to BYN923.2 million as at January 1, 2020). As at January 1, 2020, the aggregate share of the debt prolonged by the National Bank accounted for 22.3% of the total volume of the external accounts receivable. The facts of violating the deadlines for completion of foreign trade transactions by economic entities were revealed as a result of the conducted monitoring (relevant information was submitted to the State Control Committee for the purpose of taking response measures thereby).

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The National Bank adopted regulatory legal acts for the purpose of implementing measures aimed at improving foreign exchange regulation and foreign exchange control (Attachment 2.6).

2.8. Macroprudential regulation

An important area of the National Bank’s activities is macroprudential regulation aimed at increasing the stability of financial institutions and reducing systemic risks, which may affect the ability of the financial system to perform its functions in a proper manner.

In 2019, the financial stability of the Republic of Belarus was ensured. The financial sector of the country remained sustainable with regard to the most significant risks. In the domestic foreign exchange market, a steady dynamics of the national currency exchange rate was observed. Changes in the indicators of the deposit market evidence the maintenance of stability in this segment of the country’s financial system. A stable functioning of the banking sector was ensured and main secure functioning requirements of banks were met. The coverage of risks accepted by banks by the regulatory capital remained at a high level. The stable functioning of the insurance sector, the leasing organizations’ segment and the sector of other financial intermediaries was preserved.

The National Bank carried out financial stability monitoring on an on-going basis, the main aim of which was to identify and assess the threats to the banking sector’s sustainability, as well as the vulnerabilities of the financial system. The indicators characterizing the systemic risks of financial stability and sources thereof were identified and analyzed on a regular basis. The results of financial stability monitoring were reflected in the analytic survey “The Financial Stability of the Republic of Belarus”, posted on the official website of the National Bank in the global computer network Internet.

The credit risk remained most significant risk to financial stability. Since May 2019, the quality of the credit portfolio has been gradually improving. Assets exposed to credit risk increased, the volume of non-performing assets reduced. However, the financial condition of the sector of non-financial organizations, as a whole, was unstable, with a high level of debt load and a chronic lack of working capital.

In order to prevent the potential growth of risks associated with the dynamics of retail lending, the National Bank in 2019 used such sectoral macroprudential instruments as the debt-service-to-income (DSTI) ratio (a percentage ratio of the size of the monthly payment for credit transactions to the amount of the borrower’s monthly average income) and the loan-to-value (LTV) ratio (a percentage ratio of the loan amount to the cost of the property accepted as a collateral). The DSTI ratio should not exceed 40% and the LTV ratio – 90%. The efficiency of these

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instruments was confirmed by a downward trend in the dynamics of consumer lending.

In 2019, for the purpose of applying a uniform approach to preventing the accumulation of excessive debt burden on citizens, the recommendations were submitted to banks on the methodology for calculating the average monthly payment on a loan, as well as using information on utility payments and other services, installments of trade (service) enterprises, in assessing the creditworthiness of natural persons and calculating debt burden indicators.

On January 1, 2019, a planned increase in the systemic importance buffer to 1.5 percentage points for banks of Group of Systemic Importance I and up to 1 percentage point for banks of Group of Systemic Importance II took place. The growth rates of banks’ lending to the economy during 2019 were in line with economic activity in the country and did not create prerequisites for an increase in systemic risks. The grounds for introduction of a positive countercyclical capital buffer were lacking, it remained at 0 percentage points.

Since March 2019, the National Bank has been applying a system of macroprudential measures based on the estimated values of standard risk (EVSR). The main objectives of its use are to limit the risks assumed by banks that deliberately implement a high-risk business model or allow unfair competition, as well as to promote the efficient distribution of financial resources in the economy and ensure financial stability. An excess of the interest rates on new deposits, credits and issued bonds set by banks over the corresponding estimated values of standard risk is used as an indicator of the increased level of risk of the business models implemented by banks. The system of macroprudential measures based on the EVSR made it possible to limit the excessively high interest rates of separate banks and reduce the possibility of transmitting a speculative impulse from them to other segments of the financial market.

The Concept of Developing the National Bank’s Potential for Ensuring Financial Stability and Implementing Macroprudential Policy, which provides for improving the legal and institutional infrastructure, strengthening analytical standards for monitoring financial stability, as well as creating an integrated system of macroprudential regulation, was developed and approved.

2.9. Accounting and reporting

In 2019, the National Bank carried out activities on the implementation of measures aimed at applying international financial reporting standards (hereinafter – the “IFRS”) as the primary and sole accounting standards and accounting (financial) statements of banks.

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As part of a Strategy for the Application of International Financial Reporting Standards in the Banking System of the Republic of Belarus for the Period up to 2022, approved by the Board of the National Bank of the Republic of Belarus, the activities were carried out to determine the directions and terms of changes in the accounting system and prepare proposals for amending the legislation in order to transfer the National Bank, banks, and non-bank financial institutions to the application of international financial reporting standards in the accounting.

During the reporting year, regulatory legal framework on accounting and financial reporting was improved, including with regard to the practice of application and modification of legislation. The approaches to the accounting of operations of banks, non-bank financial institutions, JSC “Development Bank of the Republic of Belarus”, providing for the assignment of rights of a monetary claim (Attachment 2.7), were unified.

2.10. Cash circulation In 2019, cash circulation grew by 7.8% (by BYN8.2 billion) compared with

2018 and amounted to BYN112.6 billion. The issue of cash in circulation (M0) totaled BYN716.8 million.

In the year under review, the share of monetary aggregate M0 in the ruble money supply accounted for 17.5 - 18.3%. As at January 1, 2020, this indicator totaled 17.2% (as at January 1, 2019, 17.7%).

As at January 1, 2020, the National Bank issued banknotes and coins in the amount of BYN4.7 billion.

50-ruble notes (30%), 20-ruble notes (23.7%), 5-ruble notes (20.1%), and 10-ruble notes (18.2%) accounted for the largest share in the total amount of banknotes in circulation. 100-ruble notes totaled 7.9%. The share of 200-ruble notes and 500-ruble notes stood at about 0.1%.

Coins with the denomination of 1 kopeck and 2 kopecks accounted for the largest share in the total amount of kopecks in circulation (29.3% and 17.4% respectively). Coins with the denomination of 5, 10, and 20 kopecks totaled 13.2%, 12.3%, and 9.5% respectively. The share of coins with denomination of 50 kopecks, 1 and 2 rubles accounted for about 6% of each denomination.

In the year under review, commemorative coins of 17 names were put into circulation by the National Bank. 67,714 commemorative coins were sold in the domestic market, and 25,898 commemorative coins – in the external market by mints.

With a view to preventing money counterfeiting the National Bank took preventive measures to inform households and the banking system about authenticity features of the National Bank’s banknotes and foreign notes, and made available, in a timely manner, information on newly revealed ways of

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forging banknotes for the cashiers of the banks. As a result of the work done, 812 counterfeit banknotes were identified and withdrawn from cash circulation (900 counterfeit banknotes in 2018), including 368 US dollar notes, 258 Russian ruble notes, 140 euro notes, 30 Belarusian ruble notes (1 of them of the 2000 Series), and 16 notes denominated in other currencies.

In the year under review, the National Bank completely outsourced cash transportation operations and placed it for remote storage at OJSC “Non-bank Credit and Financial Organization “Belincasgroup”, while retaining the functions of the central cash circulation management.

In 2019, a significant work was carried out to improve the regulatory legal framework in the field of cash circulation, taking into account the practice of application and changes in legislation (Attachment 2.8).

2.11. Payment system

In 2019, the payment system of the Republic of Belarus satisfied the needs of the real sector of the economy, banking system and other financial institutions of the Republic of Belarus in full in terms of timely and efficient conduct of settlements in the Republic of Belarus.

2.11.1. Payment system management

In the year under review, with the aim of managing the payment system the legislation was improved, as well as the indicators characterizing its state were collected, accumulated and analyzed.

In 2019, amendments were made to a number of regulatory legal acts establishing requirements for processes or objects of the payment system of the Republic of Belarus, in particular, changes aimed at conducting interbank settlements in Belarusian rubles, as well as the mechanism of intersystem interaction of the BELCARD and “Mir” payment systems was determined. In addition, requirements were established for the central archive of the National Bank’s interbank settlements, the automated subsystem for document synchronization of archives of the BISS* participants (instant payment system), related, inter alia, to the commercial operation of an instant payment system and an automated information system for the fulfillment of monetary obligations, in order to ensure storage and use of electronic documents and electronic messages

                                                            * The BISS (Belarus Interbank Settlement System) is a gross interbank settlement system in which settlements of

urgent and non-urgent money transfers, as well as settlements based on the results of clearing within the related systems or settlement are effected on a real-time basis.

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on instant payments, electronic documents and electronic messages received by the automated information system for the fulfillment of monetary obligations and sent to this system.

With a view to expanding the methods of initiating payments, the legislation provides for the use of QR codes and (or) mobile applications by legal entities and individual entrepreneurs when performing payments in non-cash form. The legislation also ensured the possibility of issuing cash in Belarusian rubles to the cardholders through the cash equipment used by the trade (service) organization, which expands citizens’ access to financial services.

A number of standards for carrying out settlements was developed and approved that establish the requirements for ensuring the continuity of functioning and restoration of operability of a payment system participant, and the rules of interaction between API providers and API users. Changes were made to certain previously approved standards based on the results of pilot operation of the financial information transfer system and the practical application of a settlement technology through direct debit of the account, as well as with regard to the creation of an instant payments system in the Republic of Belarus (Attachment 2.9).

Collection, accumulation and analysis of data on the functioning of the payment system and its components and analysis of influence of the critical service providers on the payment system were conducted.

In order to record and systematize information on software and hardware tools of the participants of the payment system of the Republic of Belarus, which are used for settlements, JSC “BISC” maintains a register of these funds that meet the requirements of standards for carrying out settlements. These include software and hardware tools that implement the processes of:

- creating and reproducing in hard copy electronic documents (messages) of a bank and a client used for settlements within the Belarusian payment system;

- forming a user interface and output documents by peripheral equipment for transactions involving cards; and

- forming a general part of the inventory of synchronized electronic documents. Given the change in the standards for carrying out settlements, amendments

were made to the Instructions on the Procedures for Maintaining the Register of Software and Hardware Tools of Participants of the Payment System of the Republic of Belarus, approved by Resolution of the Board of the National Bank of the Republic of Belarus No. 499 dated October 31, 2018.

In 2019, the National Bank became a full-fledged member of the technical committees for standardization TK BY 24 “Identification” and TK BY 38 “Digital Transformation”, in the framework of which the state standards of the Republic of Belarus, including СТБ/ОР “Digital Transformation. Terms and Definitions” and СТБ ISO 8000-2/OP “Data Quality. Dictionary” were considered.

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The Board of the National Bank approved the report on supervision (oversight) of the payment system of the Republic of Belarus for 2018, a short version of which is published on the official website of the National Bank in the global computer network Internet.

As part of the measures designed to reduce (limit) operational risk in the automated system of interbank settlements of the National Bank (hereinafter – the “ASIS”), documentation was updated to ensure its continuous operation and restoration of operability.

In order to strengthen consumer protection, increase the transparency of services provided by banks and banking operations, and develop open APIs, a glossary of terms was formed that can be used by banks, non-bank financial institutions, JSC “Development Bank of the Republic of Belarus”, and JSC “Belarusian Currency and Stock Exchange” to inform customers in an accessible and understandable way when rendering services.

As part of the implementation of measures to create the Belarusian integrated service and settlement system, provided for by the Government Program for the Development of Digital Economy and Information Society for 2016 - 2020, technical requirements were developed for the interaction of payment participants when performing payment for an administrative procedure by dint of the ID-pay payment service.

For the purpose of improving the balance of payment flows during the operational days of the BISS system and the instant payments system, encouraging banks to manage their own payment flows efficiently, accumulating turnovers in the first half of the operational day, as well as accelerating cash turnover, the conduct of a well-balanced tariff policy within these payment systems was continued in the reporting year.

In 2019, the National Bank reached an agreement with the BelCARD, VISA, MasterCard, and UnionPay payment systems on establishing by these systems since 2020 a сeiling of the interbank remuneration in the amount of 1.5% for the majority of cards issued by banks of the Republic of Belarus. This measure is aimed at creating conditions in the Republic of Belarus to prevent the growth of the upper limit of the level of banks’ fees for acquiring within the existing tariff range and to eliminate the imbalance in the card market.

At the same time, the National Bank comprehensively resolves the issues of optimizing the costs of economic entities, expanding the accessibility of payment services, reducing the costs of trade (service) organizations and providing the population with alternative mechanisms for conducting non-cash settlements at these organizations.

2.11.2. Functioning and development of the ASIS

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In 2019, the National Bank ensured effective, reliable and secure functioning of the payment system.

JSC “BISC” carried out technical implementation of the National Bank’s functions in organization and conduct of interbank settlements.

Within the framework of implementing functions of technical operator, JSC “BISC” ensured the development and maintenance of the applied software of the ASIS, as well as operation and service of software and hardware complexes of the ASIS’s functional systems.

Attempts and cases of unauthorized access to the ASIS were prevented from happening.

As at January 1, 2020, the annual parameter of banks’ accessibility to the ASIS averaged 100% of the production time, with the level being not lower than 99.7%.

As at January 1, 2020, there were 32 direct participants of the BISS system, including 2 special participants and 14 indirect participants.

A reduction in the number of special BISS participants by 1 compared with 2018 was due to the liquidation of CJSC “N.E.B. Bank”, and decrease in the number of indirect BISS participants by 13 – as a result of optimization of the branch network of JSC “JSSB Belarusbank”.

In the year under review, 82.3 million payment instructions worth BYN764.1 billion were effected in the BISS (Attachments 2.10 and 2.11). Compared with 2018, payment instructions grew by 5.5% in terms of their number and by 32% in terms of their amount. The average daily turnover amounted to BYN3billion in terms of payments value and 0.3 million in terms of their number. The growth in payments in absolute terms totaled BYN185.3 billion, of which the National Bank’s payments accounted for BYN72 billion (38.9%).

The main factor in the growth of the National Bank’s payments became the increase in the excess liquidity of the banking system and, as a result, the turnover on liquidity regulation operations.

In the reporting year, risk-based supervision of the BISS was carried out, working capacity of the software and hardware complexes and failures in the operation of the automated systems of its participants were monitored, results of monitoring were analyzed on a regular basis, recommendations were produced, and their implementation was followed up.

In order to verify that the personnel of the National Bank, banks and non-bank financial institutions carried out the measures provided for by their contingency plans for business continuity and recovery procedures, complex tests of the ASIS were successfully performed, that indicates its secure and reliable functioning.

Complex tests of the ASIS to check the performance by the personnel of the National Bank, banks and non-bank financial institutions of the activities

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envisaged by the contingency plans for business continuity and recovery procedures of the ASIS participants in the event of failure of the main communication channels and software and hardware complexes were carried out.

With a view to developing the payment industry in the Republic of Belarus and accelerating settlements for goods, work, services and payments to the budget, the National Bank in concert with the banking community took actions to establish the instant payments system, through which payments are made in real time on a 24-hour basis seven days a week.

The instant payments system was put into commercial operation on August 1, 2019. The National Bank is the owner of this system and determines the organizational and legal framework for its functioning. OJSC “BISC” performs the functions of a technical operator of the instant payments system.

In the reporting period, the National Bank and 10 largest banks were participants of the instant payment system. The terms for rendering instant payment service by banks were determined by the rules of agreements concluded between banks and clients. According to the implemented functional model of the instant payments system, the availability of services for customers was ensured through remote banking services. In 2019 H2, 10,274 payments worth BYN31.6 million were performed within the instant payments system, with the average payment per day amounting to BYN2,310.

2.11.3. Development of the system for non-cash settlements of retail payments

The bank payment card is the payment instrument, which is most frequently

used for non-cash settlements by the households. As of January 1, 2020, the number of bank payment cards that have been put

into circulation totaled 15.5 million, of which 3.5 million cards of the domestic payment system BelCard (22.3% of the total number of cards) and 5.1 million cards of the payment system VISA (33% of the total number of cards), 5.2 million cards of the payment system MasterCard (33.8% of the total number of cards), and 1.7 million co-badging BelCard/Maestro cards (11% of the total number of cards).

As many as 4,294 ATMs, 3,080 self-service terminals, and 173,233 payment terminals operating in 128,015 trading (servicing) organizations were functioning in the Republic of Belarus as of January 1, 2020.

As at January 1, 2020, the share of non-cash transactions in the general volume of transactions involving this payment instrument amounted to 88.8% in terms of their number and 54.9% in terms of their amount (as of January 1, 2019, these indicators stood at 86.2% and 49.9% respectively).

In the year under review, the e-money market was developing in the Republic of Belarus following the global trends.

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As of January 1, 2020, transactions involving these means of payment were carried out by OJSC Belgazprombank, OJSC “Technobank”, OJSC “Paritetbank”, Reshenie Bank Joint-Stock Company, “Priorbank” JSC, JSC “JSSB Belarusbank”, “Bank Dabrabyt” JSC, CJSC ”Alfa-Bank“,OJSC “BPS-Sberbank”, and “Belinvestbank” JSC. The following systems of settlements based on the e-money were operating: WebMoney Transfer, iPay, V-coin, e-Pay, “Berlio”, “MTS Money”, QIWIBel, QIWI Wallet, “Rosberliocard”, Euroberlio, “eCard ABB”, “Yandex.Money”, “Oplati” as well as e-money, the access to which is provided by means of issuing the prepaid cards of the MasterCard, VISA, BelCard, UnionPay, American Express, JCB, and “Mir” systems.

In 2019, the efforts aimed at developing the system for non-cash settlements of retail payments were taken within the framework of the Strategy for Digital Banking Development in the Republic of Belarus in 2016-2020 approved by Resolution of the Board of the National Bank of the Republic of Belarus No. 108 dated March 2, 2016. This document determines an indicative indicator of the share of non-cash money turnover in the retail turnover, which should total at least 40% by January 1, 2021. Based on the data of the National Statistical Committee, in the year under review this figure stood at 44.9% (40.9% in 2018) (Attachment 2.12).

In the reporting period, the regulatory legal framework was improved, which ensured the dynamic development of the system for non-cash settlements of retail payments.

2.11.4. Functioning and development of the interbank identification

system

In 2019, the development of the interbank identification system continued, through which banks’ customers, once having passed the identification procedure at one of the banks, have an opportunity to receive banking service by dint of digital channels in any bank of the Republic of Belarus at a convenient time.

With a view to expanding the list of organizations entitled to receive data stored in the interbank identification system, implementing the possibility for remote conclusion of agreements, as well as identifying and authenticating customers using their biometric data (customer’s photo and video, voice), Decree of the President of the Republic of Belarus No. 148 “On Digital Banking Technologies” dated April 18, 2019 was issued.

As of January 1, 2020, the interbank identification system contained information about 6.7 million natural persons, 129 thousand legal entities, and 169.5 thousand individual entrepreneurs.

As of this date, 1.28 million natural persons registered in the interbank identification system and used this service to obtain banking services and complete

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the Internet census, which was conducted in the Republic of Belarus on November 4 –18, 2019.

2.11.5. Introduction of international standards

In 2019, the National Bank carried out activities on implementing the methodology of ISO 20022 “Financial services – Universal financial industry message scheme” in the country’s payment system (hereinafter – “ISO 20022”).

The albums of schemes for the use of messages of ISO 20022 standard when carrying out money transfers at the initiative of the beneficiary and the collector, which include transfer models and a list of messages used, were developed and approved. The draft national message formats created in accordance with the methodology of ISO 20022, messages (their components, elements) of the Repository of ISO 20022 (www.iso20022.org), national practice and used in the implementation of money transfer at the initiative of the beneficiary and the collector, were developed and submitted to the banking community and concerned government agencies for consideration.

The implementation of the ISO 20022 methodology in the payment system of the Republic of Belarus was carried out in conjunction with the similar activities of the central (national) banks of the EEU member states within the framework of the payment systems integration. These issues were considered at the meetings of the Working Group on the Coordination of Developing National Payment Systems established in line with the agreement concluded between the National Bank of the Republic of Belarus, the National Bank of the Republic of Kazakhstan and the Central Bank of the Russian Federation in 2015 (in 2016, the Central Bank of the Republic of Armenia and the National Bank of the Kyrgyz Republic joined the above-mentioned agreement). In 2019, two round tables were held with the participation of representatives of central (national) banks, draft documents were exchanged, analytical information was prepared based on the materials submitted by experts, as well as videoconferences designed to exchange practical experience in the sphere of implementing ISO 20022 methodology were conducted.

2.11.6. Development of the single settlement and information space

In 2019, the single settlement and information space continued to develop dynamically, the number of participants increased every month and the list of goods, works, services, and payments to the budget available for payment expanded.

As of January 1, 2020, the participants of the AIS “Settlement” were 24 settlement agents (23 banks and OJSC “Non-bank Financial Institution “SSIS”)

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and the payment agent of RUE “Belpochta”. 18,676 service providers are connected to the system (in 2019, their number increased by 1,840 service providers).

In 2019, 469.1 million payments worth BYN12,565.9 million were conducted through the AIS “Settlement”. The increase in payments received accounted for 2.9% in terms of number and 27% in terms of the amount.

The average amount of one payment accepted through the AIS “Settlement” was BYN26.79.

In the reporting year, the share of payments made in a non-cash form through the AIS “Settlement” increased from 60.4% to 66.6% in terms of number and from 61.1% to 69.8% in terms of the amount. About 65% of payments were made using remote banking channels.

In 2019, the share of payments made by RUE “Belpochta” in AIS “Settlement“, totaled 28.8% in terms of quantity and 20.7% in terms of the amount.

In the reporting year, the further development of an automated information system for accounting, calculating and charging fees for housing and communal services and fees for the use of residential premises (AIS “Settlement-Housing and Public Utilities Services”) was ensured. As of January 1, 2020, 335 organizations carried out settlement, accounting and charging of housing and communal services under 4.49 million personal accounts in the AIS “Settlement-Housing and Public Utilities Services”.

In view of implementing the provisions of Decree of the President of the Republic of Belarus No. 322 “On Providing Non-cash Housing Subsidies” dated August 29, 2016, on October 1, 2016, a system of non-cash housing subsidies was introduced, through which 22,470 households obtained assistance in 2019 in the amount of BYN1.47 million in the form of partial payment of housing and communal services.

The increase in the number of service providers in AIS “Settlement” is due, inter alia, to the implementation of new approaches in the tariff policy of OJSC “Non-bank Financial Institution “SSIS”, in particular: - gradual unification of approaches to charging remuneration from service

providers for receiving payments in order to solve the problem of low economic interest of new service providers in connecting to AIS “Settlement” and creating equal conditions for participation in the system;

- approval of a number of sectoral remunerations for organizing payment acceptance through AIS “Settlement”; and

- introduction of the “Differentiated” system tariff since February 2, 2019, according to which the size of remuneration charged by banks to a service provider is determined depending on the amount of the payment made.

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2.12. Protection of the rights of financial service consumers In 2019, the National Bank took measures to form the legal framework and

improve the system of protecting the rights of financial service consumers. The Board of the National Bank approved approaches to enshrining

provisions in the legislation aimed at protecting the rights and legitimate interests of consumers of financial services (disclosure of information on a financial service and its executor, clarification of the nature of legal relations, etc.). In accordance with these approaches, the National Bank drafted the relevant regulatory legal acts.

At the National Bank’s initiative, the draft Law of the Republic of Belarus “On Amending the Law of the Republic of Belarus “On Protection of Consumer Rights””, which envisages a legal support for the system of protecting the rights of financial service consumers by dint of its improvement, was included in the plan of preparation of draft legislation for 2020, approved by Decree of the President of the Republic of Belarus No. 482 dated December 26, 2019. An approximate structure and main provisions of the above-mentioned draft law were prepared.

2.13. Financial literacy

In 2019, the activities on improving the population’s financial literacy were

carried out in accordance with Resolution of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 241/6 “On the Joint Action Plan on Improving Financial Literacy of the Population for 2019-2024” dated April 12, 2019.

This document defines objectives and primary goals, priority areas, main target groups, measures and ways to efficient achievement of goals, principles of coordinating activities and forms of interagency cooperation, expected results and mechanisms for monitoring and evaluating ongoing work in the field of improving the population’s financial literacy.

In the reporting year, with a view to increasing financial literacy of citizens of different age categories the following arrangements and projects were implemented: - a Financial Literacy Week for Children and Youth was held, in which about

500,000 people took part. In accordance with the key tasks of the National Bank, the events were dedicated to the issues of ensuring price stability. Employees of the National Bank prepared a training presentation on the topic “Money. Inflation. Price stability”;

- a video blogger competition “Money Matters”, in which 417 creative works were presented, was held (in 2018, 260 works);

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- a competition for the best work on economic theme among students, undergraduates and graduate students of higher education institutions was held. In 2019, it was dedicated to the 25th anniversary of the legislative consolidation of the Belarusian ruble as a single legal tender in the Republic of Belarus. The topics of the presented works included issues of increasing confidence in the national currency;

- a republican competition on financial literacy among students of general secondary education, for which methodical recommendations and options for assignments on current financial topics were developed, was carried out. The four stages of the competition were attended by over 24 thousand students of 10 - 11 grades from more than 2,100 educational institutions;

- a number of joint projects with the printed media (newspapers “Nastaunitskaya Gazeta”, “Znamya Yunosti”, weekly newspaper “7 Dnej”, magazines “Chto Pochem”, “Mentor”, information portal “1prof.by”, information agency “Minsk-Novosti”, etc.) was implemented; - continuous updating of the Unified Internet Portal of Financial Literacy of

the Population of the Republic of Belarus (http://fingramota.by) and accounts on financial literacy in social networks (Facebook, Vkontakte, Odnoklassniki) was organized; - the functioning of the channel “Financial Literacy of Belarus” at the

YouTube Internet site, where training video materials on financial and economic topics, as well as the works of the winners and participants of video blogger competition “Money Matters” are placed, continued;

- organizational support for the conduct of IV Open Olympiad of the Belarusian State University on the world economy and functioning of the special educational course “School of Young Economists” was provided; and

- the National Bank participated in the annual republican campaign “The Right to Serve People,” aimed at improving financial literacy and legal culture of the population. The National Bank prepared information booklets “What Does a Natural Person Need to Know When Receiving Services at the Bank” and “Your ISI Personal Account”.

2.14. Research activities

In 2019, economic studies of the National Bank were aimed at obtaining new knowledge, developing methodologies, recommendations and instruments designed to enhance the efficiency of measures aimed at ensuring dynamic and sustainable development of the monetary sphere, banking, payment and financial systems. Research activities contributed to improving human resources and strengthening position of the National Bank in the academic community.

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In the reporting year, employees of the National Bank fulfilled 24 studies. The results of studies were published in the section of “Scientific Publications” of the periodical “Bankauski Vesnik” (18 research articles), special issues of “Studies of the Bank” (3 articles), and other domestic and foreign publications. Published studies were posted on the official website of the National Bank in the global computer network Internet.

The most significant studies included: - “Interest Spread and Banks’ Margin in Belarus: Results of Cross-Country

Comparisons.” Based on regression analysis and cross-country comparisons, it was found that the interest spread and net interest margin of banks are small compared to the values of these indicators in the countries with a similar level of economic development. A relatively low level of the interest spread and net interest margin is to a large extent caused by the participation of banks in lending to government organizations. The low efficiency of the public sector makes their level unsustainable. A further decrease in the level of these indicators is possible due to the development of the financial system and diversification of the banking business;

- “The Use of Microdata of the Credit Register to Monitor Financial Stability”. With a view to monitoring the financial stability of the real sector of the economy, based on the credit histories of the largest borrowing organizations, the algorithms were developed and applied to build a scoring model for assessing the probability of default of non-financial institutions. These algorithms make it possible to automate calculations during stress testing of credit risk of organizations and banks; and

- “Short-term Forecasting of Inflation in the Republic of Belarus: a Disaggregated Approach”. In the course of the study, the forecasting of individual components of the consumer price index with similar characteristics and the aggregation of the forecasts into a general assessment were carried out. The forecast was performed with the use of one-dimensional econometric models, exponential smoothing, as well as expert estimates, depending on the individual characteristics of the components of the consumer price index.

In addition, in the year under review the researches aimed at addressing such topical issues as studying the monetary policy transmission mechanism, macroscenario based stress testing of the banking sector sustainability, analysis of global approaches to managing inflation expectations, digital currencies of central banks, and other issues, were carried out.

The National Bank’s employees involved in research gave lectures at the higher education establishments of the Republic of Belarus, the Training Center of the National Bank, developed academic programs for institutions of higher education of the Republic of Belarus, made presentations at international scientific

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conferences, peer-reviewed scientific articles, conducted a scientific management of diploma works and practical training of students and master degree’s students.

In 2019, for the purpose of improving economic policy, disseminating information on the National Bank’s mission and functions, and strengthening confidence in the monetary and financial stability policies pursued by the National Bank, scientific communications were expanded on topical issues of economic policy with the participation of expert economists and representatives of government agencies and the media.

In order to increase the research potential and quality of the research conducted by the National Bank, a Memorandum of Understanding between the National Bank of the Republic of Belarus and the Global Development Network was concluded.

2.15. International Cooperation

In 2019, within the Treaty on the Eurasian Economic Union the streamlining

of the EEU member states’ legal framework was continued. The National Bank took an active part in finalizing and coordinating draft

international treaties: - on cooperation between the member states of the Eurasian Economic Union

in the field of exchanging information included in credit histories; - on admission of brokers and dealers of one member state of the Eurasian

Economic Union to stock exchanges (organizers of trade) of other member states; - on the Advisory Council for Currency Policy of the Member States of the

Eurasian Economic Union; - on agreed approaches to the regulation of foreign exchange relations and

adoption of liberalization measures; and - on audit activities in the Eurasian Economic Union.

In 2019, representatives of the National Bank took part in the work of advisory bodies acting under the Eurasian Economic Commission, as well as interbank councils. The issues of monetary, foreign exchange and financial sectors, macroprudential regulation, interaction of banking supervisory authorities, requirements in the field of ensuring information security in the financial sector and other issues were discussed at the meetings.

The Concept for the formation of the common financial market of the Eurasian Economic Union, developed by the financial regulators of the EEU countries, was approved by the Decision of the Supreme Eurasian Economic Council No. 20 dated October 1, 2019.

Following the results of the meetings of the Eurasian Council of central (national) banks, Memorandum on Recommendations related to ensuring the transparency of the market of money transfer services and consumer protection,

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financial institutions that transfer money on behalf of natural persons without opening a bank account to foreign countries was signed, as well as the Program of professional training for central (national) banks’ personnel for 2020 was approved.

The results of the activities were discussed, the budget execution was reviewed, the strategy for the period of 2019 - 2023 and the budget for 2020 of the Interstate Bank were approved at the meetings of the Council of the Interstate Bank.

In the reporting period, negotiations were held with the President of the European Bank for Reconstruction and Development (EBRD) during his visit to Minsk, the management and experts of this institution in the framework of the Annual Meeting of the Board of Governors of the EBRD, as well as regular bilateral meetings. In the course of negotiations, the implementation of the Cooperation Strategy for 2016 - 2019 in the banking sector was discussed, including the Memorandum of Understanding between the National Bank of the Republic of Belarus, the Ministry of Finance of the Republic of Belarus and the European Bank for Reconstruction and Development regarding their cooperation and action plan for the EBRD SME Local Currency Programme in the Republic of Belarus, as well as other promising projects.

The interaction of the National Bank with a number of international organizations and interstate structures in the sphere of improving financial literacy was developing in a dynamic manner.

In particular, cooperation with the Organization for Economic Cooperation and Development (OECD) was continued as part of a technical assistance project in the field of financial education in separate CIS countries (Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan). Representatives of the National Bank took part in a high-level conference and a round table on the results of the implementation of the first phase of the project, held in December 2019 in Moscow (Russian Federation). During the events, the main results of the OECD project (study of the levels of the population’s financial literacy in the CIS countries, preparation of recommendations for the effective implementation of the national financial education strategies, determination of the features of work with the youth, etc.) were presented.

The cooperation with the Alliance for Financial Inclusion was continued by means of supporting and implementing its initiatives, participating in annually held forums and working group meetings.

Cooperation with the IMF and the World Bank was carried out as part of the National Bank’s participation in Spring and Annual Meetings of the Board of Governors of the IMF and the World Bank, the implementation of technical cooperation on urgent issues, and during consultations on Article IV of the Articles of Agreement with the IMF.

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In 2019, technical cooperation with the IMF continued. As part of improving the capacity of the Quarterly Projection Model (QPM), the work aimed at developing a block of satellite models was continued. In November 2019, a review mission of the IMF experts on this issue was held. Within the project to improve the National Bank’s communication policy, in November 2019, an internship was held for employees of Information and Public Relations Department at the IMF Communications Department in Washington, DC (USA). In addition, in concert with the IMF experts, the work was carried out to improve approaches to the classification of assets and regulation of non-performing loans, which resulted in the IMF report.

On October 29 – November 5, 2019, the preliminary mission of the IMF worked in the Republic of Belarus in the framework of consultations on Article IV of the Articles of Agreement with the IMF.

During 2019, as part of the implementation of the World Bank Group’s Country Partnership Framework for Fiscal Years 2018–2022 , technical cooperation with the World Bank continued in the following areas:

- improvement of the system of guaranteed repayment of bank deposits in the Republic of Belarus;

- resolution of problem banks; - convergence of the national accounting system with international financial

reporting standards (based on the results of the interaction in 2019, a draft roadmap for the transition of the banking system to the IFRS was prepared);

- enhancement of the financial sector’s cyber security (the World Bank presented the report “Assessment of Cyber Readiness of the National Bank of the Republic of Belarus” and the results of the analysis of regulatory legal acts on the cyber security of the financial sector of the Republic of Belarus); and

- expansion of the range of encumbrances on movable property, the information about which is subject to the entry in the register of movable property (in June 2019, an Agreement on Cooperation between the National Bank of the Republic of Belarus and the International Finance Corporation was signed to implement a project on improving the system of secured transactions in the Republic of Belarus aimed at facilitating the access to finance for small and medium-sized businesses through the use of financing secured by movable assets and the register of movable property).

Cooperation with the Eurasian Fund for Stabilization and Development was carried out within the framework of the implementation of the Matrix of Economic Policy and Structural Adjustment Measures of the Government and the National Bank of the Republic of Belarus to Receive the Support in the Form of Financial Credit of the Eurasian Fund for Stabilization and Development. The Fund’s credit program was completed in 2019. The total amount allocated to the Republic of

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Belarus stood at USD1.8 billion. Further interaction with the Fund continues in the framework of post-program monitoring.

Macroeconomic and financial stability, supported by joint actions of the Government of the Republic of Belarus and the National Bank, made it possible to maintain the position of the Republic of Belarus in sovereign credit ratings. The rating agency Standard and Poor’s affirmed the sovereign rating of the Republic of Belarus at the level “B” (October 2019), and the Fitch Ratings agency – at the level “B” (November 2019). In addition, according to the OECD classification by country credit risks, the Republic of Belarus maintained its position in the sixth risk group (October 2019).

Given the intensification of the process of our country’s accession to the World Trade Organization, two meetings of the working group on the accession of the Republic of Belarus to this organization, as well as bilateral negotiations with three WTO member countries, during which a significant success was reached in the issue of bringing the positions of the parties closer with regard to the terms of access of foreign suppliers of banking and financial services to the Belarusian market, were held.

As part of development of bilateral cooperation, the negotiations of the National Bank’s management with the management of the Bank of Lithuania, Narodowy Bank Polski, Swiss National Bank and central banks of a number of African and Latin-American countries were organized and held.

Twinning. In 2019, within the framework of the partnership program of the European Union, the National Bank, in concert with the Deutsche Bundesbank, Narodowy Bank Polski and the Bank of Lithuania, completed the implementation of the twinning project “Strengthening the National Bank of the Republic of Belarus”.

The twinning project was implemented with regard to six main components, for each of which concrete results were achieved.

The key results of the implementation of component 1 “Payment Systems” were the development of the draft Law of the Republic of Belarus “On Payment Systems and Payment Services in the Republic of Belarus”, as well as the preparation and publication on the official website of the National Bank in the global computer network of the Internet a public version of the annual report on supervision (oversight) for the payment system of the Republic of Belarus.

As part of the implementation of component 2 “Financial Stability”, a Concept for developing the National Bank’s potential for ensuring financial stability and implementing macroprudential policy and a draft Decree of the President of the Republic of Belarus, which provide for the legal consolidation of the main approaches to ensuring financial stability in the country, were developed.

Based on the results of the implementation of component 3 “Banking Supervision”, the National Bank introduced modern banking supervision tools,

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developed a methodology for conducting Supervisory Review and Evaluation process (SREP), as well as formed a system of early warning indicators.

As part of the implementation of component 4 “Financial Risk Management”, a comprehensive analysis of the financial risk management system at the National Bank was carried out, the recommendations and an action plan for further development of risk management were developed. An internal document that forms the methodological framework for managing financial risks was drafted.

During the implementation of component 5 “Protection of the Rights of Financial Service Consumers” with the active assistance of experts, a concept for the system of protection of the rights of financial service consumers in the Republic of Belarus and a standardized terminology for the most common banking services were developed, which will increase the transparency and understandability of the provisions of the agreements for consumers of financial services.

Following the results of the implementation of component 6 “Information Policy” the Communication Policy of the National Bank of the Republic of Belarus, which is aimed at increasing the level of confidence in the National Bank as a government agency implementing an open, consistent and understandable policy to maintain price and financial stability, as well as the guidance on its implementation and methodology for evaluating the efficiency thereof were developed and approved by the Board of the National Bank.

In the course of the project implementation, 67 missions, 3 expert forums, 3 study visits, 2 internships, 14 seminars and 2 round tables were held.

About 100 experts of the European Union countries, more than 200 managers and specialists of the National Bank, representatives of the republican general government, banks, banking associations and other concerned institutions took part in the project implementation.

2.16. Staffing and staff training

In 2019, activities aimed at optimizing the functions, structure and staffing

of the National Bank were continued. As the result, the number of the National Bank’s staff was decreased (excluding the personnel in charge of buildings security and maintenance) by 26 staffing positions due to the implementation of measures aimed at improving management processes and bringing the number of employees in line with the volume of the work performed.

In the reporting year, the average age of employees of the National Bank stood at 44 years, of civil servants - 43 years.

The National Bank’s civil servants that are graduates of the institutions of higher education accounted for 100%, of which 36% obtained the diplomas of

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additional higher education or retraining in other fields. 21 employees of the National Bank have a degree.

In 2019, a considerable attention was paid to improving the efficiency of personnel selection procedures, introducing digital technologies, including robotization, to the work with personnel.

In the reporting period, 697 employees were trained in the Republic of Belarus and 170 officials participated in international seminars and courses. The National Bank organized and conducted 6 international seminars and 4 internships.

The opportunities of corporate training in the field of project management, development of IT competencies, study of financial instruments, international financial reporting standards, and audit activities were used in an intensive manner.

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2.17. Internal audit

In 2019, internal audit activities of the National Bank were carried out in accordance with the requirements of international professional standards of internal audit and the Code of Ethics of the Institute of Internal Auditors and were aimed at improving the processes of internal control, risk management and corporate governance. The best international practices in the sphere of internal audit, national and international standards in the field of information technologies, international methodologies in the management sphere, control and audit of CobiT information technologies, PMBOK project management, etc., were applied in the course of audit organization and performance.

The list of processes and information systems of the National Bank for the purpose of conducting the audit thereof in 2019 (hereinafter – the “auditees”) was determined by Resolution of the Board of the National Bank of the Republic of Belarus No. 572 ”On Approving the Plan of Audits and Inspections of Internal Audit Directorate for 2019 - 2021” dated December 4, 2018. The auditees were included in the above-mentioned plan based on the results of the explicit quantitative risk assessment thereof with regard to the strategic objectives of the National Bank’s activities. In the reporting year, the internal audit function fulfilled 15 audit assignments, as well as reviewed the timeliness, adequacy, and the entirety of follow-up of the recommendations, which were made based on the audits findings.

The audit was performed on the basis of a risk-based approach with the assessment of the adequacy of the internal control and risk management system in the National Bank’s activities. When performing engagements, the audited

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processes’ efficiency, the adequacy of internal control procedures and risk management at all stages of the processes implementation, as well as the National Bank’s compliance with legislative and other regulatory requirements were assessed. In the course of audit of information technologies, the priority was given to the issues of the efficiency of the information systems’ management processes, as well as ensuring their reliable and secure functioning.

According to the results of the audits performed, the owners and participants of the audited processes as a whole ensured the fulfilment of functions assigned thereto, and the internal control and risk management systems applied thereby were adequate to a sufficient degree to the nature and scale of their operations (functions performed). The results of the audits were submitted to the Chairman of the Board of the National Bank for consideration, and subsequently to the Board of the National Bank as part of the annual report on the results of the internal audit of the National Bank for 2019.

For the purpose of implementing the recommendations of the internal audit, a set of measures was taken to increase the efficiency of internal control and risk management systems, including improving regulatory legal acts, streamlining the processes of the National Bank, and finalizing software systems. The work was carried out to ensure secure and efficient functioning of the National Bank’s information systems.

Over the year under review, Internal Audit Directorate coordinated the activities on collaboration with the audit firm KPMG LLC in the process of auditing the annual financial statements of the National Bank for 2018 and external audit company Ernst & Young LLC when performing preliminary audit procedures for 10 months of 2019 as part of the audit of the annual accounting (financial) statements of the National Bank for 2019.

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Chapter 3 Annual financial statements

The annual financial statements of the National Bank are compiled in

accordance with legislation of the Republic of Belarus and regulatory legal acts of the National Bank.

In the year under review, operations stemming from the tasks and functions stipulated in the Banking Code of the Republic of Belarus, the Statute of the National Bank of the Republic of Belarus approved by Edict of the President of Belarus No. 320 dated June 13, 2001, and the Republic of Belarus Monetary Policy Guidelines for 2019 approved by Edict of the President of the Republic of Belarus No. 484 dated December 20, 2018 were performed.

The audit of the annual accounting (financial) statements was conducted by Ernst & Young LLC. According to the opinion of the audit firm, the National Bank’s annual financial statements present fairly, in all material aspects, the financial position of the National Bank as at January 1, 2020, and its financial performance and change in the financial situation therein in 2019.

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Form 1

BALANCE SHEET as of January 1, 2020

National Bank of the Republic of Belarus (BYN, thousand)

No. Item Index Note 2019 2018

1. ASSETS 2. Cash 1100 94,543 92,9613. Precious metals and precious stones 1101 4 5,227,729 4,451,9644. Assets in special drawing rights 1102 5 1,080,972 –5. Securities 1103 6 1,936,320 2,140,9516. Amounts due from banks 1104 7 14,293,292 11,083,4837. Loans and other asset operations with

customers 1105

8 11,726 7,4438. Derivative financial assets 1106 – –9. Long-term financial investments 1107 9 295,075 293,607

10. Fixed and intangible assets 1108 10 105,421 117,43311. Other assets 1109 11 19,450 28,79612. TOTAL assets 110 23,064,528 18,216,63813. LIABILITIES 14. Cash in circulation 1200 4,721,424 3,765,67515. Precious metals and precious stones 1201 12 105,803 86,34216. Liabilities in special drawing rights 1202 13 1,071,674 –17. Amounts due to international financial

institutions

1203 5,376 5,34318. Amounts due to banks 1204 14 8,105,381 5,830,48019. Amounts due to customers 1205 15 15,471,549 14,468,37620. Obligatory reserves with banks 1206 423,589 380,28521. Securities of the National Bank 1207 16 1,157,624 2,255,54722. Derivative financial liabilities 1208 – –23. Other liabilities 1209 17 1,886 1,58324. TOTAL liabilities 120 31,064,306 26,793,63125. EQUITY 26. Statutory fund 1211 25,000 25,00027. Reserve fund and other funds 1212 832 83228. Accumulated loss 1213 18 (12,290,330) (12,012,687)29. Balance sheet items revaluation reserves 1214 19 4,264,720 3,409,86230. TOTAL equity 121 (7,999,778) (8,576,993)31. TOTAL liabilities and equity 12 23,064,528 18,216,638

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Form 2

STATEMENT of income and loss

for 2019 National Bank of the Republic of Belarus

(BYN, thousand)

No. Description Index Note 2019 2018

1. Interest income 2011 20 384,388 286,4022. Interest expenses 2012 20 (621,310) (514,660)3. Net interest expenses 201 20 (236,922) (228,258)4. Fee and commission income 2021 21 5,065 4,1945. Fee and commission expenses 2022 21 (2,232) (1,763)6. Net fee and commissions income 202 21 2,833 2,4317. Net loss from foreign currency

transactions 203

22 (2,732) (307,654)8. Net gain from operations with

precious metals and precious stones 204

23 10,222 4,8349. Net gain (loss) from operations with

securities 205

24 6,348 (41)10. Net gain from operations with

derivative financial instruments 206

– –11. Dividend income 207 14,669 9,147

12. Net loss on charges to provisions 208 25 (1,207) (4)13. Other expenses 2091 26 (113,539) (352,032)14. Other income 2092 26 39,090 84,63315. Other expenses, net 209 26 (74,449) (267,399)16. Allocations to the budget 210 (111) (116)17. LOSS 2 (281,349) (787,060)

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Form 3

STATEMENT of changes in equity

for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Item Index

Equity items

Statutory fund

Reserve fund

Other funds

Retained earnings

(accumulated loss)

Balance sheet items

revaluation reserves

Equity, total

Section I. For the year preceding the reporting year 1. Balance as of January 1, 2018 3011 25,000 – 832 (11,229,583) 3,085,130 (8,118,621) 2. Change in equity items, including: 3012 – – – (783,104) 324,732 (458,372)

2.1. comprehensive income 30121 x x x (787,060) 328,688 (458,372) 2.2. distribution of profit 30122 – – – – x – 2.3. transfer of the amounts of revaluation of disposed fixed and intangible

assets to retained earnings 30123 x x x 3,956 (3,956) – 2.4. other changes 30124 – – – – – –

3. Balance as of January 1, 2019 3013 25,000 – 832 (12,012,687) 3,409,862 (8,576,993) Section II. For the reporting year

4. Balance as of January 1, 2019 3011 25,000 – 832 (12,012,687) 3,409,862 (8,576,993) 5. Change in equity items, including: 3012 – – – (277,643) 854,858 577,215

5.1. comprehensive income 30121 x x x (281,349) 858,564 577,215 5.2. distribution of profit 30122 – – – – x – 5.3. transfer of the amounts of revaluation of disposed fixed and intangible

assets to retained earnings 30123 x x x 3,706 (3,706) – 5.4. other changes 30124 – – – – – –

6. Balance as of January 1, 2020 3013 25,000 – 832 (12,290,330) 4,264,720 (7,999,778)

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Appendix to the Statement of changes in equity

INFORMATION on comprehensive income

for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Description Index Note 2019 2018

1. Loss 301211 18 (281,349) (787,060)2. Other components of comprehensive

income, including: 301212 19 858,564 328,6882.1. revaluation of fixed assets and non-

installed equipment 3012121 3 32.2. revaluation of intangible assets 3012122 – –2.3. translation differences from foreign

exchange revaluation 3012123 176,219 –2.4. revaluation of precious metals 3012124 682,391 328,7732.5. revaluation of securities 3012125 (49) (88)2.6. revaluation of hedging instruments 3012126 – –2.7. revaluation of precious stones 3012127 – –2.8. revaluation of other balance sheet items 3012128 – –

3. Total comprehensive income 30121 577,215 (458,372)

 

 

 

 

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Form 4

STATEMENT

of the formation and use of reserves for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Item Index Statutory

fund Reserve

fund Other funds

Fixed assets and non-installed

equipment revaluation

reserve

Intangible assets

revaluation reserve

Translation differences

from foreign exchange

revaluation reserve

Precious metals and precious stones

revaluation reserves

Securities revaluation reserve

Hedging instrument

s revaluation reserve

Other balance sheet items

revalua-tion

reserve

Total

Section I. For the year preceding the reporting year 1. Balance as of January 1, 2018 4011 25,000 – 832 121,173 – – 2,964,064 (107) – – 3,110,962 2. Paid into reserves by

allocating profit 4012 – – – х

х х

х х

х х – 3. Paid into reserves by using

other sources 4013 – – – 71 – – 2,527,357 497 – –

2,527,925 4. Reserves used 4014 – – – (4,024) – – (2,198,584) (585) – – (2,203,193) 5. Balance as of January 1, 2019 4015 25,000 – 832 117,220 – – 3,292,837 (195) – – 3,435,694

Section II. For the reporting year 6. Balance as of January 1, 2019 4011 25,000 – 832 117,220 – – 3,292,837 (195) – – 3,435,694 7. Paid into reserves by

allocating profit 4012 – – – х

х х

х х

х х – 8. Paid into reserves by using

other sources 4013 – – – 12 – 176,219 3,566,590 792 – –

3,743,613 9. Reserves used 4014 – – – (3,715) – – (2,884,199) (841) – – (2,888,755)

10. Balance as of January 1, 2020 4015 25,000 – 832 113,517 – 176,219 3,975,228 (244) – – 4,290,552

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Form 6

STATEMENT of maintenance costs of the National Bank

for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Description of expenses Index 2019 Actually for

2018 Plan Actual

1. Maintenance costs total, 6011 113,838 99,838 104,441 including:

1.1. staff costs 60111 46,661 42,231 50,2571.2. expenses on the use of land, buildings,

structures and other fixed assets as well as stocks 60112 9,569 6,876 9,756

1.3. expenses on the consulting, audit, informational, marketing, advertising and other services received 60113 3,076 2,435 1,855

1.4. Depreciation and amortization charges 60114 13,494 13,413 13,0211.5. costs arising from the disposal of long-

term financial investments and property 60115 17,342 16,194 14,1181.6. costs of operation of the payment system 60116 631 343 1,3221.7. other operating costs 60117 23,065 18,346 14,112

 

 

 

 

 

 

 

 

 

 

 

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Form 7

STATEMENT of capital investments budget executions

for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Capital investment workstream Index 2019 Actually for

2018 Plan Actual

1. Capital investments, total 7011 31,359 9,718 11,993

1.1. including: capital construction and reconstruction 701101 6,330 2,197 3,458

1.2. measures to develop the software and technical infrastructure of the payment system 701102 3,258 1,539 1,206

1.3. hardware, software and network equipment 701103 17,543 4,005 5,4711.4. safety enhancement equipment 701104 1,104 647 1,1101.5. cash registers and other equipment to work with

valuables 701105

–

–

–1.6. equipment to work with precious metals and

precious stones 701106 – – 81.7. staff motorcars and other vehicles 701107 375 367 3531.8. maintenance equipment for vehicles and

buildings 701108 195 107 661.9. equipment, hardware and software packages and

data protection tools 701109 1,700 345 –1.10. other 701110 854 511 321

 

 

 

 

 

 

 

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Form 8

STATEMENT of profit and its allocation

for 2019

National Bank of the Republic of Belarus (BYN, thousand)

No. Item Index 2019 2018

1. Profit for the reporting year 2 – –2. Allocation of profit for the reporting year that requires

approval:

221 – –2.1. prior year losses coverage 2211 – –2.2. statutory fund 2212 – –2.3. reserve fund 2213 – –2.4. other funds 2214 – –

3. Undistributed profit for previous years 3 3,706 3,9564. Distribution of profit for previous years that requires

approval:

321

3,706

3,9564.1. prior year losses coverage 3211 3,706 3,9564.2. statutory fund 3212 – –4.3. reserve fund 3213 – –4.4. other funds 3214 – –

 

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Notes to the financial statements

of the National Bank for 2019

1. Corporate information

The National Bank is the central bank and state body of the Republic of Belarus. It operates exclusively in the interests of the Republic of Belarus. In concert with the Government of the Republic of Belarus, the National Bank pursues a unified monetary policy of the Republic of Belarus.

The primary objectives of the National Bank are: - to maintain price stability; - to ensure the stability of the banking system of the Republic of Belarus;

and - to ensure the efficient, reliable and secure functioning of the payment

system. The National Bank operates in accordance with the Constitution of the

Republic of Belarus, the Banking Code of the Republic of Belarus, laws and regulatory legal acts of the President of the Republic of Belarus and is independent in its activities.

The National Bank is accountable to the President of the Republic of Belarus.

As of January 1, 2020, the National Bank comprised a head office, five region main departments and a Training Center.

The Bank’s registered legal address is 20 Nezavisimosty Ave., 220008 Minsk, Republic of Belarus.

2. Basis of accounting and reporting

The National Bank maintains its accounting records and prepares the annual financial statements in accordance with the Banking Code of the Republic of Belarus and Law No. 57-З of the Republic of Belarus “On Accounting and Reporting” dated July 12, 2013.

The financial statements of the National Bank for the year ended December 31, 2019 comprise:

- Balance sheet; - Statement of income and loss; - Statement of changes in equity;

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- Statement of the formation and use of reserves; - Statement of maintenance costs of the National Bank; - Statement of capital investments budget executions; - Statement of profit and its allocation, and - Notes to the financial statements. Presentation currency of these annual financial statements is the Belarusian

ruble. These annual financial statements are prepared in thousands of Belarusian rubles (“BYN”) in whole numbers. Accumulated loss, negative results by other equity items, expenses, loss for the reporting year, provisions and accumulated amortization are presented in brackets.

Amounts due to/from JSC “Development Bank of the Republic of Belarus” and JSC “Belarusian Currency and Stock Exchange” are recorded in the respective items of the annual financial statements specified for accounting of transactions with banks.

The annual financial statements are prepared based on the balance sheet data of the National Bank. The annual financial statements do not include reports of the legal entities where the National Bank has an interest in equity and (or) which are controlled by the National Bank.

3. Summary of significant accounting policies

Accounting and reporting are based on the principles of going concern, independence, accrual, adequacy of income and expenses, credibility, predominance of the economic substance, prudence, neutrality, completeness, transparency, consistency and appropriateness.

In 2019, the National Bank applied a centralized accounting system using the automated banking system “Transaction activities” and local program packages.

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3.1. Assets and liabilities denominated in foreign currency

Assets and liabilities arising from dealing in foreign currency are divided

into monetary and non-monetary items for accounting purposes. Transactions in foreign currency resulting in monetary items are reported

in two ways (in a foreign currency and in its equivalent in Belarusian rubles) at the official exchange rate of the Belarusian ruble to the relevant foreign currency set by the National Bank (hereinafter, the “official rate”) at the date of recording. Monetary items are revalued to reflect changes in the official exchange rate.

Non-monetary items are recognized in accounting by translating the amounts into Belarusian rubles at the official exchange rate at the date of recording on the balance sheet accounts, using the method of currency position accounts. Thereafter, non-monetary items are recorded exceptionally in Belarusian rubles. Non-monetary items are not revalued.

Translation differences arising from revaluation of monetary items denominated in foreign currency are charged to an offset account for dealing in foreign currency on a daily basis. Accumulated foreign exchange gains (losses) are recorded on the last working day and should be taken to the following accounts:

- to the balance sheet account for recognizing the foreign exchange revaluation reserve (in case of a positive difference) (Note 19); and

- to the balance sheet account for recognizing the foreign exchange revaluation reserve or to the balance sheet account for expenses arising from dealing in foreign currency if cash on the balance sheet account for recognizing the foreign exchange revaluation reserve is not available (in case of a negative difference).

The financial result of currency exchange operations arising from dealing in foreign currencies at the exchange rates other than the official exchange rate is taken to the gain or loss arising from dealing in foreign currency on a daily basis (Note 22).

As of December 31, 2019, the official exchange rates used for translating the assets and liabilities denominated in foreign currency were as follows:

Currency Official exchange rate, BYN

1 Australian dollar (AUD) 1.4717 1000 Armenian drams (AMD) 4.4113 100 hryvnias (UAH) 8.8759 10 Danish kroner (DKK) 3.1541 1 US dollar (USD) 2.1036 1 euro (EUR) 2.3524 10 zlotys (PLN) 5.5318 100 yens (JPY) 1.9277

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Currency Official exchange rate, BYN 1 Canadian dollar (CAD) 1.6092 10 Chinese yuans (CNY) 3.0109 10 Norwegian kroner (NOK) 2.3875 100 Russian rubles (RUB) 3.4043 1 SDR (special drawing rights) 2.9033 100 soms (KGS) 3.0117 1000 tenges (KZT) 5.5129 1 pound sterling (GBP) 2.7597 10 Swedish kronor (SEK) 2.2554 1 Swiss franc (CHF) 2.1625

3.2. Precious metals and precious stones

Operations with precious metals in standard bars are recognized on the

balance sheet accounts at accounting prices set by the National Bank and valid at the date of recording the operation.

Acquisition of produced precious metals in small bars is recorded at actual acquisition cost; acquisition of previously sold precious metals in small bars is recorded at the acquisition cost.

Commemorative, bullion (investment) coins made of precious metals issued into circulation by the National Bank and being the legal tender in the Republic of Belarus, are accounted for at their nominal value, unless the National Bank acquired them at the cost of precious metal they contain.

Other precious metal coins, and precious metals in other forms and shapes are accounted for at their acquisition price.

Precious metals are written off the balance sheet accounts, including in case of sale, at their carrying amount.

The financial result from the National Bank's dealing with precious metals is determined as the difference between the carrying amount of precious metals and transaction (agreement) price. The financial result is recognized on the balance sheet accounts for income (expenses) arising from dealing with precious metals for accounting purposes (Note 23).

Revaluation of precious metals in standard bars shall be performed in proportion to changes in accounting prices set by the National Bank.

Results of revaluation of precious metals reflected on balance sheet accounts at the date of revaluation are taken to:

- the amount of a positive difference – balance sheet account for recognizing the precious metals revaluation reserve (Note 19);

- the amount of a negative difference – balance sheet account for recognizing the precious metals revaluation reserve; if cash on the balance sheet account for recognizing the precious metals revaluation reserve is not

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available – balance sheet account for expenses arising from dealing with precious metals.

Acquisition of precious stones other than acquired (purchased) by the National Bank, certified diamonds and rough diamonds are accounted for at their actual acquisition cost. Certified diamonds acquired (repurchased) by the National Bank are recorded at the acquisition (repurchase) price.

Precious stones sold are written off from the accounts for recognizing precious stones at their carrying amount.

Financial result arising from the National Bank's dealing with precious stones is determined as the difference between the consideration received thereon and carrying amount of precious stones. The amount of the financial result as of the date of consideration receipt shall be taken to the balance sheet accounts for income (expenses) arising from dealing with precious stones (Note 23).

Precious stones are not subject to mandatory regular revaluation.

3.3. Securities Securities acquired by the National Bank, except for securities acquired

under repo agreements and on behalf of the customers, are accounted for at their acquisition price, including income paid (accumulated) in the form of interest, which shall be recorded separately. The amount of income in the form of discount is recorded as interest income accrued over the maturity period of a security from the date of its acquisition through the date of its redemption or sale. Securities are subsequently recorded within the category of financial assets, to which they have been classified.

Revaluation of securities at fair value shall be carried out on a monthly basis as of the last working day of the reporting month in case of their reclassification from one category to another or in case of derecognition.

Results of changes in the fair value (revaluation) of securities recognized at fair value are recorded at the date of revaluation as related to:

- securities classified as “Financial assets at fair value through profit or loss” – on balance sheet accounts for income (expenses) arising from dealing with securities (Note 24); and

- securities classified as “Financial assets available for sale” – on the balance sheet account for recognizing securities revaluation reserve (Note 19).

Income (expenses) arising from the change in the fair value of securities accumulated in the securities revaluation reserve are recorded until their disposal, except for formation of special provision for potential losses in respect of the assets exposed to credit risk.

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Securities are written off the balance sheet accounts at their carrying amount.

Gains or losses from sale of securities are recorded as gains or losses from operations with securities (Note 24).

Securities received by the National Bank under repo agreements are recorded on the off-balance sheet accounts, and advances are recorded as financing transactions on the balance sheet accounts (Note 7).

Gains arising from financing under repo agreements are recorded as interest income (Note 20).

3.4. Securities of the National Bank

The National Bank issues interest-bearing and discount securities.

Securities issued by the National Bank are recognized as they are placed (sold) at their nominal value. Expenses are recorded as interest expenses (Note 20). Upon issue of the discount securities, the amount of discount is recorded within deferred expenses and is subsequently taken to the interest expenses over the period of maturity of securities.

Securities issued by the National Bank are derecognized as they are repurchased by the National Bank, including with the purpose of their subsequent sale.

3.5. Long-term financial investments

Long-term financial investments of the National Bank in statutory funds of

legal entities are recorded in Belarusian rubles at the acquisition price, and cash contributions to form the assets are recorded in the amount of funds transferred by the National Bank.

3.6. Loans and deposits

Loans (borrowings) issued to the banks and customers and deposits placed

are recorded as cash paid upon their issue (placement) taking into account the repayment made.

Loans (borrowings) received and deposits attracted are recorded in the amount of cash received (attracted) subject to the payments made.

3.7. Provisions

Special provisions to cover general banking risks

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Special provisions for overall bank risks (hereinafter, “special provisions”) are accrued to cover potential losses with respect to the assets of the National Bank in accordance with certain local legal acts of the National Bank.

Special provisions with respect to assets denominated in foreign currency and exposed to credit risk, as well as provisions with respect to accrued and unearned income in foreign currency directly associated with such assets are accrued in the currency of these assets or income. Other special provisions are accrued in Belarusian rubles.

Amounts charged to special provisions are taken to the expenses of the National Bank in full (Note 25).

Decrease of special provisions accrued is taken to the income of the National Bank in the reporting period when such decrease takes place and when the amount for debt repayment, previously written off against provisions, is received.

Special provisions are used to write off losses with respect to the assets, for which these provisions have been accrued, upon the decision of the Board of the National Bank.

Assets, in respect of which special provisions have been accrued, are recorded in the balance sheet less the amount of the provisions accrued.

Special provision for long-term investments to the statutory funds of legal

entities To cover potential losses from long-term investments of the National Bank

to the statutory funds of legal entities, it forms a special provision (hereinafter, “the provision for investments”) in accordance with the local legal acts of the National Bank.

The provision for investments is formed in Belarusian rubles. Amounts charged to the provision for investments are taken to the expenses

of the National Bank in full (Note 25). Provision for investments is used to write-off the carrying amount of

investments upon decision of the Board of the National Bank. Long-term financial investments, in respect of which provisions for

investments have been accrued, are recorded on the balance sheet less the amount of the provisions accrued.

Vacation provision The National Bank accrues a provision for expected amounts of payments

for short-term vacations of the employees of the National Bank, including payments for unused vacation and contributions for compulsory social insurance

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for occupational accidents and diseases to the budget of the state non-budgetary Social Security Fund of the Republic of Belarus (hereinafter, the “vacation provision”).

Vacation provision is accrued in Belarusian rubles. Contributions to the vacation provisions are charged to expenses of the

National Bank in full (Note 26): - for the accumulating paid vacations – not later than on the last working

day of the reporting year; and - for the non-accumulating paid vacations – in the reporting period, in

which they are accrued (settled) (directly upon commencement of a vacation). The accumulated amount of the vacation provision is used in the month

when an employee takes a vacation. If there is no vacation provision or its accumulated amount is insufficient,

the deficient amount for vacation payment is charged to the respective expenses and (or) deferred expenses accounts.

3.8. Fixed and intangible assets

Recognition, initial or subsequent measurement and derecognition of fixed assets shall be performed in accordance with National Financial Reporting Standard 16 “Fixed Assets” (NFRS 16) approved by Resolution No. 708 of the Board of the National Bank of the Republic of Belarus dated December 28, 2012.

Recognition, initial or subsequent measurement and derecognition of intangible assets shall be performed in accordance with National Financial Reporting Standard 38 “Intangible Assets” (NFRS 38) approved by Resolution No. 25 of the Board of the National Bank of the Republic of Belarus dated January 14, 2013.

Fixed assets and intangible assets are recorded for accounting purposes at cost if revaluation is not required in accordance with the legislation, or at the revalued amount.

Initial cost of fixed assets and intangible assets is formed before their delivery and bringing into a condition in which they are suitable for use (before putting into operation).

Revalued amount is the cost of fixed assets after their revaluation. Revaluation of fixed assets, non-installed equipment, installed equipment

and ready-to-operate equipment as a part of construction in progress and investments in fixed assets is carried out in accordance with Edict No. 622 of the President of the Republic of Belarus “On the Issues of Revaluation of Fixed Assets, Income-Bearing Investments in Tangible Assets, Construction in Progress and Non-installed Equipment” dated October 20, 2006.

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The amounts of revaluation of disposed fixed assets recognized in the equity, except for fixed assets contributed as non-cash contributions in the statutory fund of another legal entity, are taken in full to the account for recording retained earnings (uncovered loss) of prior years.

Fixed and intangible assets are depreciated on a monthly basis in accordance with:

- the Instructions on the Procedure of Depreciation of Fixed Assets and Amortization of Intangible Assets approved by Resolution No. 37/18/6 of the Ministry of Economy of the Republic of Belarus, Ministry of Finance of the Republic of Belarus, and Ministry of Architecture and Construction of the Republic of Belarus dated February 27, 2009; and

- Resolution No. 161 of the Ministry of Economy of the Republic of Belarus “On Establishing Standard Useful Lives of Fixed Assets and Deeming as no Longer Effective Certain Resolution of the Ministry of Economy of the Republic of Belarus” dated September 30, 2011, as modified by local regulations of the National Bank.

Fixed assets and intangible assets are depreciated using a straight-line method and the amortization charges are taken to the expenses of the National Bank on a monthly basis.

The useful lives, standard service lives of fixed assets and useful lives of intangible assets are set and revised upon the decision of the authorized commission.

The useful lives of fixed assets and intangible assets are as follows: - buildings and structures – from 8 to 100 years; - other fixed assets – from 2 to 58 years; and - intangible assets – from 1 to 50 years.

3.9. Cash in circulation

The National Bank has an exclusive right to issue money and organize its circulation.

Banknotes, coins, commemorative banknotes, commemorative coins, bullion (investment) coins issued by the National Bank and which form a legal tender in the Republic of Belarus are recorded for the accounting purposes at their nominal value.

3.10. Balances on accounts with the National Bank

Balances on accounts with the National Bank include: - precious metals; - amounts due to international financial institutions;

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- amounts due to banks; - amounts due to customers; and - obligatory reserves of banks. Balances on the accounts with the National Bank are recorded at nominal

value of liabilities except for precious metals, which are recorded at accounting prices set by the National Bank.

Balances on accounts with the National Bank are derecognized upon discharge of liabilities or their replacement by new liabilities.

3.11. Equity

The National Bank's equity comprises: - statutory fund; - reserve fund and other funds; - accumulated loss; and - balance sheet items revaluation reserves. Information on formation and use of the reserves is disclosed in the

statement of changes in equity and the statement of the formation and use of reserves.

3.12. Financial result for the reporting year

Loss of the reporting year is the financial result of the National Bank's operations for the reporting period. Financial result of the operations (profit or loss) of the National Bank is determined as the difference between the gains and losses, that arose during the calendar year in the course of the National Bank’s activities in accordance with the Banking Code of the Republic of Belarus and other legislative acts.

Information on the loss of the reporting year is disclosed in the statement of income and loss.

3.13. Income and expenses

The National Bank recognizes income and expenses in accordance with the requirements of the Instructions on Recognizing in Accounting Income and Expenses approved by Resolution No. 125 of the Board of the National Bank dated July 30, 2009, on an accrual basis, the Instructions on Defining Probability of Interest Income and Other Income Directly Associated With Assets at the National Bank of the Republic of Belarus approved by Resolution No. 588 of the Board of the National Bank dated December 29, 2010, the Instruction on the Accounting Policy Organization Procedure with the National Bank and other

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regulations of the National Bank. Income and expenses are recognized in the reporting period to which they relate, irrespective of the actual date of their receipt or payment.

Interest income on securities of JSC “Development Bank of the Republic of Belarus” and local executive and regulatory authorities to be transferred in accordance with Edict No. 593-дсп of the President of the Republic of Belarus “On Improving the Asset Structure of the National Bank” dated December 23, 2011, is recorded as interest expenses (Note 20).

3.14. Taxation of the National Bank

In accordance with the Tax Code of the Republic of Belarus (Special Part), the National Bank is released from taxes and levies (duties, except for customs duties).

The National Bank is not released from the obligation to perform the duties of a tax agent, including withholding taxes and levies (duties) from salary payments and other income accrued (transferred).

4. Precious metals and precious stones

2019 2018

Gold, other precious metals and precious stones 1,595,746 1,421,659Precious metal deposits 2,981,348 2,963,085Correspondent accounts in precious metals 650,635 67,220Total 5,227,729 4,451,964Provisions – –Total 5,227,729 4,451,964

 

An increase in the item results from changes in the precious metals on the correspondent accounts with non-resident banks and accounting prices for precious metals in standard bars established by the National Bank.

5. Assets in special drawing rights

2019 2018

Assets in special drawing rights 1,080,972 –Total 1,080,972 –

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Special drawing rights are allocated among member states of the International Monetary Fund as a percentage of their quota in the International Monetary Fund. As a result of allocation of the special drawing rights, both assets and liabilities in the special drawing rights of the member states of the International Monetary Fund arise.

Prior to May 1, 2019, the Ministry of Finance acted as a financial agent of the Republic of Belarus to carry out all operations and transactions in accordance with the agreements on the International Monetary Funds and the International Bank of Reconstruction and Development.

In accordance with Resolution No. 246/7 of the Council of Ministers of the Republic of Belarus and National Bank of the Republic of Belarus “On Managing the Allocated Special Drawing Rights and Accounting Thereof” dated April 16, 2019, from May 1, 2019, the National Bank manages the allocated special drawing rights of the International Monetary Fund and makes the respecting accounting records.

In accordance with Resolution No. 306 of the Council of Ministers of the Republic of Belarus “On Entering the International Monetary Fund, International Bank of Reconstruction and Development, International Finance Corporation, International Development Association and Multilateral Investment Guarantee Agency by the Republic of Belarus” dated May 22, 1992 (as amended by Resolution No. 245 of the Council of Ministers of the Republic of Belarus dated April 16, 2019 “On Amendments to Resolution No. 306 of the Council of Ministers of the Republic of Belarus dated May 22, 1992”), the Ministry of Finance is appointed to act as a financial agent of the Republic of Belarus to carry out operations and transactions with the agreements on the International Monetary Fund and the International Bank for Reconstruction and Development, other than the operations and transactions involving management and accounting of the International Monetary Fund’s special drawing rights carried out by the National Bank.

6. Securities

2019 2018 Securities at fair value through profit or loss: Securities of foreign governments 281,575 286,394Securities of banks 78,605 83,779Securities of financial institutions 72,235 62,068Total 432,415 432,241Provisions – –Total 432,415 432,241Securities available for sale: Securities of banks 1,198,303 1,314,513

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2019 2018 Securities of the republican government bodies 299,664 330,864Securities of local government bodies 5,938 9,258Securities of foreign governments – 54,075Total 1,503,905 1,708,710Provisions – –Total 1,503,905 1,708,710 Total 1,936,320 2,140,951

Securities at fair value through profit or loss include bonds issued by non-residents. This portfolio has been formed as part of the National Bank’s participation in the Reserves Advisory and Management Program (RAMP) of the World Bank's Treasury (RAMP).

Securities available for sale include securities of non-resident banks, JSC “Development Bank of the Republic of Belarus,” the republican government bodies, and local government bodies.

Securities of non-resident banks were purchased in order to increase the effectiveness of managing foreign currency denominated provisions.

Bonds of the JSC “Development Bank of the Republic of Belarus” were acquired by the National Bank on the primary market during their placement under Edict No. 593-дсп of the President of the Republic of Belarus dated December 23, 2011.

Securities of the republican government bodies include interest-bearing long-term government bonds of the Republic of Belarus denominated in Belarusian rubles.

Securities of local government bodies include the bonds of local executive and regulatory authorities denominated in Belarusian rubles and acquired by the National Bank for the purpose of implementing objectives of social and economic development of the regions of the Republic of Belarus.

7. Amounts due from banks

2019 2018 Loans 134,230 149,568Deposits 7,050,222 6,600,971Amounts on correspondent accounts 5,150,806 3,254,772Amounts received under repurchase transactions 1,958,031 1,078,172Other amounts 3 –Total 14,293,292 11,083,483Provisions – –Total 14,293,292 11,083,483

The item “Loans” includes liabilities under loans granted to:

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- resident banks to finance investments to import from the People's Republic of China; and

- the People's Bank of China (in Belarusian rubles) under the Bilateral Currency Swap Arrangement between the People's Bank of China and the National Bank of the Republic of Belarus.

The item “Deposits” includes foreign currency-denominated amounts placed with non-resident banks under a time bank deposit agreements and on demand agreements.

Foreign currency denominated amounts placed on correspondent accounts with non-resident banks increased by BYN2,577,373 thousand and amounted to BYN5,099,790 thousand as of the reporting date. Foreign currency denominated amounts placed on correspondent accounts with resident banks decreased by BYN681,339 thousand and amounted to BYN51,016 thousand as of the reporting date.

Amounts placed with non-resident banks resulting from purchase of securities of foreign issuers and subject to repurchase are included in the item “Amounts received under repurchase transactions.” Securities received by the National Bank as collateral under repurchase transactions are recognized on off-balance sheet account at present value of USD930.8 million (equivalent to BYN1,958,031 thousand). Fund placement transactions are intraday.

8. Loans and other asset operations with customers

2019 2018 Loans (borrowings) 463 529Amounts due from (placed with) international financial institutions 11,149 6,911Other amounts 114 3Total 11,726 7,443Provisions – –Total 11,726 7,443

Amounts due from individuals (employees (former employees) of the

National Bank) under loans (borrowings) which were previously issued as loans for real estate financing are included in the item “Loans (borrowings)”.

Amounts provided to the International Bank for Reconstruction and Development under the Reserves Advisory and Management Program (RAMP) of the World Bank's Treasury are included in the item “Amounts due from (placed with) international financial institutions.”

Cash used in settlements on bank card transactions is included in the item “Other amounts.”

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Special provision for potential losses from assets exposed to the credit risk and for unearned income from such assets is based on the asset classification and depends on credit risk and the existence and age of overdue amounts.

The table below shows movements in the special provision for the reporting year.

Provision Total as of

January 1, 2019

Charge (increase)of provision

Decrease of provision

Use of provision Total as of

January1, 2020

Provision for possible losses from loans to individuals – 4 4 – –

9. Long-term financial investments

2019 2018 Participation interests 62,267 62,443Investments in legal entities 234,018 231,164Total 296,285 293,607Provision (1,210) –Total 295,075 293,607

This item and changes in investments of the National Bank for the reporting year are presented in the following table:

Investment 2019 2018 Participation

interest in the statutory

fund, % (at par)

Carrying amount

Participation interest

in the statutory fund, % (at par)

Carrying amount

Participation interests JSC “NCFO “Belincasgroup” 44.00 53,238 44.00 53,238JSC “Banking Processing Center” 39.17 6,344 39.17 6,344Interstate Bank, Moscow 8.40 1 8.40 1JSC “Belinvestbank” 1.03 2,684 1.16 2,684JSC “Development Bank of the Republic of Belarus” – – 0.01 176

Investments in legal entities JSC “Belarusian Currency and Stock Exchange” 99.98 14,326 99.98 14,326JSC “Dabrabyt Bank” 99.75 58,804 99.75 58,804JSC “Sanatorium Ozerny” 99.61 34,121 99.61 24,021JSC “BISC” 99.00 70,178 99.00 67,990JSC “Sanatorium Ruzhansky” 97.62 42,526 97.62 42,500

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Investment 2019 2018 Participation

interest in the statutory

fund, % (at par)

Carrying amount

Participation interest

in the statutory fund, % (at par)

Carrying amount

JSC “Center for Banking Technologies” 94.10 478 94.10 434CJSC “Bank Finance Telenetwork” 64.50 1,454 64.50 958OJSC “Non-bank Credit and Financial Institution “SSIS” 51.78 12,131 51.78 12,131State Institution “Agency of Guaranteed Repayment of Natural Persons’ Bank Deposits” – – х 10,000

In the reporting period, changes in long-term financial investments resulted from the following:

- increase in the par value of shares of JSC “Center for Banking Technologies” and CJSC “Bank Finance Telenetwork”;

- additional issue of shares of JSC “BISC,” JSC “Sanatorium Ozerny” and JSC “Sanatorium Ruzhansky”;

- sale of shares of JSC “Development Bank of the Republic of Belarus” held in the operating management by the National Bank and owned by the Republic of Belarus in accordance with Edict No. 65-рп of the President of the Republic of Belarus dated April 18, 2019; and

- derecognition of asset in the form of monetary contribution to form assets of the State Institution “Agency of Guaranteed Repayment of Natural Persons’ Bank Deposits” (Note 26).

Provision for investments is based on the following principle: regulatory capital per share is less than the par value of one share.

The special provision was accrued in full. The table below shows movements in the special provision for the reporting

year.

Provision Total as of

January 1, 2019

Charge (increase)in provision

Decrease in provision

Provision used Total as of

January 1, 2020

Provision for possible losses from participation interests – 505 – – 505Investments in legal entities – 705 – – 705

10. Fixed and intangible assets

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2019 2018 Fixed assets 153,634 156,786Intangible assets 29,407 24,912Non-installed equipment and construction materials 2 6,704Investments in fixed assets and construction in progress 1,912 3,337Investments in intangible assets 2,663 3,625Total 187,618 195,364Depreciation and amortization (82,197) (77,931)Total 105,421 117,433

10.1. Value of fixed and intangible assets

Groups Balance

as of January 1,

2019

Additions (commissioned)

Disposals Change resulting

from revaluation

Balance as of

January 1, 2020

Buildings and structures 89,346 1,668 3,907 – 87,107Other fixed assets 67,440 10,205 11,124 6 66,527Intangible assets 24,912 7,228 2,733 – 29,407Non-installed equipment and construction materials 6,704 103 6,805 – 2Investments in fixed assets and construction in progress 3,337 10,491 11,916 – 1,912Investments in intangible assets 3,625 5,856 6,818 – 2,663Total 195,364 35,551 43,303 6 187,618

10.2. Accumulated depreciation and amortization

Groups Balance as of

January 1, 2019

Accrued depreciation

and amortization

charges

Depreciation and

amortization charges on

disposed fixed assets

Change resulting

from revaluation

Balance as of

January 1, 2020

Buildings and structures 18,600 1,286 1,635 (1) 18,250Other fixed assets 42,967 6,691 4,783 4 44,879Intangible assets 16,364 5,437 2,733 – 19,068Total 77,931 13,414 9,151 3 82,197Net book value 117,433 х х х 105,421

In accordance with Edict No. 622 of the President of the Republic of Belarus dated October 20, 2006 and local legal acts of the National Bank, revaluation of fixed assets, non-installed equipment, installed equipment and ready-to-operate equipment within construction in progress and investments in fixed assets was not performed as of January 1, 2019 and January 1, 2020.

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Revalued cost of fully depreciated fixed assets and fully amortized intangible assets, which continue to be in use, is as follows:

- buildings and structures – BYN986 thousand; - other fixed assets – BYN24,975 thousand; and - intangible assets – BYN10,269 thousand.

11. Other assets

2019 2018 Deferred expenses 15,753 24,547Accrued fees, other banking and operating income 692 1,233Settlements with debtors 487 398Other assets 2,518 2,624Total 19,450 28,802Provision – (6)Total 19,450 28,796

The decrease in deferred expenses is due to a decrease in bonds issued by the National Bank in freely convertible currency, for which the discount is recorded within deferred expenses.

A special provision for possible losses on receivables is determined with account of the period of the debtor's untimely fulfillment of the established requirements, as well as of any additional criteria indicating that the debt is unlikely to be repaid.

The special provision was accrued in full. The table below shows movements in the special provision for the reporting

year.

Provision Total as

of January 1, 2019

Provision (increasein provision)

Decrease in provision

Provision used Total as

of January 1, 2020

Provision for possible losses on settlements with debtors 6 1 – 7 –

12. Precious metals and precious stones

2019 2018 Precious metal deposits 46,035 39,932

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2019 2018 Unallocated bullion accounts of customers 59,768 46,134Amounts on correspondent accounts – 276Total 105,803 86,342

13. Liabilities in special drawing rights

2019 2018 Liabilities in special drawing rights 1,071,674 –Total 1,071,674 –

In accordance with Resolution No. 246/7 of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus dated April 16, 2019, this item includes liabilities of the National Bank in special drawing rights allocated by the International Monetary Fund (Note 5).

14. Amounts due to banks

2019 2018 Loans 891,227 1,203,911Deposits 2,219,947 7,005Amounts on correspondent accounts 4,440,935 4,608,587Other amounts 553,272 10,977Total 8,105,381 5,830,480

Loans from non-resident banks, including a loan in Chinese yuans under the Bilateral Currency Swap Arrangement between the People's Bank of China and the National Bank of the Republic of Belarus, are included in loans.

Deposits include funds in Belarusian rubles placed by resident banks in term deposits at a fixed interest rate following the results of the deposit auction. The increase in the item is due to seven-day deposit auctions which the National Bank started to use in November 2019 as a key excess liquidity management tool.

Other amounts include: - accrued interest expenses in the amount of interest income on bonds of

JSC “Development Bank of the Republic of Belarus,” payable to JSC “Development Bank of the Republic of Belarus”;

- amounts to be recorded on correspondent accounts of resident banks in accordance with correspondent account agreements; and

- amounts transferred by resident banks under cash transactions.

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15. Amounts due to customers

2019 2018 Deposits 4,690,060 3,294,812Balances on current (settlement) bank accounts 9,641,573 7,268,469External government loans raised by the Government of the Republic of Belarus 1,135,483 3,887,640Other amounts 4,433 17,455Total 15,471,549 14,468,376

Other amounts include: - budget funds of the Union State on accounts of the Ministry of Finance; - non-budgetary funds on current (settlement) bank accounts of the

Ministry of Finance; - accrued interest expenses in the amount of interest income on bonds of

local executive and regulatory authorities payable to the state budget; and - amounts transferred to customers under transactions with

commemorative coins.

16. Securities of the National Bank

2019 2018 Bonds 1,157,624 2,255,547Total 1,157,624 2,255,547

Securities issued by the National Bank include bonds in Belarusian rubles and freely convertible currency providing for income in the form of discount, maturing in 2020 and acquired by resident banks and the State Institution “Agency of Guaranteed Repayment of Natural Persons’ Bank Deposits”.

The National Bank issues bonds in the course of monetary regulation activities, as well as for the purposes of formation of gold and foreign currency reserves of the Republic of Belarus.

17. Other liabilities

2019 2018

Accrued fees, other banking and operating expenses 1,083 608Settlements with creditors 782 949

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2019 2018 Other liabilities 21 26Total 1,886 1,583

18. Accumulated loss

2019 2018

Uncovered loss of previous years (12,012,687) (11,229,583)Loss of the reporting year (281,349) (787,060)Retained earnings on disposed fixed assets 3,706 3,956Total (12,290,330) (12,012,687)

Loss of the National Bank for 2019 amounted to BYN281,349 thousand; specifically, income received totaled BYN466,394 thousand and expenses totaled BYN747,743 thousand.

19. Balance sheet items revaluation reserves

2019 2018

Fixed assets and non-installed equipment revaluation reserve 113,517 117,220Reserve for translation differences from foreign exchange revaluation 176,219 –Precious metals revaluation reserve 3,975,228 3,292,837Securities revaluation reserve (244) (195)Total 4,264,720 3,409,862

Sources of formation and use of the balance sheet items revaluation reserves are disclosed in the statement of changes in equity and the statement of the formation and use of reserves.

20. Net interest expenses

2019 2018

Interest income on: 384,388 286,402Operations with precious metals 10,387 6,206Amounts due from banks 236,098 135,179Securities at fair value through profit or loss 8,707 7,119Securities available for sale 119,350 137,728Assets in special drawing rights 9,617 –Settlements with customers 229 170

Interest expenses on: (621,310) (514,660)Operations with precious metals (32) (24)Settlements with banks (145,331) (137,176)

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2019 2018

Securities of the National Bank (219,099) (169,193)Loans received (52,103) (59,666)Budget funds and other state funds (182,446) (138,100)Liabilities in special drawing rights (9,535) –Amounts due to customers (1,449) (3,030)Other amounts due to customers (824) (1,063)Other (10,491) (6,408)Total (236,922) (228,258)

The increase in interest income is mainly due to the following: - an increase in term deposits placed with non-resident banks; - recognition of income from asset placements, represented by proceeds

from external government loans raised by the Republic of Belarus, on accounts of the National Bank; and

- income on assets in special drawing rights transferred under the control of the National Bank in 2019.

The increase in interest expenses is mainly due to the following: - as applied to transactions with banks – the transfer to deposit auctions as

a key tool to withdraw excess liquidity of banks; - as applied to securities of the National Bank – an increase in BYN-

denominated bonds following the rise in excess liquidity of the banking system; - as applied to liabilities in special drawing rights – the recognition of

expenses on liabilities in special drawing rights transferred to the National Bank in 2019; and

- as applied to budget funds and other state funds – an increase in placements of the Ministry of Finance in term bank deposits with the National Bank.

The “Other” item includes interest expenses on cash placed on correspondent accounts and deposits with non-resident banks at negative interest rates.

21. Net fee and commissions income

2019 2018

Fee and commission income on: 5,065 4,194Account maintenance 1,964 1,343Securities transactions 57 59Provision of credit reports 3,040 2,730Transactions with foreign currency – 21Other 4 41

Fee and commission expenses on: (2,232) (1,763)Account maintenance (419) (747)Transactions involving bank cards (27) (26)Transactions with foreign currency (13) (6)

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2019 2018 Advisory and investment management services rendered by the International Bank for Reconstruction and Development (596) (573)Safekeeping of documents and valuables (811) (29)Transfers of cash on card accounts (167) (203)Other (199) (179)Total 2,833 2,431

The increase in fee and commission income on account maintenance relates

to an increase in income from additional commissions for the maintenance of correspondent accounts in euros; the increase in fee and commission income on the provision of credit reports is due to a larger number of credit reports provided.

Expenses on safekeeping of documents and valuables result from the transfer of cash by the National Bank to OJSC “NCFO “Belincasgroup” for remote storage.

22. Net loss from foreign currency transactions

2019 2018

Gains from foreign currency transactions: 3,542 10,890Financial result from currency exchange transactions 3,542 10,890

Losses from foreign currency transactions: (6,274) (318,544)Financial result from currency exchange transactions (6,274) (4,102)Translation differences from foreign exchange revaluation – (314,442)Total (2,732) (307,654)

Foreign exchange gains from foreign exchange revaluation during the reporting year are included in the reserve for translation differences from foreign exchange revaluation (Note 19).

23. Net gain from operations with precious metals and precious

stones

2019 2018

Gains from operations with precious metals 9,492 2,269Gains from operations with precious stones 899 3,051Losses from operations with precious metals (159) (478)Losses from operations with precious stones (10) (8)Total 10,222 4,834

The increase in gains from operations with precious metals results from a

growing number of domestic sales of small bars to legal entities and individuals in the domestic market, as well as growing prices for precious metals in the international market.

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Gains include positive differences between the realizable value and the carrying amount of precious metals and precious stones.

A decrease in gains from operations with precious stones results from a decrease in external and domestic sales of precious stones using the lot principle.

Losses from operations with precious metals mainly comprise losses from purchases of precious metals from the Ministry of Finance. Losses from operations with precious stones comprise costs to write off packaging and quality certificate forms for precious stones and delivery costs.

24. Net gain (loss) from operations with securities

2019 2018

Gains from operations with securities: 9,240 5,279At fair value through profit or loss 9,001 5,190Available for sale 239 89

Losses from operations with securities: (2,892) (5,320)At fair value through profit or loss (2,227) (5,269)Available for sale (665) (51)Total 6,348 (41)

This item includes the result of changes in the fair value of bonds of non-

resident banks acquired by the National Bank and the result of changes in the fair value of bonds of non-resident banks accumulated in the revaluation reserve, which is recorded within income (expense) upon disposal (redemption) of bonds.

25. Net loss from charges to provisions

2019 2018 Loss from charges to provisions on: (1,215) (19)Long-term financial investments (1,210) –Settlements with customers (4) (2)Settlements with debtors (1) (8)Other transactions – (9)

Gains from decrease in provisions on: 8 15Settlements with customers 4 2Other transactions 4 13Total (1,207) (4)

During the reporting year, a provision was accrued on investments in charter funds of OJSC “NCFO “Belincasgroup” and OJSC “Non-bank Credit and Financial Institution “SSIS”.

26. Other expenses, net

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2019 2018 Other expenses: (113,539) (352,032)Staff costs (42,231) (50,257)Depreciation and amortization charges (13,413) (13,021)Manufacture and delivery of banknotes and coins (13,169) (546)Acquisition and maintenance of software (10,465) (9,190)Long-term financial investments (10,000) (218,679)Fixed assets and inventories (6,876) (9,756)Disposal of property (6,194) (14,118)Gratuitous (sponsor) support (2,611) (10,054)Advisory, audit, informational, marketing, advertising and other received services (2,435) (1,855)Payment system operation (343) (1,322)Transportation, delivery of documents (67) (52)Creation of material and technical basis for educational institutions – (17,292)Other (5,735) (5,890)

Other income: 39,090 84,633Transactions in special drawing rights 9,256 –Disposal of property 6,875 4,160Rights to use computer software 5,557 10,286Lease of property 4,471 2,952Cash services to banks 3,441 8,144Sale of coins and banknotes 2,607 8,670Cash support transactions 2,400 45Settlement services 56 3,663Long-term financial investments – 34,348Transportation, delivery of documents – 6,065Services provided by the Settlement Center – 618Other 4,427 5,682Total (74,449) (267,399)

Expenses on transactions with long-term financial investments relate to derecognition of the asset in form of the cash contribution of the National Bank to form assets of the State Institution “Agency of Guaranteed Repayment of Natural Persons’ Bank Deposits.”

Other expenses mainly comprise communication fees, write-down of acquired goods and in-house catering products, tools and administrative materials, medications, entertainment expenses, campaigns to enhance financial literacy, expenses to publish the Bankauski Vesnik magazine, membership fee for the National Bank’s participation in the Alliance for Financial Inclusion.

Decrease in income from the cash settlement services to banks and absence of income from services related to transportation and delivery of documents was due to the establishment of OJSC “NCFO “Belincasgroup” and transfer by the National Bank of the above-mentioned functions.

Increase in income from disposal of property was due to the sale by the National Bank’s property required for operations of OJSC “BISC” and OJSC “NCFO “Belincasgroup”.

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Other income mainly comprises income from paid services, catering services, leasing, compensation for utilities.

27. Statement of changes in equity.

Statement of the formation and use of reserves

In accordance with clause 33 of the Statute of the National Bank of the Republic of Belarus, the statutory fund of the National Bank comprises BYN25,000 thousand and is formed as of the reporting date to the full extent.

Other funds formed in accordance with clause 34 of the National Bank's Statute comprise a loan fund worth BYN832 thousand as of January 1, 2020.

The balance sheet items revaluation reserves are formed as follows: - revaluation reserve for fixed assets and non-installed equipment of

BYN113,517 thousand. Revaluation of fixed assets retired in the reporting period in the amount of BYN3,706 thousand, which was transferred to retained earnings;

- reserve for translation differences from foreign exchange revaluation of BYN176,219 thousand. The reserve was formed due to the foreign exchange gains from foreign currency revaluation in the reporting year;

- revaluation reserve for precious metals of BYN3,975,228 thousand. Increase of BYN682,391 thousand results from the revaluation of precious metals performed in proportion to changes in accounting prices; and

- securities revaluation reserve was negative at BYN244 thousand, including accumulated revaluation of securities available for sale. On disposal of securities, the accumulated revaluation result is transferred to balance sheet accounts for income (expenses) arising from dealing with securities (Note 24).

Resolution No. 163 of the Board of the National Bank of the Republic of Belarus dated March 17, 2015 approved the Plan of Actions to Increase the Equity of the National Bank and to Achieve Break-even Operations in 2015-2021, which is aimed at implementing measures to cover the negative capital of the National Bank and to improve financial results.

Given the existence of losses and inability to cover these losses from own sources, the Program provides for the maximum use of internal and external sources to ensure that the National Bank gradually achieves break-even operations and cuts accumulated losses.

28. Statement of maintenance costs of the National Bank

In accordance with the “Estimates of Current Expenses and Capital

Expenditures of the National Bank of the Republic of Belarus for 2019” approved by the President of the Republic of Belarus on December 24, 2018 (No. 09/520-208 P1739) and adopted by Resolution No. 642 dated December 28, 2018, the

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limit of expenses to maintain costs of the National Bank was established at BYN113,838 thousand, while the actual amount was BYN99,838 thousand (87.7%).

Maintenance costs of the National Bank for 2019 totaled 13.4% of the total current expenses and decreased compared to 2018 by BYN4,603 thousand (4.4%).

Staff costs amounted to BYN42,231 thousand and are in line with the legislation and regulatory legal acts of the National Bank concerning remuneration. Decrease in this type of expenses was due to measures taken to optimize the structure and headcount of the National Bank.

Expenses on the use of land plots, buildings, structures, other fixed assets, as well as materials, amounted to BYN6,876 thousand. These expenses include cost of electricity, heating, water supply, security, alarm system, repairs and technical maintenance and maintenance of vehicles, lease payments and other. Decrease in expenses was due to the following:

- non-monetary contribution in form of assets of the National Bank in the charter fund of OJSC “BISC” in accordance with Edict No. 371 of the President of the Republic of Belarus “On the Belarusian Interbank Settlement Center” dated October 10, 2017, and in the charter fund of OJSC “NCFO “Belincasgroup” in accordance with Edict No. 45 of the President of the Republic of Belarus “On the Establishment of the Open Joint-Stock Company” dated February 1, 2018; and

- free of charge transfer of the building and other assets located in Grodno to the state cultural institution “Grodno Regional Research Library n.a. E.F. Karskiy” in accordance with Resolution No. 571 of the Council of Ministers of the Republic of Belarus “On Disposal of Property” dated August 28, 2019; transfer of the building and other assets located in Vitebsk to the Vitebsk Regional Court in accordance with the local regulatory acts of the National Bank.

Received advisory, audit, information, marketing, advertising and other services amounted to BYN2,435 thousand and increased due to the use of international payment systems, as well as international communication and payment systems.

Depreciation and amortization charges totaled BYN13,413 thousand. Depreciation and amortization charges were calculated based on the statutory rates.

Costs arising from the disposal of long-term financial investments and property totaled BYN16,194 thousand. This group of expenses include costs arising from the disposal of long-term financial investments and costs arising from the disposal of property of the National Bank due to its alienation or write-off. An increase in expenses was due to recognition within expenses of the cash

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contribution of the National Bank to form assets of the State Institution “Agency of Guaranteed Repayment of Natural Persons’ Bank Deposits”.

Payment system costs totaled BYN343 thousand. Decrease in expenses related to the establishment of OJSC “BISC” and transferring it the function of the technical operator of the automated interbank settlement system.

Other operating expenses totaled BYN18,346 thousand. These expenses comprise expenses on the acquisition and maintenance of software (other than software required to operate the payment system), communication, printing and entertainment expenses, expenses to publish the Bankauski Vesnik magazine, expenses on catering services, administrative materials, medications, sports, recreation and cultural events, statutory payments to the budget, and other expenses.

29. Statement of capital investments budget execution

In accordance with “Estimates of Current Expenses and Capital

Expenditures of the National Bank of the Republic of Belarus for 2019” , the National Bank can use cash for capital expenditures in the amount of BYN31,359 thousand.

In 2019, capital investments of the National Bank totaled BYN9,718 thousand (31%), with a benefit of BYN21,641 thousand. Cash was used for the following purposes.

Capital construction and reconstruction – BYN2,197 thousand (34.7%), in particular:

- modernization of ventilation and air conditioning system of the specialized financial institution building at 14, Lenina str., Minsk – BYN779 thousand;

- reconstruction of the water intake facility at the National Bank’s Training Center in Raubichi village, Minsk region – BYN634 thousand;

- reconstruction of the air supported building at the National Bank’s Training Center in Raubichi village, Minsk region – BYN493 thousand; and

- other construction – BYN291 thousand. Measures to develop software and technical infrastructure of the payment

system – BYN1,539 thousand (47.2%), in particular: - development of the automated information system “Fulfillment of

monetary obligations” – BYN661 thousand; - development of the second stage of the automated information system for

providing bank information – BYN335 thousand; - development of the subsystem to the automated interbank settlements

system providing instant payment service – BYN274 thousand;

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- upgrading the telecommunications network of the distributed software and technical package of the automated system of interbank settlements, including the three-website architecture – BYN101 thousand; and

- other – BYN168 thousand. Hardware, software and network equipment – BYN4,005 thousand

(22.8%), in particular: - republic-wide projects and projects of the banking sector – BYN186

thousand; - design and development of systems, subsystems and software suites of

the National Bank’s information system – BYN3,716 thousand; and - acquisition of computer hardware and accessories – BYN103 thousand. Safety enhancement equipment – BYN647 thousand (58.6%). Cash was

used to upgrade systems, hardware and software packages and individual security, fire alarm, fire and emergency alert devices.

Equipment, hardware and software packages and data protection tools – BYN345 thousand (20.3%). Cash was used to design automated information safety system.

Staff motorcars and other vehicles – BYN367 thousand (97.9%). Vehicles for business and operational purposes were purchased under this item.

Maintenance equipment for vehicles and buildings – BYN107 thousand (54.9%). Cash was used to purchase equipment supporting the operation of buildings, technological equipment and other fixed assets.

Other capital investments – BYN511 thousand (59.8%). This item includes expenses to purchase communication equipment, furniture, publications for the collection of reference information, exhibits and items for museum expositions, R&D costs, and other expenses.

30. Segment information For the purposes of management decision-making process, the National

Bank identifies the following three major operating segments: - management of gold and foreign exchange reserves – placement of funds

in precious metals on correspondent accounts and term deposits with non-resident banks, in special drawing rights in the International Monetary Fund, in foreign currency on correspondent accounts with resident and non-resident banks, in term and demand deposits with non-resident banks, provision of funds in foreign currency to non-resident banks under repurchase transactions, lending in foreign currency to resident banks, conducting operations with securities of foreign countries state authorities and securities purchased under the World Bank Treasury Reserves Advisory and Management Program (the RAMP Program) that the National Bank participates in, provision of cash to the International Bank

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for Reconstruction and Development under the RAMP Program, investment of renminbi into securities issued by banks of the People's Republic of China, foreign currency conversion transactions and purchases and sales of precious metals;

- creation of gold and currency assets – placement of funds in precious metals on term deposits and unallocated bullion accounts of customers, in special drawing rights, placement of funds in foreign currency by resident banks on correspondent accounts, attraction of funds from customers in foreign currency to current (settlement) accounts and demand deposits, currency-denominated borrowings from foreign counterparties, conducting transactions to purchase foreign currency in the over-the-counter market, emission of currency-denominated bonds;

- regulating liquidity of the banking system – attracting funds in Belarusian rubles on term deposits with resident banks, placement of funds in Belarusian rubles by resident banks on correspondent accounts and with the obligatory reserve fund, lending to resident banks as part of refinancing, conducting operations with securities issued by JSC “Development Bank of the Republic of Belarus” and local executive and regulatory authorities, issuance of bonds in Belarusian rubles.

Operating segments are classified as reporting segments provided at least one of the following criteria is met:

- the operating segment's income makes at least 10% of the total income of all operating segments for the same reporting period

- profit or loss of the operating segment makes at least 10% of the higher of total profit of all profit-making operating segments or total loss of all loss-making operating segments for the same reporting period; and

- the operating segment's assets make at least 10% of the total assets of all operating segments for the same reporting period.

For the purposes of segment reporting, income, expenses, assets and liabilities are distributed on a straight-line basis using the actual accounting data on each segment.

The tables below contain information about income, expenses, assets and liabilities of the National Bank for the reporting period and comparable information for the preceding year.

2019 Management

of gold and foreign

currency assets

Creation of gold and foreign

currency assets

Regulating liquidity of the

banking system

Other (unallocated)

Total

Interest income 265,550 – 118,808 30 384,388Interest expenses (10,492) (122,089) (291,835) (196,894) (621,310)

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2019 Management of gold and

foreign currency

assets

Creation of gold and foreign

currency assets

Regulating liquidity of the

banking system

Other (unallocated)

Total

Net interest expenses 255,058 (122,089) (173,027) (196,864) (236,922)Fee and commission income – 1,880 79 3,106 5,065Fee and commission expenses (1,016) (194) – (1,022) (2,232)Net fee and commission income (1,016) 1,686 79 2,084 2,833Net loss from foreign currency transactions (1,730) (1,593) – 591 (2,732)Net gain from operations with precious metals and precious stones 9,333 – – 889 10,222Net gains from transactions with securities 6,348 – – – 6,348Dividend income – – – 14,669 14,669Net loss from charges to provisions – – – (1,207) (1,207)Other expenses – – – (113,539) (113,539)Other income 9,256 – – 29,834 39,090Other expenses, net 9,256 – – (83,705) (74,449)Allocations to the budget – – – (111) (111)Financial result 277,249 (121,996) (172,948) (263,654) (281,349)Assets 20,975,381 6,431 1,151,631 931,085 23,064,528Liabilities 226 15,394,843 6,962,118 8,707,119 31,064,306

Income and expenses of the National Bank from operations with major external customers for 2019 exceed 10% of the total respective income and expenses and relate to the following segments:

- management of gold and foreign currency assets – fee and commission expenses on operations with the International Bank for Reconstruction and Development;

- creation of gold and foreign currency assets – fee and commission income on operations with JSC “JSSB Belarusbank” and JSC “Belgazprombank”;

- regulating liquidity of the banking system – interest income and expenses on operations with JSC “Development Bank of the Republic of Belarus”; and

- other – interest income on operations with the Ministry of Finance, fee and commission expenses on operations with OJSC “NCFO “Belincasgroup,” other income on operations with JSC “JSSB Belarusbank” and OJSC “BISC”.

2018 Management

of gold and foreign

currency assets

Creation of gold and foreign

currency assets

Regulating liquidity of the

banking system

Other (unallocated)

Total

Interest income 133,699 – 152,584 119 286,402

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2018 Management of gold and

foreign currency

assets

Creation of gold and foreign

currency assets

Regulating liquidity of the

banking system

Other (unallocated)

Total

Interest expenses (6,409) (177,559) (182,667) (148,025) (514,660)Net interest expenses 127,290 (177,559) (30,083) (147,906) (228,258)Fee and commission income – 1,281 59 2,854 4,194Fee and commission expenses (1,320) (177) – (266) (1,763)Net fee and commission income (1,320) 1,104 59 2,588 2,431Net loss from foreign currency transactions 3,808 (5) – (311,457) (307,654)Net gain from operations with precious metals and precious stones 1,791 – – 3,043 4,834Net loss from operations with securities (41) – – – (41)Dividend income – – – 9,147 9,147Net loss from charges to provisions – – – (4) (4)Other expenses – – – (352,032) (352,032)Other income – – – 84,633 84,633Other expenses, net – – – (267,399) (267,399)Allocations to the budget – – – (116) (116)Financial result 131,528 (176,460) (30,024) (712,104) (787,060)Assets 15,988,175 23,405 1,262,032 943,026 18,216,638Liabilities 205 15,970,534 4,312,174 6,510,718 26,793,631

31. Risk management Risk management goals The Board of the National Bank approved the Risk Management Policies

that establish goals and objectives of the risk management system of the National Bank, types of risks, principles and approaches to risk management, organizational structure of the risk management system, including powers and functional responsibilities of its participants, and regulate the major steps in the risk management process.

The goal of risk management is to ensure a high level of financial stability, effectiveness and authority of the National Bank as the basis for successfully achieving its goals and performing its functions.

The risk management system of the National Bank is a combination of interrelated components, including the organizational structure, powers and responsibilities of officers, local regulations that define risk management policies, rules and procedures, and the risk management process, designed to

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achieve the goals and fulfill the objectives of the National Bank, and to ensure the stability of its operations.

Organizational structure of the risk management system and functions of its participants

Functional responsibilities for risk identification, assessment, response, control and monitoring are distributed in compliance with the principle of avoiding conflicts of interest among the Board of the National Bank, the Risk Management Committee, the Risk Management Department, the Internal Audit Directorate, and other structural units of the head office and structural units of the National Bank (hereinafter – the “structural units”).

The Board of the National Bank carries out strategic management for all types of risks of the National Bank, which includes setting conceptual approaches to establishing a risk management system in the National Bank and determining future development areas. The Board of the National Bank determines the procedure for managing all risks that are material for the operations of the National Bank, makes final decisions on such risks, and exercises overall control over the operation of the risk management system.

The Risk Management Committee has been responsible for tactical risk management at the National Bank. The main tasks of this collegial body are to coordinate financial and non-financial risk management activities, monitor the level of risks at the National Bank, and discuss and make risk response decisions based on the results of such monitoring.

The Risk Management Department is responsible for organizing and coordinating risk management activities at the National Bank.

The Internal Audit Directorate assesses the effectiveness of the risk management system and develops recommendations to eliminate identified deficiencies.

Structural units, which are directly engaged in transactions and processes, perform their risk management functions, including ensuring compliance with internal regulatory acts, requirements and restrictions (limits) set for risks, as well as identify and assess risks inherent in their activities and implement risk mitigation (reduction) and control measures.

Risk management system Risk management at the National Bank is a continuous cyclic process that

consists of risk identification, assessment, response, control and monitoring, and covers all risks that are material for the National Bank's operations as the central bank and for supporting its activities.

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Risk identification focuses on detection, examination and description of risk and involves identification of sources of risks, events and reasons for their occurrence and possible consequences.

Risk assessment is the determination of the risk level and its comparison with the risk tolerance indicators.

Response to the risk involves selecting the measures to be taken by the National Bank based on the results of the risk assessment, that may include risk evasion, assuming (maintaining) the risk, mitigating the assumed risk and sharing of risk with another party or its transfer to another party.

Risk control involves the implementation of measures designed to mitigate (reduce) risk and contain it within the established risk tolerance parameters.

Risk monitoring involves overseeing the risks by collecting, accumulating, processing and analyzing the information on risks in order to identify deviations from established risk tolerance indicators, and assessing the effectiveness of control measures.

Risk profile and sources of risks Significant types of risks of the National Bank that may affect the financial

statements are as follows: - credit risk; - liquidity risk; - market risk (currency, interest and commodity risks); and - operational risk. Realization (change) of each type of risk may be caused by individual

sources of risk or their combination. Different but interrelated types of risks may be caused by the same source, as the realization of one risk may lead to the realization of other risks or a change in their level.

Instruments (measures) to mitigate (reduce) financial risks Mitigation (reduction) of financial risks which the National Bank's

activities are exposed to is carried out by means of changing probability of risk occurrence, changing the consequences of the risk, reducing the risk to the level not exceeding the established risk tolerance indicators, including complete elimination of the risk and (or) its source.

The National Bank uses the following instruments (measures) to mitigate (reduce) financial risks:

- limits on transactions with counterparties; - minimum acceptable ratings for counterparties, issuers, and securities; - list of counterparties to transactions with securities of foreign issuers;

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- currency structure of assets (the percentage shares of foreign currencies in total assets denominated in foreign currencies);

- the structure of assets in precious metals (the required percentage shares of types of precious metals in total assets in precious metals);

- the division of gold and foreign currency assets into tranches; - the criteria for banks' access to liquidity support operations; - collateral to secure the performance obligations on transactions; - list of acceptable collateral for performance obligations; - collateral ratios for performance obligations; - differentiation of the collateral ratio depending on the nature and type of

operations, as well as the type of financial assets used as collateral; - assessment and control of collateral for performance obligations; - diversification of types of operations and their terms; - covenants applied to counterparties; - special provisions; and - other requirements and restrictions (limits). Risk control Risk control is one of the stages of the risk management process Based on the segregation of control functions by performance time, the

National Bank's risks are subject to preliminary control (before initiating a transaction), current control (in the course of executing and formalizing a transaction) and subsequent control (after completing and formalizing a transaction).

Structural units arrange and carry out preliminary, current and subsequent control. In addition, subsequent control is carried out by Risk Management Committee and Risk Management Department within the scope of their competencies, as well as by Internal Audit Directorate in the course of audits and revisions.

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31.1. Credit risk

Credit risk is the risk that the National Bank will incur a loss or will not receive income as a result of a debtor's failure to meet its financial and other property obligations under the contract or legislation.

Based on the main objectives of the National Bank's activities as well as the models of financial assets management, the credit risk is one of the significant types of risks.

Credit risk management activities are coordinated by Risk Management Committee, while internal and external financial market operations and decisions on conducting operations are coordinated by Financial Market Operations Committee.

The instruments for mitigating (reducing) credit risk are as follows: - counterparty limits; - limits on the volume of transactions; - list of acceptable collateral for performance of obligations; - collateralization ratios (discounts) for each type of collateral; - list of acceptable credit ratings of non-resident counterparties, issuers, and

securities, assigned by international rating agencies; - list of counterparties to transactions with securities of foreign issuers; - restrictions on counterparties; and - special reserves. Limits for non-resident banks on operations with gold and foreign currency

assets are determined based on the analysis of their financial position and business reputation, as well as international credit ratings, and are set by Risk Management Committee. Control over compliance with the limits is carried out on a daily basis by structural units directly involved in operations and processes, as well as by Risk Management Department. The limits are reviewed by Risk Management Department at least once a quarter based on the results of monitoring the financial position of the counterparties.

The aggregate and individual limits for resident banks on standing facilities designed to maintain current liquidity are determined in each specific case on the basis of the tasks at which the limits are aimed (achieving the operational benchmark of the monetary policy or mitigating (reducing) credit risk). These limits are set by Financial Market Operations Committee.

Limits for resident banks on bilateral transactions to maintain current liquidity are determined based on the indicators that represent the criteria for considering the issue of suspending banks' access to monetary transactions. These criteria are monitored on a daily basis and analyzed on a monthly basis. These limits are set and monthly reviewed by Financial Market Operations

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Committee in case of suspension of the bank's access to standing facilities and auction transactions to maintain liquidity.

The list of liquid and acceptable collateral for performance obligations on monetary operations is established by the Board of the National Bank of the Republic of Belarus and is represented by the pledge of securities included in the Lombard list of securities and guarantee deposits in foreign currencies. With regard to stabilization refinancing, the Board of the National Bank has established a list of financial assets that may serve as collateral for performance of obligations, considering the National Bank's preference scale for selecting collateral.

Collateralization ratios (discounts) for each type of collateral are determined to ensure that there is sufficient collateral for each acceptable type of securities, foreign currency or other financial instrument. Discounts are set by the Board of the National Bank on the basis of suggestions of Risk Management Department. Structural units directly involved in operations and processes assess and control sufficiency of collateral subject to certain conditions and at the prescribed intervals.

Below is the analysis of credit quality of financial assets exposed to credit risk:

Item Neither overdue nor impaired Impaired Overdue Total

as of January

1, 2020

High grade

Standard grade

Sub-standard

grade Assets in special drawing rights 1,080,972 – –

–

– 1,080,972

Securities 493,396 1,436,986 5,938 – – 1,936,320Amounts due from banks 13,778,765 514,525 2 – – 14,293,292Loans and other asset operations with customers 11,149 – 577 – – 11,726Other financial assets – 200 511 – – 711Total 15,364,282 1,951,711 7,028 – – 17,323,021

Item Neither overdue nor impaired Impaired Overdue Total

as of January 1,

2019

High grade

Standard grade

Sub-standard

grade Securities 548,168 1,583,525 9,258 – – 2,140,951Amounts due from banks 9,693,425 1,390,058 – – – 11,083,483Loans and other asset operations with customers 6,911 – 532 – – 7,443Other financial assets – 386 892 1 – 1,279Total 10,248,504 2,973,969 10,682 1 – 13,233,156

Neither overdue nor impaired financial assets are classified into assets with high, standard and sub-standard grades on the basis of credit ratings of

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counterparties (issuers) of the National Bank assigned by international rating agencies.

A high grade is assigned to assets placed in securities with at least one rating of not lower than A3 (Moody’s Investors Service) or A- (Fitch Ratings or Standard and Poor’s), as well as those placed with counterparties with at least one long-term foreign currency credit rating of not lower than A3 (Moody’s Investors Service) or A- (Fitch Ratings or Standard and Poor’s).

A standard grade is assigned to assets placed in securities with at least one rating ranging from Baa1 to B3 (Moody’s Investors Service) or from BBB+ to B- (Fitch Ratings or Standard and Poor’s), as well as those placed with counterparties with at least one long-term foreign currency credit rating ranging from Baa1 to B3 (Moody’s Investors Service) or from BBB+ to B- (Fitch Ratings or Standard and Poor’s).

A sub-standard grade is assigned to assets placed in securities with ratings of lower than B3 (Moody’s Investors Service) or B- (Fitch Ratings or Standard and Poor’s), as well as those placed with counterparties with long-term foreign currency credit ratings of lower than B3 (Moody’s Investors Service) or B- (Fitch Ratings or Standard and Poor’s) or unrated counterparties (except for central banks and government agencies).

If central banks or government agencies do not have a rating set by Moody's Investors Service, Fitch Ratings or Standard and Poor's, the sovereign (country) credit rating of the respective country is assigned to such counterparties (issuers).

Impaired assets comprise assets exposed to credit risk for which special provisions have been accrued.

The table below shows maximum exposure of financial instruments to credit risk.

Item Total maximum risk exposure at the end of

the reporting period 2019 2018

Assets in special drawing rights 1,080,972 –Securities 1,936,320 2,140,951Amounts due from banks 14,293,292 11,083,483Loans and other asset operations with customers 11,726 7,443Other financial assets 711 1,279Total financial assets 17,323,021 13,233,156Loan commitments – 27,781Total exposure to credit risk 17,323,021 13,260,937

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The maximum credit risk exposure for financial assets recorded on balance sheet accounts is limited to the carrying amounts of these assets less any special provisions. For off-balance sheet liabilities, the maximum credit risk exposure represents the maximum amount of the National Bank's obligations to its counterparties related to provision of funds.

Where financial instruments are recorded at fair value, the amounts shown above represent the current but not the maximum credit risk exposure that could arise in the future as a result of changes in values of financial instruments.

The National Bank accepts various types of collateral securing the discharge of obligations to decrease the maximum credit risk. The fair value of the collateral matches its carrying amount.

The tables below contain geographical concentration of financial assets and liabilities of the National Bank for the reporting period and comparable information for the preceding year.

Item Republic of

Belarus OECD CIS and

other states Total as of

January 1, 2020

Financial assets Cash 94,543 – – 94,543Assets in special drawing rights – 1,080,972 – 1,080,972Securities 1,442,924 423,898 69,498 1,936,320Amounts due from banks 63,123 11,291,017 2,939,152 14,293,292Loans and other asset operations with customers 576 11,150 – 11,726Long-term financial investments 295,074 – 1 295,075Other financial assets 711 – – 711Total 1,896,951 12,807,037 3,008,651 17,712,639 Financial liabilities

Cash in circulation 4,721,424 – – 4,721,424Liabilities in special drawing rights – 1,071,674 – 1,071,674Amounts due to international financial institutions – 5,376 – 5,376Amounts due to banks 7,087,286 – 1,018,095 8,105,381Amounts due to customers 15,471,549 – – 15,471,549Securities of the National Bank 1,157,624 – – 1,157,624Other financial liabilities 861 225 1 1,087Total 28,438,744 1,077,275 1,018,096 30,534,115Net position (26,541,793) 11,729,762 1,990,555 (12 821,476)

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Item Republic of Belarus

OECD CIS and other states

Total as of

January 1, 2019

Financial assets Cash 92,961 – – 92,961Securities 1,592,783 484,141 64,027 2,140,951Amounts due from banks 790,296 8,544,391 1,748,796 11,083,483Loans and other asset operations with customers 532 6,911 – 7,443Long-term financial investments 293,606 – 1 293,607Other financial assets 1,279 – – 1,279Total 2,771,457 9,035,443 1,812,824 13,619,724 Financial liabilities

Cash in circulation 3,765,675 – – 3,765,675Amounts due to international financial institutions – 5,343 – 5,343Amounts due to banks 4,523,153 – 1,307,327 5,830,480Amounts due to customers 14,468,376 – – 14,468,376Securities of the National Bank 2,255,547 – – 2,255,547Other financial liabilities 591 205 1 797Total 25,013,342 5,548 1,307,328 26,326,218Net position (22,241,885) 9,029,895 505,496 (12,706,494)

31.2. Liquidity risk

Liquidity risk is the risk that the National Bank will incur losses due to inability to meet its financial obligations in full when they fall due.

The division of gold and foreign currency assets into tranches (operational tranche, liquidity tranche and investment tranche) is used as a tool to manage liquidity risk. The criteria for dividing gold and foreign currency assets into tranches are the objectives of their use, which determine their level of liquidity and integrity (risk level), as well as the level of expected return.

Target, maximum and (or) minimum tranche sizes are determined by Financial Market Operations Committee. Funds are transferred between tranches in order to comply with the established amounts taking into account the information about upcoming payments or cash receipts by the National Bank and (or) the Government of the Republic of Belarus. Deviations of the actual size of the tranches of gold and foreign currency assets from the established limits are controlled on a daily basis.

The process of liquidity risk management also includes daily monitoring of the currency position, current liquidity and liquidity for longer intervals, as well as the assessment of expected future cash flows.

Liquidity risk is distributed based on the remaining maturity of financial liabilities (as counted from the reporting date), and for undiscounted cash flows

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(principal and interest) – based on the earliest period when the liability could be required to be settled.

The tables below contain information about liquidity risk distribution for the reporting year and for the preceding year.

Financial liabilities Less than

3 months From 3 to 12 months

From 1 year to 5 years

More than 5 years

Total as of

January 1, 2020

Cash in circulation 4,721,424 – – – 4,721,424Liabilities in special drawing rights 1,071,674 –

– – 1,071,674

Amounts due to international financial institutions 5,376 – – – 5,376Amounts due to banks 7,417,371 258,233 476,160 – 8,151,764Amounts due to customers 14,424,984 – 1,053,815 – 15,478,799Securities of the National Bank 758,900 398,724 – – 1,157,624Other financial liabilities 1,087 – – – 1,087Undiscounted financial liabilities, net 28,400,816 656,957 1,529,975 – 30,587,748

Financial liabilities Less than

3 months From 3 to 12 months

From 1 year to 5 years

More than 5 years

Total as of

January 1, 2019

Cash in circulation 3,765,675 – – – 3,765,675Amounts due to international financial institutions 5,343 – – – 5,343Amounts due to banks 4,845,555 245,555 841,611 – 5,932,721Amounts due to customers 14,472,277 – – – 14,472,277Securities of the National Bank 1,114,357 1,153,909 – – 2,268,266Other financial liabilities 797 – – – 797Undiscounted financial liabilities, net 24,204,004 1,399,464 841,611 – 26,445,079

The table below shows the maturity of contractual liabilities. Each undrawn loan commitment is included in the period containing the earliest date it can be drawn down.

Date Less than

3 months From 3 to 12 months

From 1 year to 5 years

More than 5 years

Total

As of January 1, 2020 – – – – – As of January 1, 2019 27,781 – – – 27,781

31.3. Market risk

Market risk is the risk that the National Bank will incur losses or fail to receive income due to adverse changes in market prices for financial assets,

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precious metals and financial liabilities because of changes in the financial market conditions.

Market risk includes currency, interest rate and commodity risks

31.3.1. Currency risk Currency risk is the risk that the National Bank will incur losses or will fail

to receive income due to changes in the value of financial instruments denominated in foreign currency resulting from adverse changes in the exchange rate of Belarusian ruble against foreign currencies.

In order to mitigate (reduce) currency risk in transactions with gold and foreign currency assets, the Board of the National Bank has approved the statutory structure of the National Bank's assets denominated in foreign currency.

Currency risk is monitored on a daily basis against the percentage shares of foreign currencies in total assets denominated in foreign currencies.

The table below shows the effect on equity of changes in the official rate of the Belarusian ruble to the US dollar, euro and Russian ruble. These changes stand for assessment of the maximum possible changes in the official rate. The sensitivity analysis includes only outstanding foreign currency-denominated monetary items at the end of the reporting period.

Currency 2019 2018

Change in official

exchange rate, %

Effect on equity, BYN thousand

Change in official exchange

rate, %

Effect on equity, BYN thousand

USD +8 (40,755) +5 (195,716)EUR +8 73,967 +8 5,501RUB -3 (2,306) +5 (22,279) USD +3 (15,283) +3 (117,429)EUR +3 27,738 +6 4,126RUB -2 (1,537) +3 (13,367)

All other variables are held constant.

31.3.2. Interest rate risk

Interest rate risk is the risk that the National Bank will incur losses or will fail to receive income due to adverse changes in market interest rates on financial instruments.

The major part of assets placed in fixed maturity instruments bear a fixed interest rate, consequently, the National Bank bears substantively no interest rate risk on such instruments.

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The table below shows the sensitivity of the statement of income for one year to possible changes in interest rates for financial instruments with a floating interest rate:

Currency 2019 2018

Change in interest rate,

basis points

Effect on profit (loss),

BYN thousand

Change in interest rate,

basis points

Effect on profit (loss),

BYN thousand USD +16 (882) +7 (605) USD -16 882 -7 605

All other variables are held constant.

31.3.3. Commodity risk

Commodity risk is the risk that the National Bank will incur losses or lose income due to adverse changes in accounting prices for precious metals because of changes in the financial market conditions.

In order to mitigate (reduce) commodity risk in transactions with gold and foreign currency assets, the Board of the National Bank approved the statutory structure of precious metals.

Commodity risk is controlled on a daily basis by means of complying with the percentage shares of assets in precious metals in the general structure of assets in precious metals.

The table below provides for the possible effect on the equity of changes in accounting prices on precious metals.

Precious metals 2019 2018

Change in accounting price,

%

Effect on equity, BYN thousand

Change in accounting price,

%

Effect on equity, BYN thousand

Gold +5 231,440 +2 79,876Silver +6 890 +4 411Platinum +4 3,015 +5 2,825Palladium +9 18,532 +9 10,403

All other variables are held constant.

31.4. Operational risk

Operational risk is the risk that the National Bank will incur losses due to inadequate internal processes, errors or incompetence of the National Bank's employees, failure or breakdown of the technological, informational and (or) other systems used by the National Bank, non-compliance of transactions and other deals with the requirements of the applicable legislation or internal

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practices and procedures or breaches by the National Bank's employees, and due to external factors.

The National Bank collects, analyzes and systematizes data on operational incidents. Based on the results of analyzing incidents, if necessary, measures are developed to minimize negative consequences of incidents, as well as to prevent similar events in the future.

32. Fair value measurement of financial instruments

The National Bank uses the following assessment methods to determine and disclose fair values of financial instruments:

- quoted prices (unadjusted) at active markets for identical assets or liabilities (Level 1);

- techniques, for which all inputs, which have a significant effect on the fair value, are observable at the market, either directly or indirectly (Level 2); and

- techniques, for which all inputs, which have a significant effect on the fair value, are not observable at the market (Level 3).

For the purpose of fair value disclosures, the National Bank has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability, and the fair value hierarchy.

The tables below contain information about fair values for the reporting period and comparable information for the preceding year.

Item Item

valuation date

Fair value measurement techniques Total as of

January 1, 2020

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs Assets measured at fair value

December31, 2019 493,396 – – 493,396

Securities: at fair value through profit or loss 432,415 – – 432,415available for sale 60,981 – – 60,981 Assets for which fair values are disclosed

December31, 2019 15,479,956 – 1,678,027 17,157,983

Cash 94,543 – – 94,543Assets in special drawing rights 1,080,972 – – 1,080,972Securities available for sale – – 1,381,722 1,381,722Amounts due from banks 14,293,292 – – 14,293,292Loans and other asset operations with customers 11,149 – 519 11,668Long-term financial investments – – 295,075 295,075Other financial assets – – 711 711

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Item Item valuation

date

Fair value measurement techniques Total as of

January 1, 2020

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs

Liabilities measured at fair value

December31, 2019 – – – –

Liabilities for which fair values are disclosed

December31, 2019 1,071,674 1,163,000 23,578,017 25,812,691

Liabilities in special drawing rights 1,071,674 – – 1,071,674Amounts due to international financial institutions – 5,376 – 5,376Amounts due to banks – – 8,105,381 8,105,381Amounts due to customers – – 15,471,549 15,471,549Securities of the National Bank – 1,157,624 – 1,157,624Other financial liabilities – – 1,087 1,087

Item Item

valuation date

Fair value measurement techniques Total as of

January 1, 2019

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs Assets measured at fair value

December29, 2018 548,168 – – 548,168

Securities: at fair value through profit or loss 432,241 – – 432,241available for sale 115,927 – – 115,927 Assets for which fair values are disclosed

December29, 2018 11,183,355 – 1,799,309

12,982,664

Cash 92,961 – – 92,961Securities available for sale – – 1,503,980 1,503,980Amounts due from banks 11,083,483 – – 11,083,483Loans and other asset operations with customers 6,911 – 443 7,354Long-term financial investments – – 293,607 293,607Other financial assets – – 1,279 1,279

Liabilities measured at fair value

December29, 2018 – – – –

Liabilities for which fair values are disclosed

December29, 2018 – 2,260,890 20,299,653 22,560,543

Amounts due to international financial institutions – 5,343 – 5,343Amounts due to banks – – 5,830,480 5,830,480

115

Item Item valuation

date

Fair value measurement techniques Total as of

January 1, 2019

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs Amounts due to customers – – 14,468,376 14,468,376Securities of the National Bank – 2,255,547 – 2,255,547Other financial liabilities – – 797 797

The following describes the methodologies and assumptions used to determine fair values for those financial instruments, which are already recorded at fair value.

Securities at fair value through profit or loss are represented by quoted bonds of foreign issuers denominated in foreign currency. As a rule, the fair value of bonds of foreign issuers is represented by their public price quoted at the international market according to trading and informational system Bloomberg.

Securities available for sale are represented by quoted bonds issued by banks of the People's Republic of China. Fair value of bonds is determined on the basis of inputs observable at the market.

Set out below is a comparison by class of the carrying amounts and fair values of financial assets and financial liabilities.

Item As of January 1, 2020 As of January 1, 2019

Carrying amount

Fair value

Unrecognizedgain (loss)

Carrying amount

Fair value

Unrecognized gain (loss)

Financial assets 17,712,639

17,651,379 (61,260) 13,619,724

13,530,832

(88,892)

Cash 94,543 94,543 – 92,961 92,961 –

Assets in special drawing rights

1,080,972

1,080,972

–

–

–

–

Securities 1,936,320 1,875,118 (61,202) 2,140,951 2,052,148 (88,803)Amounts due from banks

14,293,292 14,293,292 –

11,083,483

11,083,483 –

Loans and other asset operations with customers 11,726 11,668 (58) 7,443 7,354 (89)Long-term financial investments 295,075 295,075 – 293,607 293,607 –Other financial assets 711 711 – 1,279 1,279 – Financial liabilities 30,534,11

5 30,534,115 –26,326,21

8 26,326,21

8 –

Cash in circulation 4,721,424 4,721,424 – 3,765,675 3,765,675 –Liabilities in special drawing rights 1,071,674 1,071,674

–

–

–

–

Amounts due to international financial institutions 5,376 5,376

–

5,343

5,343

–

116

Item As of January 1, 2020 As of January 1, 2019 Carrying amount

Fair value

Unrecognizedgain (loss)

Carrying amount

Fair value

Unrecognized gain (loss)

Amounts due to banks 8,105,381 8,105,381 – 5,830,480 5,830,480 –Amounts due to customers

15,471,549 15,471,549 –

14,468,376

14,468,376 –

Securities of the National Bank 1,157,624 1,157,624 – 2,255,547 2,255,547 –Other financial liabilities

1,087

1,087

–

797

797

–

Total unrecognized change in unrealized fair value х х (61,260) х х (88,892)

The table does not include values for non-financial assets and non-financial liabilities.

The following describes the methodologies and assumptions used to determine fair values for those financial instruments, which are not recorded at fair value in the financial statements:

- it is assumed that fair values of financial assets and financial liabilities that are liquid or have a short-term maturity approximate their carrying amounts. This assumption is also applied to demand deposits and accounts without specific maturity; and

- fair values of the financial instruments whose carrying amounts do not approximate their fair values were determined by discounting future cash flows using the refinancing rate of the National Bank as at the reporting date.

33. Subsequent events

From the beginning of 2020, the National Bank continued to decrease the

refinancing rate. At the date of signing the annual financial statements, the refinancing rate was 8.75% p.a.

117

Conclusion

In 2019, the National Bank’s activities were aimed at creating the basis for a balanced and sustainable development of the country’s economy by dint of maintaining price and financial stability.

The inflation target for 2018 was met. Inflation totaled 4.7%, with the prescribed parameter being no more than 5%. This was facilitated by measures of the National Bank that ensured control over the money supply, with a more restrained policy of the Government of the Republic of Belarus in the field of price regulation.

As of January 1, 2020, international reserve assets amounted to USD9.4 billion, or 2.7 months of import. Over the reporting year, they grew by USD2.2 billion. At that, the Government and the National Bank of the Republic of Belarus repaid external and domestic liabilities in foreign exchange.

The National Bank in concert with the Government of the Republic of Belarus systematically implemented measures designed to reduce the use of foreign exchange in the economy and increase confidence in the national currency.

Improving analytical and instrumental means of macroprudential regulation, developing a system of monitoring and ensuring financial stability, increasing the quality of anti-crisis management and the system of supervision of financial market participants ensured sustainable functioning of the banking sector.

The development of the remote channels of bank servicing, the single settlement and information space and digital bank technologies made it possible to increase the speed and security of non-cash payments and expand the scope of their application.

Efficient, sound, and secure functioning of the payment system was ensured by dint of improving legal framework, tariff policy, developing software and hardware infrastructure and electronic document management, introducing international standards, limiting (reducing) risks in the payment system, and carrying out supervision of the payment system.

The conditions for the development of microfinance and leasing activities, as well as activities in the Forex market were established.

118

Attachment 1.1 to the Report of the National Bank

for 2019 MAIN macroeconomic parameters of social and economic development of the Republic of Belarus in 2019

(in comparable prices, %)

Indicators 2019 to

2018 For

information: 2018 to 2017

Gross domestic product (GDP) 101.2 103.1 GDP labour productivity 101.4 103.5 Industrial products 101.0 105.7 Profitability of sales in organizations of industry, % 8.2 8.5 The share of innovative products shipped by organizations, the main economic activity of which is manufacturing of industrial products in the total volume of products shipped, % 16.6 18.6 Agricultural products 102.9 96.7 Export of goods and services according to the methodology of the balance of payments 99.2 115.5 Balance of foreign trade in goods and services, % of GDP -0.5 1.5 Reduction in GDP’s energy/output ratio -2.5 +1.4 Households’ disposable real money income 106.0 107.9 Foreign direct investments on a net basis according to the methodology of the balance of payments, USD bn 1.3 1.4 Placing houses in use at the expense of all financing sources, million square meters 4061.9 3966.8

 

119

Attachment 1.2 to the Report of the National Bank for 2019

DYNAMICS of financial results of organizations

(BYN mln)

Indicators 2018 2019 Growth rates,%

Proceeds from sale of products, goods, works, and services 222,412.4

240,149.4 108.0

Taxes and fees accrued from proceeds 26,524.3 28,888.9 108.9% of proceeds 11.9 12.0 х

Cost of sold products, goods, works, and services 179,018.3

194,409.4

108.6

% of proceeds 80.5 81.0 хProfit/losses (-) from sold products, goods, works, and services 16,869.8

16,851.1 99.9

Profit, losses (-) before tax 8,120.9 13,342.1 164.3Net profit, losses (-) 5,821.7 10,720.8 184.2

Profitability of sales, % 7.6

7.0 х

Profitability of sold products, goods, works, and services, % 9.4

8.7 х

Share of loss-making organizations in their total number, % 16.0

13.1 хNet loss amount of the loss-making organizations 4,433.4

1,724.6 38.9

Funds obtained from the budget to cover losses related to state regulation of prices and tariffs and to compensate for current expenses 1 983.9

2 322.6 117.1

120

Attachment 1.3 to the Report of the National Bank for 2019

DYNAMICS of the income, costs, deficit (-)/surplus(+) of the Republic of Belarus consolidated budget in 2018 – 2019

(on a cumulative total from the beginning of the year, BYN bn)

0

1

2

3

4

5

6

7

0

5

10

15

20

25

30

35

40

Janu

ary

Janu

ary-

Feb

ruar

y

Janu

ary-

Mar

ch

Janu

ary-

Apr

il

Janu

ary-

May

Janu

ary-

June

Janu

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July

Janu

ary-

Aug

ust

Janu

ary-

Sep

tem

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Jana

ury-

Oct

ober

Janu

ary-

Nov

embe

r

Janu

ary-

Dec

embe

r

Janu

ary

Janu

ary-

Feb

ruar

y

Janu

ary-

Mar

ch

Janu

ary-

Apr

il

Janu

ary-

May

Janu

ary-

June

Janu

ary-

July

Janu

ary-

Aug

ust

Janu

ary-

Sep

tem

ber

Janu

ary-

Oct

ober

Janu

ary-

Nov

embe

r

Janu

ary-

Dec

embe

r

2018 2019

Def

icit

(-),

sur

plus

(+)

Inco

me,

cos

ts

Income Costs Balance

121

Attachment 1.4 to the Report of the National Bank

for 2019

CHANGE in main indicators of the balance of payments in 2010–2019

(USD mln)

 

   

-9

-7

-5

-3

-1

1

3

5

7

9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Current account Financial account (given exclusive financing) Overal balance of payments Gross volume of reserve assets

122

Attachment 1.5 to the Report of the National Bank

for 2019

EXTERNAL DEBT of the Republic of Belarus in 2010 – 2019 (USD bn) (%)  

 

   

0

10

20

30

40

50

60

70

80

90

0

5

10

15

20

25

30

35

40

45

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

External debt Short-term external debt External debt/GDP ratio (the right-handed axis)

123

Attachment 1.6 to the Report of the National Bank

for 2019

INFORMATION on foreign exchange purchase/sale by resident economic entities* of the Republic of Belarus in the domestic foreign exchange market in 2018 – 2019 (USD mln)

Years Operations January February March April May June For the first half of the year, total

2018 Sold 1,469.3 1,461.6 1,685.7 1,728.3 1,653.8 1,663.9 9,662.6 Purchased 1,735.2 1,458.1 1,809.8 1,690.5 1,730.8 1,716.7 10,141.2 Balance of sale and purchase 265.9 -3.4 124.1 -37.8 77.0 52.8 478.6

2019 Sold Purchased 1,509.8 1,477.9 1,811.2 1,967.6 1,692.1 1,802.2 10,260.7 Balance of sale and purchase 1,576.4 1,526.9 1,655.8 1,842.1 1,777.4 1,753.6 10,132.2 Sold 66.6 49.0 -155.4 -125.5 85.3 -48.6 -128.5

 

Years Operations July August September October November December For the year. total

2018 Sold 1,831.2 1,648.2 1,527.2 1,776.7 1,641.5 1,952.9 20,040.2 Purchased 1,585.9 1,719.8 1,715.8 1,832.5 1,736.1 1,981.5 20,712.7 Balance of sale and purchase -245.3 71.6 188.6 55.8 94.6 28.6 672.4

2019 Sold 2,061.8 1,950.7 1,897.9 2,103.2 1,790.3 2,310.5 22,374.9 Purchased 1,775.5 1,805.1 1,938.5 1,903.7 1,830.1 2,458.1 21,843.3 Balance of sale and purchase -286.2 -145.6 40.6 -199.5 39.9 147.6 -531.7

                                                            * Economic entities – commercial and non-commercial organizations, independent entrepreneurs, and non-bank financial institutions.

124 Attachment 1.7

to the Report of the National Bank for 2019

INFORMATION on foreign exchange purchase/sale by natural persons in 2018 – 2019

(USD mln) Years Operations January February March April May June For the first half

of the year, total 2018 Sold 693.8 675.2 730.4 764.9 843.0 765.3 4,472.5

Purchased 656.7 547.8 591.5 617.8 635.7 626.1 3,675.6 Balance of sale and purchase -37.1 -127.4 -138.9 -147.2 -207.3 -139.2 -797.0

2019 Sold 683.3 668.6 707.3 837.3 839.8 784.7 4,521.0 Purchased 677.5 612.7 727.7 738.5 708.0 734.1 4,198.6 Balance of sale and purchase -5.8 -55.9 20.4 -98.7 -131.8 -50.5 -322.4

 

Years Operations July August September October November December For the year. total

2018 Sold 814.7 862.9 712.5 793.9 725.8 707.5 9,089.7 Purchased 688.5 710.5 705.7 749.5 715.6 729.3 7,974.9 Balance of sale and purchase -126.1 -152.4 -6.7 -44.4 -10.2 21.9 -1,114.8

2019 Sold 920.6 904.2 872.4 869.4 789.6 886.2 9,763.3 Purchased 853.7 796.3 781.2 819.5 787.1 929.3 9,165.6 Balance of sale and purchase -66.9 -107.9 -91.2 -50.0 -2.4 43.1 -597.7

 

   

125 Attachment 1.8

to the Report of the National Bank for 2019

DYNAMICS of the interest rate in the intraday interbank market and the interest rates on the National Bank’s operations

(% per annum)

    

126 Attachment 1.9

to the Report of the National Bank for 2019

DYNAMICS of average interest rates on banks’ new ruble loans1 as of year-end

 (% per annum)  

 

 

 

 

 

 

 

 

 

 

 

                                                            1 Excluding loans granted on preferential terms by decisions of the President of the Republic of Belarus, the Government of the Republic of Belarus at the expense of the

funds of the republican and local government bodies.

13,7

51,1

39,441,9

31,033,3

20,5

11,3 10,8

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018

127 Attachment 1.10

to the Report of the National Bank for 2019

DYNAMICS of average interest rates on natural persons’ new term ruble deposits as of year-end

(% per annum)

 

128 Attachment 2.1

to the Report of the National Bank for 2019

DYNAMICS of growth in consumer prices, core inflation, and regulated prices and tariffs for paid services offered to households and fruits and vegetables in 2010 – 2019

(%, December to December)

   

130

Attachment 2.2 to the Report of the National Bank

for 2019

DYNAMICS of broad money supply in 2019

(BYN bn)

Indicators Actual as at Growth 01.01.2019 01.01.2020 BYN bn %

1. Cash in circulation - М0 2.99 3.71 0.72 24.0 2. Transferable deposits of 5.62 6.57 0.94 16.8

natural persons 2.76 3.03 0.27 9.9 legal persons * 2.87 3.54 0.67 23.3

Monetary aggregate - М1 8.62 10.27 1.66 19.3 3. Other deposits of 7.38 9.88 2.50 33.9

natural persons 4.01 5.13 1.12 27.9 legal persons * 3.37 4.75 1.38 40.9

4. Securities issued by banks (outside bank circulation) in national currency 0.90 1.37 0.47 51.5

Ruble money supply М2* 16.90 21.52 4.62 27.4 Broad money - М3 43.23 48.51 5.28 12.2 For information: Deposits in foreign exchange (USD bn) of 11.11 12.04 0.93 8.4

natural persons 7.13 7.54 0.41 5.7 legal persons * 3.98 4.51 0.53 13.3

Deposits in precious metals (USD mln) 118.34 51.57 -66.77 -56.4

 

 

 

 

 

                                                            * Legal persons – commercial institutions, non-commercial institutions, and independent entrepreneurs, non-bank financial institutions.

131

Attachment 2.3 to the Report of the National Bank

for 2019

Regulatory legal acts adopted in 2019 as part of endeavors to improve banking supervision

Resolution of the Board of the National Bank of the Republic of Belarus No.

7 “On Amending and Modifying the Instructions on the State Registration of Banks and Non-bank Financial Institutions and Licensing Banking Activities” dated January 4, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 30 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 554 dated October 30, 2012” dated January 16, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 47 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus on the Issues of Credit Risk Assessment” dated January 28, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 89 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 669 dated December 19, 2012” dated March 1, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 352 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 640 dated December 7, 2012 and No. 669 dated December 19, 2012” dated August 29, 2019.

 

 

 

 

 

 

 

 

132

Attachment 2.4 to the Report of the National Bank

for 2019

Regulatory legal acts adopted in 2019 as part of endeavors to streamline the regulation of banking operations

Resolution of the Council of Ministers and the National Bank of the

Republic of Belarus No. 432/11 “On Automated Information System of Fulfilling Monetary Obligations” dated June 28, 2019.

Resolution of the Ministry of Finance of the Republic of Belarus and the Board of the National Bank of the Republic of Belarus No. 48/346 “On Modifying Resolution of the Ministry of Finance of the Republic of Belarus and the Board of the National Bank of the Republic of Belarus No. 143/171 dated December 8, 2005” dated August 22, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 273 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 66 dated March 29, 2001” dated June 28, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 476 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 66 dated March 29, 2001” dated December 2, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 501 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 63 dated March 29, 2001” dated December 16, 2019.

133

  Attachment 2.5to the Report of the National Bank

for 2019

Regulatory legal acts adopted in 2019 as part of endeavors to regulate the activities of non-credit financial institutions

Edict of the President of the Republic of Belarus No. 394 “On Provision and

Attraction of Loans” dated October 23, 2019. Edict of the President of the Republic of Belarus No. 503 “On Taxation”

dated December 31, 2019. Resolution of the Board of the National Bank of the Republic of Belarus No.

433 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 761 dated December 22, 2015 and No. 153 dated April 2, 2018” dated October 23, 2019.

   

134

Attachment 2.6 to the Report of the National Bank

for 2019 Regulatory legal acts adopted in 2019 as part of endeavors to streamline foreign exchange regulation and foreign exchange control  

  Resolution of the Board of the National Bank of the Republic of Belarus

No. 234 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 101 dated July 9, 2009” dated May 30, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 541 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 355 dated August 24, 2010 and No. 46 dated January 29, 2016” dated December 30, 2019.

 

   

135

Attachment 2.7 to the Report of the National Bank

for 2019Regulatory legal acts adopted in 2019 as part of endeavors to streamline the regulatory and legal basis of accounting and financial reporting   

Resolution of the Board of the National Bank of the Republic of Belarus No. 137 “On Approval of the Instruction on Accounting of Transactions Involving Assignment of a Monetary Claim” dated March 29, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 267 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 507 dated November 9, 2011 and No. 740 dated December 28, 2012” dated June 26, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 535 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus” dated December 27, 2019.

 

136

Attachment 2.8 to the Report of the National Bank

for 2019Regulatory legal acts adopted in 2019 as part of endeavors to improve cash in circulation  

Resolution of the Board of the National Bank of the Republic of Belarus No. 117 “On Approval of the Instructions on the Procedures of Carrying out Cash Transactions and Settlements in Cash” dated March 19, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 118 “On Invalidating Certain Resolutions of the Board of the National Bank of the Republic of Belarus” dated March 19, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 119 “On Invalidating Certain Resolutions of the Board of the National Bank of the Republic of Belarus” dated March 19, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 228 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 211 dated December 21, 2006” dated May 27, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 247 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 214 June 6, 2011 and No. 524 dated September 11, 2013” dated June 13, 2019.

137

Attachment 2.9 to the Report of the National Bank

for 2019Regulatory legal acts adopted in 2019 as part of endeavors to improve the payment system of the Republic of Belarus  

Edict of the President of the Republic of Belarus No. 148 “On Digital Banking Technologies” dated April 18, 2019.

Resolution of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 819/16 “On Modifying Resolution of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 924/16 dated July 6, 2011” dated November 29, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 153 “On Modifying the Standards of Carrying out Settlements” dated April 15, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 236 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 184 dated November 11, 2009 and No. 548 dated October 29, 2012” dated May 31, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 342 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 499 dated October 31, 2018” dated August 19, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 359 “On Adopting the Standards of Carrying out Settlements” dated September 4, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 379 “On Adopting the Instructions on Using Software and Hardware and Technologies” dated September 19, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 403 “On Invalidating Certain Structural Elements of Resolution of the Board of the National Bank of the Republic of Belarus No. 116 dated March 16, 2018” dated October 3, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 424 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 497 dated September 21, 2016” dated October 16, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 426 “On Adopting the Instructions on Conducting Procedures of Remote Identification and Remote Update” dated October 17, 2019.

138

Resolution of the Board of the National Bank of the Republic of Belarus No. 468 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 88 dated June 26, 2009” dated November 21, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 493 “On Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 499 dated October 31, 2018” dated December 6, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 536 “On Modifying Resolutions of the Board of the National Bank of the Republic of Belarus No. 184 dated November 11, 2009 and No. 548 dated October 29, 2012” dated December 27, 2019.

Resolution of the Board of the National Bank of the Republic of Belarus No. 552 “On Adopting the Standards of Carrying out Settlements” dated December 31, 2019.

139

Attachment 2.10 to the Report of the National Bank

for 2019

DYNAMICS of number of payment instructions settled via the BISS in 2010 – 2019 (million units)

 

   

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

140

Attachment 2.11 to the Report of the National Bank

for 2019

DYNAMICS of amounts of payment instructions settled via the BISS in 2010 – 2019 (BYN bn)

 

   

0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

141

Attachment 2.12 to the Report of the National Bank

for 2019

DYNAMICS of share of non-cash transactions in 2010 - 2019 (%)  

 

 

0

10

20

30

40

50

60

70

80

90

100

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Share of non-cash transactions in the total number of operations with cards

Share of non-cash transactions in the total volume of operations with cards

Share of non-cash turnover in retail turnover