APPROVED Edict of the President of the Republic of Belarus No. 194 dated May 21, 2019

REPORT of the National Bank of the Republic of Belarus

for 2018

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 leasing and microfinance organizations’ activities and activities in the over-the-counter forex market

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 markets

1.3.3.4. Government securities market

1.3.3.5. Corporate securities market

1.3.3.6. Trust management carried out by banks

1.3.3.7. 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 leasing and microfinance organizations’ activities and activities in the over-the-counter Forex market

2.3.1. Off-site control

2.3.2. Audits of leasing and microfinance organizations and forex companies

2.4. Regulation of credit and deposit operations and non-cash settlements

2.4.1. Improvement of regulatory legal acts governing credit and deposit operations

2.4.2. Streamlining regulation of non-cash settlements

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2.5. Formation of credit histories and provision of credit reports

2.6. Regulation of leasing and microfinance organizations’ activities and activities in the over-the-counter Forex market

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. Financial stability monitoring

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. Financial literacy

2.13. Research activities

2.14. International cooperation

2.15. Staffing and staff training

2.16. Internal audit Chapter 3. Annual financial statements

Forms of the annual financial statements of the National Bank for 2018

Notes to the annual financial statements of the National Bank for 2018

Conclusion

Attachments to the Report of the National Bank of the Republic of Belarus for 2018

1.1 – 1.12. Tables, figures, and schedules to Chapter 1

2.1 – 2.14. Tables, figures, and schedules to Chapter 2

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Introduction

The Report of the National Bank for 2018 was prepared in accordance with Article 46 of the Banking Code of the Republic of Belarus (hereinafter – the “Banking Code”).

In 2018, 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 2018 approved by Edict of the President of the Republic of Belarus No. 470 dated December 31, 2017, having regard to the current macroeconomic situation.

The National Bank’s activities in 2018 were aimed at attaining the main monetary policy 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 2018 was

characterized by maintenance of macroeconomic and financial stability, increased volumes of manufactured products, as well as the growing investment activity and households’ incomes in real terms.

In the year under review, the volume of Gross Domestic Product (hereinafter – “GDP”) amounted to BYN121.6 billion in current prices. In comparable prices the volume of GDP went up by 3% versus 2017 (in 2017, it grew by 2.5%) (Attachment 1.1).

Retail turnover (in comparable prices) went up in 2018 by 8.4% compared with 2017 (in 2017, by 4.4%).

Households’ real wages grew up in 2018 by 11.6% compared with 2017 (in 2017, by 6.2%); real disposable money income went up by 8% (in 2017, by 2.8%).

Investment in fixed capital increased in 2018 (in comparable prices) by 5.1%, as in the previous year. The annual volume of investments in fixed capital totaled BYN24.3 billion; their share in GDP did not change compared with 2017 (19.9% of GDP).

In the technological structure of investment in fixed capital the expenditures for construction and installation works (49.9%) were dominating, while investments in assets (machinery, equipment, and vehicles) amounted to 39.9% and other works and costs – 10.1% of the total volume of capital investments.

Industrial output increased in 2018 by 5.7% versus 2017 (in 2017, by 6.1%).

Finished industrial stock at the enterprises’ warehouses amounted as at January 1, 2019 to BYN4.5 billion, having risen by 16% since the beginning of the year. With respect to the monthly average volume of production, it amounted as at January 1, 2019 to 60.9% compared with 61.3% as at January 1, 2018.

Financial condition of non-financial organizations in 2018 compared with 2017 (Attachment 1.2) worsened to a slight degree:

- revenues from the sale of products, goods, works, and services amounted in 2018 to BYN222.3 billion, having grown in nominal terms by 15.8% compared with 2017; 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 7.8% growth (in nominal terms) versus 2017. At the same time, profit before tax went down by 30.6%; net profit – by 38.9%.

The real values of revenues from the sale of products, goods, works and services increased, while all profit indicators went down.

The return on sales decreased from 8.2% in 2017 to 7.6% in 2018; return on sold products – from 10.2% to 9.5% respectively.

In the year under review, the number of loss-making organizations went down to a slight degree, from 1,097 organizations in 2017 to 1,094 organizations in 2018. The share of loss-making organizations in the total number of organizations did not change and totaled 15.2%. In 2018, the amount of net loss per one organization in the red in the country on average totaled BYN4.6 million (in 2017, BYN2.3 million).

Budgetary policy in 2018 remained well-balanced. According to the data of the Ministry of Finance, in 2018 the Government

ran a consolidated budget surplus of BYN4.6 billion, or 3.8% of GDP (2.8% of GDP in 2017).

In 2018, consolidated budget revenues grew by 19.1%, amounting to BYN37.7 billion, or 31% of GDP (29.9% of GDP in 2017) (Attachment 1.3). Consolidated budget expenses amounted to BYN33.1 billion, with their ratio to GDP remaining unchanged compared with the year earlier – 27.2% of GDP.

According to the data of the Ministry of Finance, in 2018 the republican budget ran a surplus as well in the amount of BYN4.7 billion, or 3.8% of GDP (in 2017, 2.6% of GDP). Republican budget revenues grew in 2018 compared with 2017 by 23.4% and totaled BYN24.4 billion, or 20.1% of GDP (18.7% of GDP in 2017). Republican budget expenses totaled BYN19.7 billion, or 16.2% of GDP (16.1% of GDP in 2017).

According to the data of the Ministry of Finance, as at January 1, 2019, the Government debt of the Republic of Belarus amounted to BYN45.4 billion, growing over 2018 by BYN3.2 billion, or by 7.6%.

As at January 1, 2019, the Government domestic debt totaled BYN8.9 billion (7% of GDP), having dropped over 2018 by BYN0.3 billion (adjusted for the currency translation differences), or by 3.1%.

In 2018, domestic government bonds for legal and natural persons denominated in foreign exchange worth USD529.5 million were placed. In the year under review, government bonds for legal and natural persons denominated in foreign exchange and in Belarusian rubles worth USD864.9 million and BYN123.4 million, respectively, were retired.

The Government external debt amounted as at January 1, 2019 to USD16.9 billion (28.4% of GDP), having increased over 2018 by USD0.2 billion (adjusted for the currency translation differences), or by 1%. In 2018, the Government

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attracted external loans in the amount of USD2,353.8 million; repaid –USD1,997.3 million.

1.2. The balance of payments and gross external debt

In 2018, the balance of payments of the Republic of Belarus ran a slight

deficit. The current account deficit reduced due to the improvement in the results of foreign trade in services and the balance of secondary income.

The deficit of the current account of the balance of payments totaled USD0.3 billion, or 0.4% of GDP, having dropped by USD0.7 billion compared with 2017 (Attachment 1.4).

In the year under review, the surplus of foreign trade in goods and services totaled USD0.7 billion (in 2017, USD0.1 billion).

According to the balance of payments, in 2018 the balance of foreign trade in goods was characterized by the deficit in the amount of USD2.7 billion (in 2017, USD3 billion). At that, the balance of foreign trade in energy goods was, practically, at the level of 2017, amounting to minus USD3.4 billion. The balance of foreign trade in non-energy goods totaled USD0.8 billion, compared with USD0.5 billion in 2017.

In 2018, exports of goods grew by 15.9%, or by USD4.6 billion, amounting to USD33.2 billion. The growth in the delivery of intermediate non-energy goods made the major impact on the dynamics of export. The real effective exchange rate index of the Belarusian ruble, as measured by the producer price index, dropped in January - December 2018 by 4% versus January - December 2017 (Attachment 1.5). Therefore, the price competiveness of exports was maintained.

Imports of goods increased in 2018 by 13.4%, or by USD4.2 billion, amounting to USD35.9 billion. Recovery of economic growth and investments in fixed capital accounted for the increase in the investment imports by USD0.4 billion. The consumer imports went up by USD0.8 billion due to the increase in the households’ real income. The imports of intermediate goods went up by USD3 billion, including that of energy goods – by USD1.4 billion.

A more intensive foreign trade in services made a positive impact on the improvement of the balance of current account. The exports of services grew by 11.2%, totaling USD8.7 billion. The imports of services went up by 12.5%, amounting to USD5.4 billion. The surplus of foreign trade in services totaled USD3.3 billion (up by 9.3% compared with 2017) and was in excess of the deficit in the trade in goods to a considerable degree.

The balance of primary income worsened by USD0.3 billion and stood at minus USD2.4 billion, that was caused by an increase in payments to foreign investors on the background of growing economic activity in the country.

The balance of secondary income totaled USD1.4 billion against USD1 billion in 2017.

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According to the financial account data (excluding reserve assets), net lending to other countries totaled USD31.6 million versus net attraction of funds worth USD2.4 billion in 2017.

Attraction of financial resources to the Republic of Belarus at the expense of foreign direct investments amounted to USD1.4 billion (in 2017, USD1.2 billion). At the same time, the inflow of foreign direct investments (excluding reinvested incomes) was still at a low level – USD0.7 billion in 2018 compared with USD0.5 million in 2017.

Besides, the Government and the National Bank of the Republic of Belarus repaid in 2018 on net basis USD63.7 million. Net attraction of capital by the banking sector totaled USD0.3 billion. Net lending to the rest of the world by the other sectors amounted to USD1.7 billion.

In 2018, the balance of payments ran a deficit of USD0.1 billion compared with the surplus worth USD2.1 billion in 2017 (with account of the exclusive financing).

As at January 1, 2019, gross external debt of the Republic of Belarus amounted to USD39 billion, or 65.5% of GDP, decreasing since the beginning of the year by USD0.9 billion (Attachment 1.6).

As at January 1, 2019, the external debt of the government agencies sector of the Republic of Belarus totaled USD17.4 billion, having grown over 2018 by USD0.1 billion, or by 0.9% (with long-term credits and loans accounting for 85.5% of obligations of this sector).

The National Bank’s external debt totaled USD0.8 billion as at January 1, 2019, having dropped over 2018 by USD0.3 billion, or by 28.5%. Long-term credits and loans (64.6%) and debt securities (23.5%) accounted for, practically, the whole amount of the National Bank’s debt.

The deposit organizations’ liabilities (excluding intercompany financing) went up over 2018 by USD0.4 billion, or by 8.9%, amounting to USD4.9 billion as at January 1, 2019. At that, the long-term liabilities reduced (by USD0.1 billion), while the short-term went up by USD0.5 billion.

Debt of the other sectors (excluding intercompany financing) amounted to USD13.9 billion as at January 1, 2019, having dropped over 2018 by USD1.1 billion, or by 7.5%. The decline in debt liabilities was due to the repayment of debt under credits (by USD0.7 billion) and the long-term credits and loans (by USD0.5 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 January 1, 2019, long-term borrowings accounted for 75.4% of the total volume of borrowings.

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1.3. Financial sector

1.3.1. Banking sector

1.3.1.1. Institutional characteristics As at January 1, 2019, the banking activities in the Republic of Belarus

were carried out by 24 banks and three non-bank financial institutions. Four banks underwent liquidation (JSC “Delta Bank” (bankruptcy), CJSC “BIT-Bank”, CJSC “N.E.B. Bank”, and JSC “Eurobank”). The total number of banks’ organizational units (branches, banking services centers, settlement and cash centers, and exchange offices) in the country dropped over 2018 by 4.1%, amounting as at January 1, 2019 to 3,467.

As at January 1, 2019, 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 Germany, as well as a representative office of the Interstate Bank. Belarusian Banks had six representative offices abroad.

Foreign capital participated in the authorized capital of 19 banks. In 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, Iran, Switzerland, Poland, Kazakhstan, United Arab Emirates, Lebanon, Georgia, Great Britain, Germany, and other countries participates in the authorized capital of Belarusian banks.

As at January 1, 2019, the banks’ aggregate registered authorized capital amounted to BYN5.5 billion, having increased over 2018 by 5.2%.

Institutional development of the banking sector in 2018 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 81.3% to 77.6%, with the share of the above-mentioned banks in the banking sector’s authorized capital declining from 61.2% to 60% and in the banking sector’s assets – from 65.2% to 64.9%;

- the share of foreign banks increased from 16.3% to 20.1%. The share of such banks in the aggregate authorized capital went up from 35.1% to 35.8% and in the banking sector’s assets – from 31.9% to 32.2%; and

- the share of private banks in the aggregate authorized capital of the

                                                            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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banking sector dropped from 2.4% to 2.3%. The share of these banks in the banking sector’s assets did not change and amounted to 2.9%. Their share in the aggregate regulatory capital went up from 3.7% to 4.1%.

1.3.1.2. Sustainability and efficiency of the banking sector

In 2018, the banking sector maintained sustainability. As at January 1, 2019, banks’ regulatory capital* totaled BYN10.7 billion,

having increased over 2018 by 8.3% in nominal terms. The main source of the regulatory capital growth in the banking sector as a whole 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 8.8%.

In the year under review the banking sector’s income had the following structure**: interest income – 61.9%, commission income – 21.2%, other banking income – 13.2%, other operational income – 3.5%, and receipts under written-off debts – 0.2%.

In the structure of expenditures** the interest expenses totaled 28.5%, other operational expenditures – 37.3%, other banking expenditures – 8.5%, and commission expenses – 7.8%. 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 14.4% in banks’ expenditures.

The banking sector’s profit* went up in nominal terms compared with 2017 by 23.6% and totaled BYN1,096.3 million. An increase in the banks’ profit was due to the reduction in 2018 in net allocations to reserves (which totaled 18.6% compared with 2017) that was related to the slowing-down of the trend towards worsening of the banks’ assets quality. In the year under review, net allocations to reserves amounted to BYN0.9 billion.

At the end of 2018, the return on assets (in annual terms) went up from 1.36% as at January 1, 2018 to 1.56% as at January 1, 2019 and the return on regulatory capital (in annual terms) – from 9.55% to 10.72% respectively.

Over 2018, the growth of the banking sector’s assets exposed to credit risk, which amounted as at January 1, 2019 to BYN55.7 billion (as at May 1, 2018 –BYN49.4 billion) was observed.

Approval of Resolution of the Board of the National Bank of the Republic of Belarus No. 505 “On Amending and Modifying Certain Resolutions of the Board of the National Bank of the Republic of Belarus” dated December 15, 2017, which came into force on April 1, 2018 and introduced the notions of “non-                                                            

*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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performing assets” and “restructured debt”, contributed to the stabilization of the situation with the banks’ non-performing assets.

To the non-performing assets are attributed the assets exposed to credit risk, which are classified under risk Groups V – VI, as well as the restructured debt classified under risk Groups IV – VI.

As at January 1, 2019, the share of non-performing assets at banks totaled 5% (as at May 1, 2018 – 3.5%), with the volume of non-performing assets amounting to BYN2.8 billion, having grown over May – December 2018 by BYN1 billion, or by 60%. The main source of growth of the operating banks’ non-performing assets was restructured debt incorporated in non-performing assets. The volume of restructured debt totaled 79.2% of the volume of non-performing assets.

In 2018, the banks increased the extent of coverage of assets exposed to credit risk by special provisions with a view to leveling out the credit risk. The amount of special provisions established by banks was growing over the year under review and totaled BYN3.5 billion as at January 1, 2019 (BYN2.7 billion as at January 1, 2018). The extent of coverage of assets exposed to credit risk by special provisions went up from 6.2% as at January 1, 2018 to 6.3% as at January 1, 2019.

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 value of the requirement characterizing the coverage of the assumed risks (regulatory capital adequacy ratio) totaled 17.7% as at January 1, 2019, with the prescribed minimum requirement for an individual bank being 10% (with account of the conservation buffer – 11.875%). 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. As part of implementation of new capital, leverage and liquidity Basel III standards as prudential requirements for banks, on January 1, 2018, the liquidity indicators were introduced as secure functioning requirements and the minimum values of the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) in the amount of 100% were set, as well as the requirements to submission of reports on compliance therewith and analytical information on the liquidity risk monitoring instruments.

As at January 1, 2029, the average LCR in operating banks totaled 167.6%, with the prescribed requirement being no less than 100%. The average value of the NSFR in operating banks totaled 120.4% as at January 1, 2019, with the prescribed requirement being no less than 100%.

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1.3.2. Non-banking sector

1.3.2.1. Institutional characteristics As at January 1, 2019, 97 leasing organizations were in the Register of

Leasing Organizations. In 2018, the number of leasing organizations in the Register decreased by six (13 organizations were included and 19 organizations were struck off).

Foreign capital participated in the authorized capital of 30 leasing organizations. At that, in 25 leasing organizations the share of foreign investors’ participation in the authorized capital totaled 50% and more (of which 11 organizations were wholly-foreign owned). Capital from Cyprus, Estonia, Russia, Latvia, Lithuania, Luxemburg, Italy, Germany, Austria, the Great Britain, Greece, Israel, the UAE, Ukraine 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 11 leasing organizations.

The leasing organizations’ aggregate authorized capital totaled BYN649.7 million as at January 1, 2019, having increased over 2018 by 48.2%.

The volume of the leasing organizations’ leasing portfolio, including under the residential property leasing agreements, and its share in GDP went up over 2018. As at January 1, 2019, the ratio of the aggregate price of the leasing agreements entered into by the leasing organizations in 2018 to GDP totaled 2.8%.

As at January 1, 2019, 104 microfinance organizations (four consumer cooperatives, five funds, and 95 legal persons engaged in lombard activities) were on the Register of Microfinance Organizations. In 2018, the number of microfinance organizations in the Register went down by 17, with six organizations being included therein and 23 organizations being excluded therefrom.

The aggregate authorized capital of the profit-making microfinance organizations (lombards) totaled BYN5 million as at January 1, 2019, having grown over 2018 by 51.5%. Capital from Russia, Latvia and Ukraine participated in the lombards’ authorized capital.

The activities of microfinance organizations in 2018 were characterized by the growing volume of provided monetary funds and number of microloan agreements on the background of a slight decline in the number of borrowers. The measures taken by the National Bank also resulted in the decline in the value of microloans granted by non-profit-making microfinance organizations and

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increase in the amount of authorized capital of profit-making microfinance organizations (lombards).

As at January 1, 2019, 10 organizations were in the Register of Forex Companies. In 2018, the number of forex companies in the Register did not change (two organizations were included therein and excluded therefrom).

In the authorized capital of all 10 forex companies participated foreign capital from such countries as Russia, Cyprus, Ireland, Poland, Saint Vincent and the Grenadines, the Commonwealth of Dominica, Panama, Mauritius, Liechtenstein, and China. At that, the share of foreign investors in the authorized capital of nine forex companies totaled 100%.

As at January 1, 2019, the aggregate authorized capital of forex companies totaled BYN6.3 million, having grown 1.6 times over 2018.

Save the forex companies, the JSC “MTBank”, which established the banking forex platform (MTBankFX) within the joint project with the Swiss bank DukascopyBankSA, as well as the JSC “Technobank” (since 2018 Q4), 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 2018, the number of clients of forex companies increased more than 6.5 times and the share of nonresident clients – more than 10 times and, 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 leasing and microfinance organizations’

activities and activities in the over-the-counter forex market As at January 1, 2019, the aggregate leasing portfolio* totaled BYN4.2

billion (a growth by 49.4% over 2018), or 20.5% of the economic entities’ debt owed to banks under the long-term credits (as at January 1, 2018 – 14.3%).

The volume of new business (the aggregate value of the agreements entered into by the leasing organizations) stood in 2018 at BYN3.4 billion, being by 60.4% higher than the value of this indicator in 2017. The volume of the leasing companies’ new business totaled 22.1% of the volume of the long-term credits issued by banks to the economic entities.

Over 2018, about 549 thousand items of leasing were passed to lessees, exceeding by 33.7% the indicator of 2017.

The aggregate net profit of the leasing organizations in 2018 stood at BYN119.2 million.

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

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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 80.9% of the leasing portfolio.

As at January 1, 2019, the share of the lessees’ overdue liabilities under leasing payments totaled 3.6% of the total volume of their liabilities under financial lease (leasing) agreements (as at January 1, 2018 – 5.6%).

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% (BYN2.9 billion) of the aggregate leasing portfolio.

As at January 1, 2019, the export leasing operations** accounted for 1.8% of the total leasing portfolio. The majority of export operations was carried out by OJSC “Promagroleasing” (68.1%) and ”АSB Leasing“ LLC (29.6%).

In 2018, three organizations (”АSB Leasing“ LLC, ”Raiffeisen - Leasing“ JLLC and OJSC ”Agroleasing“) notified of their intention to carry out leasing activities with residential property. As at January 1, 2019, the volume of the leasing portfolio under the leasing agreements totaled BYN84.3 million, having grown over 2018 by BYN64.2 million, or nearly four times. Over 2018, 228 agreements worth BYN66.3 million, under which the subject of leasing was residential property, were entered into with natural persons. Under 222 agreements of this kind (97.4%) the subjects of leasing were apartments; under six agreements (2.6%) – detached houses.

According to the reports as at January 1, 2019, the microfinance organizations’ assets totaled BYN30.5 million, own capital – BYN16.7 million, liabilities – BYN13.8 million, and net profit obtained over the year – BYN0.9 million. Compared with January 1, 2018, the microfinance organizations’ assets grew by BYN2.6 million (9.3%), own capital – by BYN0.7 million (4.4%), and liabilities – by BYN1.9 million (16%). Net profit of the microfinance organizations went down over 2018 by BYN1.5 million (62.5%) versus 2017.

The amount of microloans granted in 2018 totaled BYN113.3 million, an increase by BYN0.8 million, or by 0.7%, compared with 2017.

Consumer cooperatives granted BYN1.2 million (an increase by BYN0.4 million, or by 50%, compared with 2017). The whole amount was allocated to natural persons for the purposes of developing business and entrepreneurial activities. In 2018 Q4, the average annual rate on microloans totaled 17.7%.

Funds granted BYN2.8 million (a decline by BYN6.5 million, or 3.3 times, compared with 2017). The microloans to natural persons for the purposes of developing business and entrepreneurial initiative accounted for BYN2.6 million,

                                                            **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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or 92.9% (in 2017, BYN8.3 million, or 89.2%). In 2018 Q4, the average rate on microloans stood at 6.2%.

Lombards granted BYN109.3 million (an increase by BYN6.8 million, or by 6.6%, compared with 2017). Microloans issued versus pledged items from precious metals and stones accounted for BYN86 million, or 78.7% (82.5% in 2017). In 2018 Q4, the average rate on microloans amounted to 1%, a decline by 0.1 percentage point versus the same period in 2017.

According to the reports as at January 1, 2019, the forex companies’ assets totaled BYN19 million, own capital – BYN5.5 million, and liabilities – BYN13.5 million. As compared with January 1, 2018, the forex companies’ assets went up by BYN12.3 million (2.8 times), own capital – BYN3 million (2.2 times), and liabilities – BYN9.3 million (3.2 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 USD5.7 million as at January 1, 2019. 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 USD3.1 million as at January 1, 2019, 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 2018, the average per quarter number of clients of forex companies, including the JSC “MTBank” and the JSC “Technobank”, totaled 7,300. The clients of forex companies and the above-mentioned banks initiated in 2018 over two million transactions worth USD26.2 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, 2019, the guarantee fund of the National Forex Center amounted to USD1.1 million.

1.3.3. Financial market

In 2018, the financial market was developing, on the whole, in line with the

directions determined by 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. The financial market was transformed towards improvement of

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the level of its diversification and sustainability, including development of the non-banking sectors of the financial market.

1.3.3.1. Foreign exchange market

In 2018, the volume of the domestic foreign exchange market totaled

USD73 billion, an increase by 16.2% versus the level of 2017. The stock market volume amounted to USD8.2 billion (a decline by 8.6%) and the over-the-counter market volume stood at USD51.3 billion (an increase by 23.1%). The cash foreign exchange market turnover totaled USD13.5 billion, having grown by 10.6% versus 2017.

In the year under review, resident economic entities sold foreign exchange worth USD20 billion, an increase by 10.2% (by USD1.9 billion) compared with 2017, and purchased foreign exchange in the amount of USD20.7 billion, an increase by 8.5% (by USD1.6 billion) compared with 2017 (Attachment 1.7).

As a result, net demand for foreign exchange of resident economic entities in 2018 stood at USD0.7 billion (in 2017, USD0.9 billion).

Foreign exchange purchased by resident economic entities in the domestic foreign exchange market in 2018 was, mainly, used to repay credits (USD5.9 billion or 28% of the total volume purchased over the year), procure raw products and materials (USD3.3 billion or 15.4%), purchase equipment and components (USD2.6 billion or 12.1%), and foods and agricultural products (USD1.5 billion or 7.1%), and other purposes (USD1.4 billion or 6.4%). A total of 69% of the foreign exchange purchased by resident economic entities was used for the above-mentioned purposes.

In 2018, households were, mainly, net sellers of foreign exchange. Households sold over 2018 USD1.1 billion on a net basis (in 2017, USD1.8 billion). At that, net supply under operations involving foreign exchange in cash totaled USD1.7 billion; net demand under operations involving non-cash foreign exchange amounted to USD0.6 billion (Attachment 1.8).

The operations involving the US dollars dominated the Belarusian foreign exchange market (49.1%). The share of this currency in foreign exchange operations fell by 1 percentage point compared with 2017, with the share of euro increasing from 23.8% to 25.9% and the share of the Russian ruble declining from 25.7% to 24.6%. The volume of operations involving other foreign currencies remained insignificant (0.5%).

The official exchange rate of the Belarusian ruble dropped over 2018 versus the US dollar by 9.5% (up to BYN2.1598/USD1), the euro – by 5% (up to BYN2.4734/EUR1), and grew versus the Russian ruble by 9.2% (up to

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BYN3.1128/RUB100). In the year under review the price of the currency basket* declined by 1.1%.

1.3.3.2. Interbank credit market

In 2018, unsecured interbank credits in the national currency continued to

be one of the main instruments regulating banks’ liquidity. Resident banks of the Republic of Belarus and foreign banks, the share of transactions of which totaled 8.4% of the total volume of transactions in the interbank market, were involved in activities in this segment of the money market. The volume of operations in the interbank market went up from BYN19 billion to BYN21 billion versus the previous year.

The structure of the interbank market saw, practically, no changes. While in 2017 the intraday interbank credits accounted for 83.5% of the aggregate interbank market, in 2018 such credits stood at 84.4%. At that, the share of transactions concluded for the term of 2-7 days dropped over the year from 15% to 11%.

At the same time, the banks continued in 2018 to attract/place resources in the national currency in the interbank market through repo and swap transactions. The share of such operations in the total volume of the interbank market totaled 9% and 6% respectively.

The average weighted rate for residents in the intraday interbank market did not change significantly over the year, having grown from 10.5% per annum in January 2018 to 10.8% per annum in December 2018. 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 1.9).

1.3.3.3. Credit and deposit markets

The credit market. The claims of banks and the JSC “Development Bank

of the Republic of Belarus” on the economy went up by 15.7%, or by BYN7,141.7 million, amounting as at January 1, 2019 to BYN52,538.4 million. Over 2018, banks’ claims on the economy increased by 14.5%, or by BYN6,266.7 million, amounting as at January 1, 2019 to BYN49,534.2 million, including in Belarusian rubles they went up by 18.8%, or by BYN3,884.5 million, amounting to BYN24,528.8 million, and in foreign exchange (in dollar terms) they grew up by 1%, or by USD109.5 million, amounting to USD11,577.7 million.                                                             

* The value of the currency basket is calculated as the weighted geometric mean of the bilateral exchange rates of the Belarusian ruble versus the US dollar, the euro, and the Russian ruble for one unit of foreign exchange with the weights 0.3, 0.2, and 0,5 respectively.

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In 2018, banks provided loans to the economy, mainly, on the long-term basis. The share of such loans in the total amount of debt under credit totaled 72% as at January 1, 2019 (73.5% as at January 1, 2018).

Credits to the economic entities accounted for the major part of banks’ credit portfolio in the year under review. As at January 1, 2019, the debt under such credits totaled BYN32,464.6 million, having increased over the year by BYN2,734 million, or by 9.2%.

In the structure of debt under credit by the types of economic activity the credits granted to the processing enterprises prevailed, the amount of debt of which totaled BYN17,329.2 million, or 53.4% of the total debt under credit, as at January 1, 2019. Debt under credits issued to the enterprises and organizations representing wholesale and retail trade, vehicles and motorcycles maintenance (BYN5,524.1 million, or 17%), agriculture, forestry and fishery (BYN2,337.7 million, or 7.2%), as well as other types of economic activities (BYN3,072.4 million, or 9.5%) remains high as well.

According to the information of banks and JSC “Development Bank of the Republic of Belarus” (hereinafter – the “Development Bank”), in 2018, within Resolution of the Council of Ministers of the Republic of Belarus No. 1046 “On Granting Credits Under Government Programs and Measures in 2018” dated December 29, 2017, credits worth BYN1,198.8 million were granted (by banks – worth BYN505.3 million and by the Development Bank – worth BYN693.5 million), or 96.7% of the amount of limits of directed lending approved for a year.

Debt under credits issued by banks and the Development Bank under government programs and measures following the decisions of the President and the Council of Ministers of the Republic of Belarus totaled BYN16,181.1 million as at January 1, 2019, having dropped since the beginning of the year by BYN25.8 million, or by 0.2%, of which the debt under credits issued by banks amounted to BYN12,283.9 million (a drop by BYN574.1 million, or by 4.5%) and the debt under credits granted by the Development Bank totaled BYN3,897.3 million (an increase by BYN548.3 million, or by 16.4%).

As at January 1, 2019, the share of debt under credits granted by banks and the Development Bank under government programs and measures in the banks’ and the Development Bank’s claims on the economy stood at 30.8%, having dropped over 2018 by 4.9 percentage points.

In 2018, banks granted credits worth BYN680.7 million for house construction within implementation of Resolution of the Council of Ministers of the Republic of Belarus No. 1051 “On Measures on Fulfilling the Assignments for 2018 on Housing Construction, Volumes of Putting into Operation and Financing Housing Construction and Objects of Engineering and Transport Infrastructure in 2019” dated December 30, 2017. Soft credits were issued in the amount of BYN126.1 million, including credits granted at the rates reduced by

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50% of the refinance rate of the National Bank for persons registered as being in need of improved housing conditions – worth BYN17.5 million. Credits granted under banks’ terms and conditions within implementation of Edict of the President of the Republic of Belarus No. 240 “On Provision of the Government Support to Citizens for Housing Construction (Reconstruction)” dated July 4, 2017 stood at BYN554.6 million.

Depository market. In 2018, funds attracted from natural persons (including bank deposits, bank deposits in precious metals, saving certificates and bonds) rose by BYN1,940.6 million, or by 8.8%, amounting as at January 1, 2019 to BYN23,969.9 million.

Funds attracted from natural persons in the national currency grew over the year by BYN1,238.5 million, or by 22.4%, amounting as at January 1, 2019 to BYN6,778.9 million; funds attracted in foreign exchange went up by BYN702.1 million in the equivalent, or by 4.3%, totaling BYN17,191 million in the equivalent as at January 1, 2019.

Bank deposits were the most popular banking products with natural persons for placement of temporary free funds. They grew over the year under review by BYN2,070.8 million, or by 10.3%, amounting as at January 1, 2019 to BYN22,174.3 million (92.5% of the total volume of attracted natural persons’ funds).

Despite the fact that foreign exchange component still dominates the structure of the natural persons’ deposits, over 2018 the share of households’ deposits in foreign exchange dropped from 72.5% to 69.5%, while the share of deposits in the national currency in the total volume of deposits went up from 27.5% to 30.5%.

Natural persons’ bank deposits* in the national currency grew over 2018 by BYN1,237 million, or by 22.4%, amounting as at January 1, 2019 to BYN6,768.2 million, of which bank time deposits and deposits in escrow went up by BYN669,9 million, or by 20%, amounting to BYN4,010.8 million.

Natural persons’ bank deposits in foreign exchange (in dollar terms) decreased by USD253.9 million, or by 3.4%, amounting as at January 1, 2019 to USD7,133.1 million. Time deposits and deposits in escrow dropped by USD591.7 million, or by 8.8%, amounting to USD6,097.9 million. The bulk of the natural persons’ deposits was placed with 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, 2019 to 87.6% of the total volume of deposits with banks, or BYN19,433.8 million.

                                                            *Here and hereinafter in subparagraph 1.3.3.3 of paragraph 1 of this Report the information on the natural

persons’ bank deposits is given based on the methodology of calculation of broad money supply.

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In 2018, the legal persons’ bank deposits grew by BYN623.6 million, or by 4.2%, amounting to BYN15,315.5 million as at January 1, 2019.

Legal persons’ bank deposits in the national currency grew over 2018 by BYN575.6 million, or by 9.5%, amounting as at January 1, 2019 to BYN6,624.0 million.

Legal persons’ deposits in foreign exchange (in dollar terms) dropped by USD357.4 million, or by 8.2%, amounting as at January 1, 2019 to USD4,024.2 million.

Legal persons’ time deposits and deposits in escrow in the national currency and foreign exchange (in ruble terms) amounted as at January 1, 2019 to BYN8,506.8 million, or 55.5% of the legal persons’ total deposits.

An improvement in the structure of the banks’ deposit portfolio was observed throughout 2018, which manifested itself in the increased share of the natural and legal persons’ irrevocable and long-term irrevocable deposits.

Thus, the share of irrevocable deposits in the total volume of the natural and legal persons’ deposits in the national currency went up from 45.1% in December 2017 to 64.4% in December 2018.

The share of the long-term component in the natural and legal persons’ irrevocable deposits in Belarusian rubles went up from 38.4% in December 2017 to 68.7% in December 2018.

Interest rates of the credit and deposit market. In 2018, 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 maintenance of price stability (Attachments 1.10 - 1.11). The rates on fresh banks’ credits in Belarusian rubles felt to a record low. 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 9.8% per annum in December 2018, having increased by 2.2 percentage points versus December 2017. The average interest rate on the natural persons’ fresh time bank deposits in foreign exchange totaled 1.2% per annum, a growth by 0.1 percentage point compared with December 2017.

The average interest rate on the legal persons’ fresh time bank deposits in the national currency stood at 6.9% per annum in December 2018, having increased by 1.3 percentage points versus December 2017. The average interest rate on the legal persons’ fresh time bank deposits in foreign exchange totaled 1.3% per annum, having dropped by 0.2 percentage point compared with December 2017.

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The average interest rate on fresh bank credits* in the national currency issued to legal persons amounted to 11.1% per annum in December 2018, having dropped by 0.4 percentage points versus December 2017. The average interest rate on fresh bank credits* issued to natural persons in the national currency amounted to 9.9% per annum, having dropped by 1.1 percentage points versus December 2017.

The average interest rate on fresh bank credits* in foreign exchange issued to legal persons totaled 4.9% per annum in December 2018, having dropped by 0.8 percentage point compared with December 2017.

1.3.3.4. Government securities market

With a view to refinancing the government debt, the Ministry of Finance**

placed in 2018, using different mechanisms, in the domestic financial market government long-term bonds denominated in foreign exchange in the total amount of USD529.5 million in the equivalent, including by means of:

- placement on the JSC “Belarusian Currency and Stock Exchange” worth USD518 million in the equivalent (nine issues); and

- sale under agreements with legal persons worth USD11.5 million (one issue).

Government bonds denominated in the national currency were not placed in 2018.

The volume of government securities placed in the domestic financial market and circulating as at January 1, 2019 declined versus early 2018 by BYN287.9 million in the equivalent, or by 3.1%, totaling BYN8,887.6 million in the equivalent, including:

- government long-term bonds denominated in the national currency – BYN1,481.1 million (the share in the total volume of government securities - 16.7%);

- government long-term bonds denominated in foreign exchange – BYN7,406.1 million in the equivalent (83.3%); and

- other government securities – BYN0.4 million in the equivalent (0.01%).

As at January 1, 2019, government long-term bonds accounted for 100% of the total volume of government securities.

In the structure of government securities, bonds with variable yield accounted for 30.2% and bonds with fixed interest yield – 69.8% (as at January

                                                            * 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. ** This section was prepared with the use of the data of the Ministry of Finance.

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1, 2018, the share of government bonds with variable yield totaled 44%, with fixed yield – 56%).

In 2018, government bonds worth BYN1,065,8 million in the equivalent were placed in the regulated market, an increase by 74.2% versus 2017. 2,444 deals were concluded with government bonds being placed in the regulated market in 2018 (1,305 in 2017).

In the year under review, the number of deals involving government bonds made in the course of their circulation in the regulated market totaled BYN5,159.2 million in the equivalent, a 2.3 times increase compared with 2017. 2,465 deals were concluded with government bonds circulating in the regulated market in the year under review (1,460 deals in 2017).

In 2018, professional participants of the securities market registered 353 deals involving purchase/sale of government bonds in the non-regulated market worth BYN81 million in the equivalent (a decline by 81.1% versus 2017).

1.3.3.5. Corporate securities market

The growing share of the corporate segment of the securities market

became the trend of the securities market development in 2018. Thus, the volume of listed issues of shares and corporate bonds went up by 32.82%, amounting to BYN8,528.3 million (in 2017, BYN6,420.9 million). The share of this segment in the total volume of the shares and bonds issue* in the year under review reached 82.8% (in 2017, 71.4%) (Attachment 1.12). The share of the corporate bonds market went up from 49.5% to 67.5%.

A growth in the corporate segment was caused by a 2.13 times increase in the volume of issue of bonds denominated in foreign exchange by banks and other organizations.

In 2018, the volume of the issues of shares registered in the Government Securities Register totaled BYN1,572.9 million, dropping by 20.1% compared with 2017 (BYN1,968.9 million).

As at January 1, 2019, the total volume of listed issues of the operating issuers’ shares amounted to BYN32,709.7 million, increasing by 5.1% over the year, with the ratio of the volume of shares in circulation to GDP (according to the preliminary data) totaling 26.9% (as at January 1, 2018, 29.6%).

In 2018, banks carried out 58 issues of bonds in line with sub-paragraph 1.8 of paragraph 1 of Edict of the President of the Republic of Belarus No. 277 “On Certain Issues of the Securities Market Regulation” dated April 28, 2006 worth BYN3,384.2 million in the equivalent, an increase by BYN1,251 million, or by 58.7%, compared with 2017. At that, 28 issues of bonds worth BYN1,247.5

                                                            *Excluding the volume of issue of the National Bank’s bonds.

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million, or 36.9% of the total volume of approved issue, were denominated in the national currency.

Over the year under review, 364 issues of corporate bonds of 125 issuers worth BYN6,955.4 million were registered. This volume of issue exceeds more than 1.5 times the volume of issue in 2017. The volume of bonds issued by banks in 2018 totaled BYN4,041.03 million, having grown more than 2.4 times compared with 2017. The share of banks’ bonds in the total volume of issued corporate bonds went up from 37% in 2017 to 58.1% in 2018.

In 2018, the share of corporate bonds issued in foreign exchange went up from 51.3% to 69.7%.

Thus, as at the beginning of 2019, 717 issues of corporate bonds of 206 issuers worth BYN16,006.2 million, or 13.2% of GDP, were in circulation (as at January 1, 2018, BYN13,206.2 million, or 12.6% of GDP).

The volume of corporate bonds issued in foreign exchange amounted as at January 1, 2019 to 51.4% of the total volume of corporate bonds in circulation (as at January 1, 2018, 49.8%). Due to the fact that the share of circulating corporate bonds denominated in foreign exchange exceeds 50%, foreign exchange risk in the corporate securities market is defined as rather high.

In 2018, the volume of registered issues of housing bonds, which certify the contribution by their owners of definite amounts of funds for construction of a certain size of a total area of a housing accommodation, totaled BYN513.8 million, a 1.58 times increase versus 2017.

According to Edict of the President of the Republic of Belarus No. 537 “On Issuance of Bonds by Banks” dated August 28, 2006, banks were granted the right to issue bonds secured by the right to claim the repayment of the principal amount of debt and payment of interest under the credits issued thereby for construction, reconstruction, or acquisition of housing against security of real estate (mortgage bonds). In 2018, as in 2017, mortgage bonds were not registered. The total volume of mortgage bonds issues circulating as at January 1, 2019 amounted to BYN10 million.

In the year under review, 15 issues of bonds of local executive and administrative authorities of 13 issuers worth BYN685.4 million in the equivalent were registered, dropping by 54.7% versus the volume of issue in 2017. At that, bonds denominated in foreign exchange accounted for 86.2% of issue.

As at January 1, 2019, bonds of local executive and administrative authorities worth BYN2,738.2 million were in circulation, a 4.1% decline over the year.

As at January 1, 2019, 61 professional participants were acting in the securities market, including 24 banks and the National Bank, of which there were 58 brokers, 58 dealers, 32 participants involved in depository activities, 22 participants – in securities trust management, one participant – in the activities on organizing securities trading, and one participant – in clearing activities.

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In 2018, corporate bonds worth BYN598.9 million were placed on the floor of the JSC “Belarusian Currency and Stock Exchange”, an increase by 23.4% compared with 2017. In the year under review, 3,207 deals involving placement of banks’ and enterprises’ bonds were registered in the regulated market (in 2017 – 2,200 deals).

In 2018 as in the previous year, there were no deals involving placement of shares in the regulated market.

The weighted average yield in the primary stock exchange market stood at: - on banks’ bonds denominated in Belarusian rubles – 7.9% per annum (in

2017, 9.92% per annum); - on banks’ bonds denominated in the US dollars – 3.52% per annum (in

2017, 4.3% per annum); - on other legal persons’ bonds denominated in Belarusian rubles – 9.18%

per annum (in 2017, 15.28% per annum); - on other legal persons’ bonds denominated in the US dollars – 5.62% per

annum (in 2017, 8.7% per annum); and - on other legal persons’ bonds denominated in the euro – 5% per annum

(in 2017, 6.13% per annum). In 2018, the total volume of the secondary trading in corporate securities in the

regulated market totaled BYN3,246.2 million, increasing 1.9 times compared with 2017, including in shares – BYN95.7 million (BYN84.2 million in 2017); in corporate bonds – BYN3,150.5 million (BYN1,663.9 million in 2017).

In 2018, transactions involving circulation of corporate bonds in the regulated market stood at 27.8% of the total amount of trades in the secondary stock market (in 2017, 24.5%).

The weighted average yield in the secondary market stood at: - on banks’ bonds denominated in Belarusian rubles – 11.89% per annum

(in 2017, 12.7% per annum); - on banks’ bonds denominated in the US dollars – 3.49% per annum (in

2017, 0.1% per annum); - on other legal persons’ bonds denominated in Belarusian rubles – 13.05%

per annum (in 2017, 24.1% per annum); and - on other legal persons’ bonds denominated in the US dollars – 6.03% per

annum (in 2017, 5.5% per annum). In 2018, transactions worth BYN16,858.2 million were registered in the

non-regulated market (in 2017, BYN8,002.3 million), including purchase/sale transactions involving securities worth BYN15,905.9 million (in 2017, BYN6,834.6 million). The share of purchase/sale transactions involving corporate bonds in the total volume of purchase/sale transactions involving securities in the non-regulated market stood at 95.5%.

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1.3.3.6. Trust management carried out by banks

Being professional participants of the securities market the banks are entitled to carry out trust management of monetary funds as well as securities.

In 2018, eight banks worked as trust managers: Alfa-Bank, “Priorbank” JSC, BPS-Sberbank, JSC “JSSB Belarusbank”, JSC “Belagroprombank”, Bank BelVEB OJSC, Belgazprombank, and OJSC “Paritetbank”, which started to provide the functions involving trust management on March 2018.

The volume of monetary funds and securities held by banks in trust management grew over 2018 by 53.4%, amounting as at January 1, 2019 to BYN848.5 million (as at January 1, 2018 – BYN553.2 million).

Two banks were involved in trust management of securities in 2018. 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, 2019, securities worth BYN446.3 million were placed in trust management.

Monetary funds placed by obligees in trust management, including bank management funds, grew over 2018 more than four times, amounting as at January 1, 2019 to BYN387.7 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 dropped from 98.5% as at January 1, 2018 to 71.3% as at January 1, 2019. The share of deposits in the period under review stood at 25.8%.

As at January 1, 2019, two bank management funds of the trust manager “Priorbank” JSC (“Raiffeisen - Assets Portfolio - USD” and “Raiffeisen - Assets Portfolio - EUR”) were in operation. The value of the funds’ net assets totaled USD446.4 thousand and EUR597.7 thousand (as at January 1, 2018 – USD603.2 thousand and EUR630.2 thousand).

125 natural persons were obligees of the above-mentioned funds as at January 1, 2019 (131 natural persons, including one non-resident, as at January 1, 2018).

In 2018, the level of yield of the bank management funds’ was negative (“Raiffeisen - Assets Portfolio - USD – minus 3.967% per annum” and “Raiffeisen - Assets Portfolio - EUR” – minus 6.801% per annum.

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1.3.3.7. The National Bank’s securities market In 2018, the National Bank placed bonds denominated in Belarusian rubles

worth BYN22,268.2 million at placement value, or worth BYN22,324.4 million at face value, with BYN22,504 million being repaid at face value. Over 2018, the volume of the circulating National Bank’s bonds denominated in Belarusian rubles declined by 31.1%, totaling BYN398.1 million as at January 1, 2019.

In 2018, the National Bank also placed bonds denominated in the US dollars worth USD649.2 million at actual value, or worth USD673.2 million at face value, with USD1,527.9 million being repaid at face value. Over 2018, the volume of circulating bonds denominated in the USD dollars dropped by 55.9%, totaling USD673.2 million as at January 1, 2019.

In 2018, the National Bank did not place bonds denominated in euro. At that, EUR266.9 million was repaid at face value. Over 2018, the volume of the National Bank’s circulating bonds denominated in euro dropped by 62.2%, amounting to EUR162.5 million as at January 1, 2019.

The volume of banks’ investments in debt and equity instruments of the securities market totaled BYN13,471.7 million in the equivalent*, of which the National Bank’s securities accounted for BYN1,315.6 million in the equivalent, or 9.8%.

In 2018, 2,468 transactions worth BYN2,799 million 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 BYN646.4 million (by 30%) versus 2017, including:

- 2,451 transactions worth BYN2,760.1 million in equivalent were carried out with the National Bank’s bonds denominated in hard currency, an increase by BYN1,003.2 million in the equivalent compared with 2017; and

- 17 transactions worth 38.9 million were carried out with the National Bank’s bonds denominated in Belarusian rubles, a decline by 356.9 million compared with 2017.

The share of repo transactions in the total volume of the secondary stock market of the National Bank’s bonds totaled 71.5%, or 1,828 transactions worth BYN2,001.3 million in the equivalent.

In 2018, in the over-the-counter market the volume of registered purchase/sale deals involving transactions with the National Bank’s bonds denominated in hard currency totaled BYN213.2 million in the equivalent, dropping by BYN84 million in the equivalent versus 2017.**

                                                            *According to the data of banks’ balance-sheets, excluding the incomes planned to be received in the form of interest. **Transactions involving the National Bank’s bonds denominated in Belarusian rubles were carried out on the

floor of the JSC “Belarusian Currency and Stock Exchange” only.

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Chapter 2 The National Bank’s activities

In 2018, the National Bank’s activities were aimed at maintaining

price stability and ensuring secure, sustainable and efficient functioning of the banking sector. The work on developing the financial market and payment system, liberalization of the 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

In 2018, the monetary policy was conducive to ensuring sustainability

in the monetary sphere and, thus, contributed to maintaining macro-economic stability.

Limiting inflation to no more than 6% 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 2018 by 5.6% versus 4.6% in 2017 (Attachment 2.1).

Consumer prices and tariffs grew to the utmost in the sphere of services (by 8.1%) (in 2017, by 9.5%). In the commodities market the prices for food products and non-foods grew by 5.7% and 3.8% respectively (in 2017, by 4.2% and 2% respectively).

In 2018, the core inflation stood at 4.8% in annual terms (2.5% in 2017) and, according to the National Bank’s estimates, led to the increase in consumer prices by 3.4 percentage points (the share of this factor totaled 60.8% in 2018 against 39.9% in 2017).

According to the National Bank’s estimates, regulated prices and tariffs grew over 2018 by 9% (in 2017, by 8.1%), contributing to the growth in the consolidated consumer price index by 2.3 percentage points (the share of this indicator was 40.1% against 41.3% in 2017).

The prices for fruit and vegetable products in the year under review declined by 0.9% (in 2017, went up by 19%), ensuring the slowing-down in the consumer prices growth by 0.1 percentage point (the share of this factor amounted to minus 0.9% against 18.7% in 2017).

Unfavourable situation in the agricultural market and considerable increase in the prices for fuel made the major impact on the acceleration of consumer prices. At that, inflationary expectations of the economic entities were still rather high, making an impact on the dynamics of consumer prices as well.

Industrial producers’ prices rose in 2018 by 6.4% compared with

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11.2% in 2017, with prices for investment goods increasing by 4.1%, for intermediate goods – by 7.8%, and for consumer goods – by 3.7%.

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 2018, the increase in the broad money supply, which was defined as an intermediate monetary policy target stood at 8.1% (December 2018 on December 2017), with the forecast being 9-12%.

The exchange rate policy was conducted in the exchange rate managed floating regime. The National Bank carried out foreign exchange interventions in order to smooth peak fluctuations of the currency basket.

The exchange rate policy was conducted with account of the need of attaining the inflation target. 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 the higher degree of its symmetry versus the level of the refinancing rate. In the year under review, the refinancing rate dropped from 11% to 10% per annum, the rate on standing and bilateral transactions designed to provide current liquidity (the upper limit of the interest rates band) – from 12% to 11.5% per annum. The rate on standing transactions designed to withdraw liquidity (the lower limit of the interest rates band) was maintained at the level of 8% per annum.

The average interest rate on intraday interbank credits in the national currency (operational target) totaled 10.8% per annum in December 2018, increasing by 1.1 percentage points versus December 2017.

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 fluctuation of the banking system’s liquidity near its neutral value the National Bank carried out liquidity withdrawal and provision transactions. The main liquidity regulation instruments were open market operations, which are carried out every week in the form of auction credits or 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. In addition, the banks used standing liquidity regulation transactions (credits and overnight deposits).

Under the average liquidity surplus in 2018, amounting to about BYN0.5 billion, transactions involving placement of the National Bank’s

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bonds accounted for the major share in the total volume of surplus under the National Bank’s liquidity regulation transactions (the average surplus totaled BYN0.4 billion). The average surplus under credit auctions totaled BYN0.1 billion, under standing liquidity regulation instruments (credits and overnight deposits) – BYN0.05 billion and BYN0.04 billion respectively. In 2018, the average daily surplus of the position of standard liquidity regulation instruments totaled BYN0.3 billion (in 2017, BYN2.0 billion).

In 2018, the ratio of required reserves in respect of the attracted funds in the Belarusian rubles was preserved in the amount of 4%; in respect of the attracted funds in foreign exchange – in the amount of 17%.

2.1.3. Key monetary indicators

As at January 1, 2019, the broad money supply (M3) amounted to BYN43.2 billion, having increased by BYN3.4 billion, or by 8.5% over 2018. As at January 1, 2019, foreign exchange component of the broad money supply in the dollar equivalent totaled BYN12.2 billion, having dropped by BYN0.9 billion, or by 6.7% (Attachment 2.2).

The share of foreign exchange constituent in the broad money supply decreased, and as at January 1, 2019, amounted to 60.9% (as at January 1, 2018 – 64.7%).

As at January 1, 2019, the ruble money supply (M2*) totaled BYN16.9 billion, having increased over the year by BYN2.8 billion, or by 20.1%. Among the main constituents of the ruble money supply (M2*) cash in circulation accounted for the largest relative growth in the year under review – by BYN0.6 billion, or by 27.5%. Other natural persons’ deposits, which grew over the year under review by BYN0.7 billion, or by 20.1%, accounted for the largest absolute growth.

Over 2018, the ruble money base increased by BYN1.2 billion. The main factors of its growth were the National Bank’s transactions worth BYN2.2 billion and decrease 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 decline in the National Bank’s liabilities to banks under short-term bonds and deposits in the national currency by BYN0.4 billion. A decrease in the net ruble claims of the National Bank on the Government of the Republic of Belarus by BYN1.4 billion contributed to the shrinkage of the ruble money base.

As of January 1, 2019, international reserve assets amounted to USD7.2 billion (2.1 months of the goods and services import), a USD0.2 billion decrease in the year under review.

The growth in international reserve assets was due to:

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- receipts worth USD3.1 billion from export duties for oil and oil products, other taxes and other net revenues in foreign exchange to the accounts of the Ministry of Finance;

- purchase by the National Bank and the Ministry of Finance of foreign exchange worth USD1.6 billion in the domestic foreign exchange market;

- receipts worth USD1.2 billion from the sale of bonds in foreign exchange by the National Bank and the Ministry of Finance;

- sale of eurobonds worth USD0.6billion; and - receipt of a tranche of the Eurasian Fund for Stabilization and

Development in the amount of USD0.2 billion. In 2018, the Government and the National Bank of the Republic of

Belarus repaid the external and domestic liabilities in foreign exchange worth USD5.7 billion. Over the year, foreign exchange liabilities of the National Bank decreased by USD1.1 billion.

2.2. Supervision of banks’ activities

2.2.1. Streamlining regulatory legal framework for banking

supervision In 2018, 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).

Following recommendations of the Basel Capital Accord (Basel II), recommendations on the assessment of the economic capital of a bank elaborated by the Basel Committee on Banking Supervision, as well as practice and methodology of the supervisory regulation in the EU countries, the National Bank developed and implemented new approaches to the organization of the internal procedures for capital adequacy and risks management assessment by banks and the Development Bank. These approaches provide for the establishment of the common requirements to banks with respect to the organization of the internal procedures for capital adequacy assessment, including determination of objectives, main principles, elements of the assessment, as well as identification of the existing risks, calculation of the available and economic capital and its usage, and generation of management reporting.

With the aim of improving the risks management under the conditions of digital economy development, the cyber risk was added to the list of the main types of operational risks, its definition was given and the sources of occurrence were specified. All requirements applicable to the organization of the risk management system, including responsibility of the governing bodies of a bank, definition of tolerance for risk, development of the local

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legal acts, implementation of the risk management process, conduct of stress-testing, compilation and submission of the management reporting and other elements of the system are valid for the cyber risk.

On the basis of the recommendations and explanations of the Basel Committee on the issues of implementing Basel III international standards, the methodology of calculation of the indicators characterizing the banks’ liquidity state was adjusted.

Besides, for the reason of the National Bank’s special attention to the issues of the banks’ work with non-performing assets, the recommendations with description of approaches to work with the non-performing assets based on the best foreign practices with account of the legislation peculiarities and expectations of the National Bank were submitted to banks. In particular, the necessity of application by banks of the systemic approach to the organization of work with non-performing assets, which provides for the integration of the processes of non-performing assets management into the risk management, internal control and corporate governance systems of a bank, is indicated. Banks were given recommendations to develop the strategy on non-performing assets management, as well as to conduct independent review of the efficiency of the bank’s work with non-performing assets on a repeated basis.

In 2018, as part of endeavors to improve the system of combating money laundering, terrorism financing, and financing the proliferation of weapons of mass destruction, the work on integration of FATF* international standards into the legislation was continued (Attachment 2.4). Resolution of the Board of the National Bank of the Republic of Belarus No. 62 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 818 dated December 24, 2018” of February 15, 2018 establishes requirements to banks, non-bank financial institutions, and the JSC “Development Bank of the Republic of Belarus” (hereinafter for the purpose of this section – the “banks”) with respect to organization of the system of internal control over financial transactions of the clients associated with the movement of funds on their accounts in connection with the purchase and (or) alienation of the digital units (tokens), as well as the obligation to conduct self-assessment of the risks to be involved into the clients’ operations associated with money laundering and terrorism financing under the established main indicators (coefficients) of involvement. Resolution of the Board of the National Bank of the Republic of Belarus No. 18 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 24 of January 18, 2017” dated January 19, 2018 made it necessary to submit the given indicators

                                                            *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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(coefficients) to the National Bank of the Republic of Belarus. The given indicators (coefficients) are used for exercising the off-site control over the activities of banks in terms of their compliance with legislation on combating money laundering, terrorism financing and financing the proliferation of weapons of mass destruction, analyzing the banks’ involvement into the conduct of suspicious financial operations, and choosing an object for the off-site inspections.

Within the framework of the national assessment of money laundering and terrorism financing risks, the National Bank conducted the relevant review of the banking sector and the sector of non-bank financial institutions, revealed the risks and vulnerabilities inherent in these sectors, and suggested the measures that will make it possible to mitigate the revealed risks.

2.2.2. Off-site supervision

In 2018, 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, control over banks’ compliance with the secure functioning and other prudential requirements was ensured on a permanent basis, including the increased requirements to the capital adequacy of the systemically important banks. Assessment of banks’ financial sustainability was conducted, in particular, by means of analysis of their assets’ quality, performance and state of liquidity.

The actions aimed at increasing banks’ capitalization, relieving the liquidity deficit, improving corporate governance and preventing performance of non-core activities thereby were taken to avoid negative tendencies and eliminate or prevent the situations threatening the interests of depositors and other creditors. Significant attention was paid to the management of non-performing assets by banks. In separate cases, the supervisory response measures were taken with respect to banks on the basis of a motivated judgment.

With the purpose of revealing problems at banks at early stages of their occurrence, monitoring of banks’ exposure to risks was conducted, including with the use of scoring. Suggestions as to conduct of inspections were made on the basis of the degree of risks at banks. Control over the completeness

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and timeliness of fulfilling the National Bank’s instructions and recommendations by banks was carried out.

The practice of results-oriented interaction with international financial institutions, the Association of Belarusian Banks, the State Institution “Agency for Guaranteed Repayment of Natural Persons’ Bank Deposits”, and supervisory bodies of other countries was further developed.

Within cooperation with external audit organizations, the work aimed at improving the quality of auditing was continued, as well as the practice of carrying out the meetings designed to discuss the urgent issues of banks’ activities.

2.2.3. Audits of banks

In 2018, the National Bank conducted eight audits. Control and review actions were taken on the initiative of the National Bank and included audits of the activities of JSC “Technobank”, Bank BelVEB OJSC, JSC Alfa-Bank, JSC “JSSB Belarusbank”, Open Joint Stock Company “BPS-Sberbank”, JSC Idea Bank, CJSC VTB Bank, and JSC “Development Bank of the Republic of Belarus”.

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 and risk management systems, and remedying the violations revealed in the course of the previous audits. During the audit of the operational risk, the main attention was given to the issues of the quality of IT risk-management, as well as the risks related to personnel and processes.

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.

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2.3. Control of leasing and microfinance organizations’ activities and activities in the over-the-counter Forex market

2.3.1. Off-site control

In 2018, 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 the leasing and 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 on the initiative of the National Bank, the authorized bodies took decisions on initiation of administrative proceedings against the persons distributing undue advertisement, as well as on the limitation of access to the corresponding web-sites (in the year under review, the access to more than 90 websites was limited).

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 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 leasing and microfinance organizations and forex

companies

In 2018, the National Bank exercised control over compliance of leasing and microfinance organizations and forex companies with legislation using measures of proactive and preventive character.

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Leasing companies were monitored as to their compliance with the requirements imposed on the volume of and the procedures for disclosing information on leasing activities, non-commercial microfinance organizations – as to their compliance with the legislation regulating the procedures of providing and attracting microloans, and forex companies – as to their compliance with the legislation requirements regulating the activities in the OTC Forex market. The recommendations to remedy the violations were submitted to the leasing and microfinance organizations, at which the violations and weaknesses were revealed.

The National Bank informed Association of Lessors and Republican Association of microfinance organizations on the typical violations of legislation revealed in the course of auditing leasing and microfinance organizations in 2015-2017.

Besides, in 2018 an unscheduled inspection was carried out in the consumer cooperative of financial mutual assistance “Tikhiy Centr”.

2.4. Regulation of credit and deposit operations and non-cash settlements

In 2018, with a view to increasing sustainability of the banking sector

and developing it, regulation of banking operations was further improved.

2.4.1. Improvement of regulatory legal acts governing credit and deposit operations

In 2018, improvement of regulatory legal acts governing credit and

deposit operations was continued (Attachment 2.5). The National Bank paid significant attention to increasing the quality of banking services, ensuring transparency of the terms of their provision, and protecting consumer rights.

With a view to streamlining the legal regulation of the credit operations with account of law-enforcement practice of the banks and international expertise, the Instructions on the Procedures for Providing Monetary Funds in the form of a Loan and Their Repayment were approved by Resolution of the Board of the National Bank of the Republic of Belarus No. 149 dated March 29, 2018.

The above-mentioned Instructions introduced a unified form of provision of the information on the terms of lending by a bank prior to signing a credit agreement, as well as established the requirement (since May 1, 2018) to banks to calculate the debt burden indicator when assessing solvency of the natural persons in taking a decision to issue a loan for consumer needs, as well as the loan provision indicator in taking a decision to issue a loan to finance real estate.

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Law of the Republic of Belarus No. 133-З “On Amending and Modifying the Banking Code of the Republic of Belarus” dated July 17, 2018 introduced changes to the Banking Code of the Republic of Belarus that bring it into line with Decree of the President of the Republic of Belarus No. 7 “On Attracting Monetary Funds into Deposits” dated November 11, 2015 and Edict of the President of the Republic of Belarus No. 471 “On the Issues of Financing Against the Assignment of a Monetary Claim (Factoring)” dated November 23, 2015, and clarified the order of setting the amount of interest for utilizing a credit, the interest on bank deposits and the approaches to its accrual, as well as the order of priority of debt repayment under credit contracts.

With regard to the protection of rights of consumers of bank services being natural persons the following regulations were enshrined:

- a prohibition to change the amount of interest on loans and bank deposits unilaterally for the worse of a client;

- a provision of the right for an early repayment of a loan for consumer needs without preliminary notification of a bank and payment of any penalties;

- an obligation of a bank to notify, without charging any fees, a borrower and a warrantor of the availability of an overdue debt under the credit contract, as well as provide information on the amount of debt under the credit contract; and

- a requirement to receive the confirmation of a borrower for provision of additional chargeable banking services and/or third party services.

A number of Resolutions of the Board of the National Bank of the Republic of Belarus was adopted as part of activities on bringing regulatory legal acts in line with the Law “On Amending and Modifying the Banking Code of the Republic of Belarus”. The banks were given recommendations concerning procedures for the payment of interest on bank deposits and provision of information to consumers on the amount of interest on bank deposits in advertisement.

With the purpose of protecting consumer rights and increasing transparency of the banking products and services provided by banks to natural persons, the glossary of standardized terms used to conduct credit and deposit operations was formed based on the results of analysis of the banks’ activities and approved by the Board of the National Bank of the Republic of Belarus. Besides, classifiers of the terms of lending and attracting monetary funds into bank deposits were developed, which, as it is planned, will be used by consumers to choose the most relevant banking products upon the given criteria. The National Bank submitted the above-mentioned glossary and the classifiers to the banks and the Association of the Belarusian Banks with a recommendation to use them when developing banking products and informing clients on the conditions of the offered

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banking products and services related to lending and attracting monetary funds into bank deposits.

The information placed on the banks’ websites, obtained from the call-centers and during the visits to (checks of) the banking products sales points, as well as in the course of consideration of the natural and legal persons’ appeals, was monitored over 2018 in order to improve the quality of the banking services provided to households in the course of lending and attracting monetary funds into deposits and to ensure transparency of terms of their provision.

303 drafts of the regulatory legal acts covering the issues of granting loans to the economic entities, extending terms of their repayment, attracting funds of the international financial organizations with a view to implementing investment projects, as well as determining the measures of government support and ways of ensuring repayment of obligations under loan agreements, as well as mechanisms of loan repayment, were submitted to the National Bank for consideration thereby.

In 2018, the National Bank participated in the development and coordination of:

- Edict of the President of the Republic of Belarus No. 50 “On Modifying the Edict of the President of the Republic of Belarus” dated February 2, 2018, which provides for modification of Edict No. 347 “On the State Agricultural Policy” dated July 17, 2014, enshrining the possibility of providing subsidies for payment of interest (part of interest) on loans granted on banks’ conditions to the agricultural complex entities. This kind of state support is applied both in lending to the current activities of the agricultural complex and within the framework of the investment projects implementation;

- Edict of the President of the Republic of Belarus No. 219 “On Modifying and Amending the Edict of the President of the Republic of Belarus” dated June 5, 2018, which provides for modification of Edict No. 146 “On Financing Purchase of Modern Machines and Equipment” dated April 2, 2015 with a view to expanding the list of sources of financing the purchase of machines and equipment, defining the possibility and conditions of purchase of machines and equipment under the financial rent (leasing) contracts by the insolvent entities of agricultural complex, and directing subsidies envisaged for the mentioned enterprises to repay debt under such contracts;

- Edict of the President of the Republic of Belarus No. 226 “On Opening Special Accounts” dated June 7, 2018, that defines approaches to ensuring repayment of debts of the cement industry enterprises under investment loans by means of accumulating monetary funds on special accounts; and

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- Edict of the President of the Republic of Belarus No. 399 “On Financial Recovery of Agricultural Enterprises” dated October 2, 2018, that provides for the possibility of restructuring the debt of these enterprises owed to creditors (budget, banks and other creditors).

2.4.2. Streamlining regulation of non-cash settlements

In 2018, the work was going on to streamline the regulatory legal acts, governing the execution of non-cash settlements (Attachment 2.5).

The Law of the Republic of Belarus “On Amending and Modifying the Banking Code of the Republic of Belarus” defined the possibility of using a new type of the bank remittance (settlements by means of direct debiting of an account) and a new type of non-cash settlements (bank payment obligation) by economic entities for making settlements. For the purpose of implementing the provisions of the Law the following resolutions were adopted:

- Resolution of the Board of the National Bank of the Republic of Belarus No. 35 “On Amending and Modifying the Instructions on Bank Remittance” dated January 29, 2018;

- Resolution of the Board of the National Bank of the Republic of Belarus No. 451 “On Amending and Modifying the Instructions on Bank Remittance” dated October 5, 2018; and

- Resolution of the Board of the National Bank of the Republic of Belarus No. 455 “On Approval of the Instructions on Executing Settlements by Means of Bank Payment Obligation” dated October 9, 2018.

With a view to developing the segment of electronic bank guarantees the project was implemented, which was designed to introduce technology of issuing bank guarantees in the electronic form and transferring the messages, associated with their circulation, through the information network built on blockchain technology, between banks and the OJSC “Non-bank Financial Institution ‘SSIS’”.

For the purpose of timely execution of the payment orders issued by the law enforcement bodies and decreasing the risks of increase in debt related to tax liabilities, Edict of the President of the Republic of Belarus No. 414 “On Improving Non-Cash Settlements” dated October 16, 2018 was enacted, which provides for creation and putting into operation on January 1, 2020 of the automated information system for execution of monetary obligations.

In addition, with the aim of ensuring the implementation of industry-specific projects and events of state significance, the National Bank took part in drafting and coordinating the Edicts of the President of the Republic of Belarus, providing for the use of the special accounts framework as an

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effective mechanism of retaining funds from encumbrance and using them exclusively for the intended purpose.

2.5. Formation of credit histories and provision of credit reports

In 2018, 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, 2019, there were 5.25 million credit histories formed in the Credit Registry, including 5.19 million credit histories of natural persons and 0.06 million credit histories of legal persons. In the period under review, the number of credit histories grew by 5.4%. Credit histories contain information on 32.4 million credit transactions, of which 7.77 million credit transactions are the current ones.

All the Belarusian banks and microfinance organizations were the sources of formation of credit histories. According to Law of the Republic of Belarus No. 66-З “On Amending and Modifying the Law of the Republic of Belarus “On Credit Histories”” dated November 13, 2017, leasing organizations and the JSC “Development Bank of the Republic of Belarus” has been also attributed to the sources of formation of credit histories since August 2018. As at January 1, 2019, 97 microfinance organizations and 78 leasing organizations were connected to the Credit Registry as the sources of formation of credit histories.

In the year under review, the main users of credit histories were banks and mobile operators. As many as 3.97 million requests for credit histories were submitted by banks to the Credit Registry (of which credit reports were presented on 3.62 million of them), 0.68 million requests for credit histories were submitted by the mobile operators (of which credit reports were presented on 0.55 million of them). In addition to banks and mobile operators, the users of credit histories who have online connection to the Credit Registry include 95 legal persons, among which there are 18 microfinance organizations, 53 leasing companies, 13 trading organizations, insurance companies, credit brokers and other users. The National Bank continued to provide scoring assessment of the natural persons’ creditworthiness on the basis of the Credit Registry data, which makes it possible to evaluate the probability of the overdue debt occurrence for more than 90 days within the subsequent 12 months. In the year under review, 82% of natural persons’ credit reports were provided to the credit histories users based on the scoring assessment.

Within the framework of implementation of the Law of the Republic of Belarus “On Amending and Modifying the Law of the Republic of Belarus “On Credit Histories””, Resolution of the Board of the National Bank of the Republic of Belarus No. 291 “On Formation of Credit Histories

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and Submission of Credit Reports” dated June 22, 2018 and Resolution of the Board of the National Bank of the Republic of Belarus No. 375 “On the Forms of Credit Reports Being Submitted” dated August 22, 2018 were adopted and other activities were carried out to expand the contents of the credit histories with the data on concluded leasing contracts, contracts on financing against the assignment of a monetary claim (factoring), information on the use of credit resources granted in the form of the renewed credit lines and overdraft lending and on the collateralized liability under the guarantee and warranty contracts. As at January 1, 2019, the data on 0.52 million leasing contracts and 0.06 million factoring contracts were presented for inclusion into the Credit Registry.

With a view to establishing conditions for decreasing credit risk in the banking system, attracting modern technologies in risk management to the banking system, and improving availability of bank financing to the small and micro enterprises, Resolution of the Board of the National Bank of the Republic of Belarus No. 224 “On Submitting Depersonalized Information from the Credit Register” dated May 10, 2018 was approved, making it possible for banks and non-bank financial institutions to obtain depersonalized information from the Credit Register for the purposes of building scoring models of credit risk assessment.

In order to decrease the costs associated with the hard-copy paperwork and improve the promptness of provision of information to the employees involved in special investigation activities, the special web-portal of the Credit Register on the interaction with the government bodies was developed and put into operation in 2018, which makes it possible to submit credit reports to the authorized employees of the Ministry of Internal Affairs in the electronic form.

In 2018, the work on drafting the agreement on the interaction of the EEU member - states in the field of exchange of the data included in the credit histories was continued, the enactment of which will make it possible to provide equal possibilities to the EEU member - states’ residents in receiving a full complex of financial services at banks located in the territory of other EEU member - states and enhance protection of financial organizations from credit risks.

2.6. Regulation of leasing and microfinance organizations’ activities

and activities in the over-the-counter Forex market

In 2018, the regulatory legal acts governing the leasing and microfinance organizations’ activities, as well as activities in the over-the-counter Forex market, were further streamlined (Attachment 2.6).

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2.6.1. Regulation of leasing activities In order to develop leasing activities, increase protection of rights and

legal interests of lessees and leasing organizations, Resolution of the Board of the National Bank of the Republic of Belarus No. 417 “On Amending and Modifying the Rules of Performing Leasing Activities” dated September 19, 2018 was adopted. The updated Rules of Performing Leasing Activities provide for, in particular, protection of the rights of lessees being natural persons in terms of the accurate and timely notification thereof of the accrued penalties, compensation of a part of leasing payments to lessees in case an insurance indemnity under the leasing item is paid to the lessor, as well as the simplified procedural formalities regarding the transfer of the leasing item to the lessee’s property and return of the leasing item to the lessor.

In the year under review, the National Bank initiated introduction of changes into approaches to the legal regulation of the rights and obligations of the parties under the international leasing contracts, which was later reflected in Edict of the President of the Republic of Belarus No.16 “On Development of the International Leasing” dated January 14, 2019. A single approach was ensured as to establishing the terms of discharging obligations under international leasing contracts and foreign trade contracts. The principle of suspension and renewal of terms of ensuring discharging of obligations on receipts of leasing payments or return of leasing items was switched to the principle of termination and recalculation of the newly specified terms. The grounds for their termination and recalculation were specified as well.

Within the framework of the leasing activities regulation, the National Bank was involved in the following work:

- modification of the Tax Code of the Republic of Belarus, in particular, a partial exemption from the income tax of revenues of the natural persons being participants or owners of the legal persons property, which were obtained from the sale (repayment) of bonds issued by these legal persons, was envisaged. These modifications will make it possible to build up the resource capacity of the leasing organizations at the expense of bonds issue; and

- development of the National Accounting and Reporting Standard “Financial Rent (Leasing)”, adopted by Resolution of the Ministry of Finance of the Republic of Belarus No.73 dated 30 November 2018.

With the purpose of safeguarding the interests and protecting the rights of consumers of financial services rendered by the leasing organizations, the natural and legal persons’ appeals were considered.

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2.6.2. Regulation of the microfinance organizations’ activities  

With a view to establishing a more efficient, transparent and competitive market of microfinancing due to improvement of financial sustainability of the legal persons involved in lombard activities, and the level of their founders’ responsibility, modifications were made to Resolution of the Board of the National Bank of the Republic of Belarus No. 692 “On Introducing the Forms of Application for and Certificate of Inclusion in the Register of Microfinance Organizations, the Minimum Amount of the Authorized Capital of the Commercial Microfinance Organization, and Adoption of the Instructions on Procedures of Generation and Maintenance of the Register of Microfinance Organizations” dated November 14, 2014. On July 1, 2018, the minimum amount of the profit-making microfinance organizations’ (lombards’) authorized capital was increased from BYN25 thousand to BYN50 thousand.

In 2018, the measures designed to reduce the cost of microloans provided by non-profit-making microfinance organizations for development of households’ employment, business initiative of citizens, and SMEs were taken. According to Resolution of the Board of the National Bank of the Republic of Belarus No. 20 “On Thresholds of Interest on Microloans in Annual Terms (Annual Interest Rate)” dated January 19, 2018, the maximum permissible annual interest rate on microloan contracts, which has been concluded since April 1, 2018 by non-profit-making microfinance organizations established in the organizational and legal form of a fund, was set in the amount of the National Bank’s refinance rate and by consumer cooperative of mutual financial assistance – in twofold amount of the National Bank’s refinance rate. In 2018, the National Bank took part in modification of legislation on the issues of microfinance organizations activities. It initiated modification of: - the Tax Code of the Republic of Belarus as it pertains to the change (since January 1, 2019) in the procedures for calculation and payment of the VAT by the profit-making organizations included in the Register of Microfinance Organizations while issuing microloans; and

- the Civil Code of the Republic of Belarus as it pertains to specifying, since November 1, 2018, the peculiarities of foreclosure on movable property used as a collateral under microloan contract and its sale in case the microloan amount is not returned within the time period stated in the contract, depending on the valuation amount of such property (up to and over 100 basic units).    

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2.6.3. Regulation of the activities in the OTC Forex market  

In 2018, the National Bank studied further the international experience of streamlining the methods and approaches used in regulation of activities in the 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.

Within improvement of the legislation governing the procedures for and conditions of carrying out activities designed to improve transactions initiated by natural and legal persons with non-deliverable over-the-counter financial instruments, the National Bank was involved in 2018 in drafting amendments to Decree of the President of the Republic of Belarus of No. 231 dated June 4, 2015, including those aimed at adjusting the procedures for calculating the risk limit of forex companies.

Resolution of the Board of the National Bank of the Republic of Belarus No. 132 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 67 dated February 10, 2016” of March 20, 2018 was adopted to extend the list of financial regulation and supervision agencies and specialized associations relating to jurisdictions characterized by a high level of development and sustainability of the financial market and an effective system of legal regulation and supervision of its participants, as well as to exclude inactive criteria with regard to external counterparties.

With the purpose of strengthening 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. 153 “On the Reporting of the National Forex Centre, Forex Companies, Banks and Non-bank Financial Institutions on the Issues Related to the Activities in the OTC Forex Market” dated April 2, 2018 was adopted, providing for the optimization of the volumes and forms of reporting on issues related to the activities in the OTC Forex market and procedures for its submission, expansion of its contents and informative value, as well as notification by the National Forex Center of the National Bank of the revealed cases of significant deviation in the price of the underlying asset from the average prices for it in the given market in the course of carrying out operations by the entities of the OTC forex market.

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Within the framework of streamlining approaches to the build-up and use of the security capital by the forex companies, Resolution of the Board of the National Bank of the Republic of Belarus No. 584 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 65 dated February 10, 2016” dated December 7, 2018 was adopted. The provisions of this resolution facilitate switching by the non-resident clients of their services providers from foreign to the Belarusian forex companies, promote efficiency of the Belarusian forex companies activities and, therefore, increase the amounts of taxes and duties.

2.7. Foreign exchange regulation and foreign exchange control

According to the earlier adopted policy documents, the National Bank

in concert with the Government of the Republic of Belarus implemented the measures on liberalization of foreign exchange relations and reduction of use of foreign exchange in the economy. The significance of these measures was conditioned by the need to maintain the Belarusian ruble stability and lift existing barriers and excessive administrative procedures hindering the conduct of business.

In 2018, a number of decisions on liberalization of foreign exchange regime was taken, in particular the following rules were lifted:

- the restrictions on purpose-oriented purchase of foreign exchange by resident legal entities;

- the mandatory sale of foreign exchange revenues; - the need to obtain permissions by natural persons for opening

accounts with foreign banks; and - the need to obtain permissions by resident legal persons for carrying

out foreign exchange operations involving the capital movement (lending to non-residents, purchase of non-residents’ securities, etc.). These operations will be carried out in the registration order.

Within implementation of measures aimed at reducing the use of foreign exchange, Resolution of the Board of the National Bank of the Republic of Belarus No. 612 “On Certain Issues of Carrying out Foreign Exchange Operations” dated December 19, 2018 was adopted, which rules out the foreign exchange settlements between residents on corporate bonds denominated in foreign exchange, under separate types of insurance contracts, as well as the possibility of issuing individual permissions of the National Bank for carrying out settlements in foreign exchange.

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 2018, the external accounts receivable increased by 0.6% (from USD4,147.7 million as at January 1, 2018 up to USD4,171.1 million as at January 1, 2019);

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overdue debt decreased by 9.4% (from USD454.8 million as at January 1, 2018 to USD412.2 million as at January 1, 2019). As at January 1, 2019, the aggregate share of the debt prolonged by the National Bank accounted for 21.6% of the total volume of the external accounts receivable.

The facts of violating the deadlines for completion of foreign trade transactions worth USD39.8 million were revealed in respect of 365 economic entities as a result of monitoring conducted in 2018.

The National Bank adopted regulatory legal acts for the purpose of implementing measures aimed at improving foreign exchange regulation and foreign exchange control (Attachment 2.7).

2.8. Financial stability monitoring

In the year under review, the National Bank carried out financial

stability monitoring, the main aim of which was to identify and assess 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.

In 2018, the financial stability of the Republic of Belarus was ensured. The financial sector of the country remained stable with regard to the most significant risks. The key indicators of financial stability had values within the acceptable ranges (Attachment 2.8). The banks and the JSC “Development Bank of the Republic of Belarus” met, in general, the secure functioning requirements. The stable functioning of the insurance sector and the sector of other financial intermediaries was preserved. Stable and continuous functioning of the payment system of the country and the major financial markets was ensured, the main risks were limited, and the threat of their escalation into the systemic risk was prevented from happening.

From the point of view of potential losses, the credit risk in the banking sector remains the most significant one. Despite the growth in the indicators of the revenues and profits from the sale of products, the share of the loss-making enterprises is still high and has the growing trend, the settlement discipline of the enterprises does not improve. The risk for financial stability of the country is driven by the volume of the gross external debt, including due to the significant cost of its servicing. The significant level of fiscal risks is still in place.

In order to prevent the potential growth of risks associated with the dynamics of retail lending, on May 1, 2018 the National Bank introduced two new macroprudential instruments – the debt-service-to-income (DSTI)

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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). In general, the DSTI ratio should not exceed 40% and the LTV ratio – 90%. Despite the short duration of these instruments, the end of 2018 witnessed a certain slowdown in the dynamics of consumer lending.

The development of these instruments effectively complemented the existing system of macroprudential regulation instruments, which since 2017 has been including a countercyclical capital buffer, a systemic importance buffer and Basel III liquidity indicators.

The growth rates of banks’ lending to the economy during 2018 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. On January 1, 2019, a planned increase in the systemic importance buffer to 1.5 percentage points for banks belonging to Group of Importance I and up to 1 percentage point for banks of Group of Importance II took place.

Over 2018, the National Bank and the Government of the Republic of Belarus implemented the project “Formation of Problem Assets Market”, within which representatives of the banking sector, government agencies and organizations studied the existing problems and risks, as well as suggested options for addressing them. The ultimate goal of this project was to prepare a legislative act defining the economic, legal and institutional conditions for the functioning of the problem assets market. The IMF’s experts provided technical assistance in the implementation of the project. As a result, a draft Decree of the President of the Republic of Belarus “On Certain Issues of Dealing with Non-performing Assets” was prepared, aimed at creating conditions for handling problem assets of all business entities.

2.9. Accounting and reporting

In 2018, 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.

These activities resulted in the preparation 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. This document indicates the directions of development of accounting and accounting (financial) statements in the banking system and the stages and expected

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results of the implementation of this Strategy. As one of the main results, the transition to the compilation of financial statements by the National Bank and banks with the use of the IFRS was defined.

During the reporting year, regulatory legal framework on accounting and financial reporting was improved with regard to the practice of application and modification of legislation, including in the framework of implementation by the National Bank of the Concept of Creating an Instant Payment Service Available 24/7/365 (Annex 2.9).

2.10. Cash circulation

In 2018, cash circulation grew by 11.4% (by BYN10.7 billion) compared with 2017 and amounted to BYN104.4 billion. The issue of cash in circulation (M0) totaled BYN645 million.

In the year under review, the share of monetary aggregate M0 in the ruble money supply accounted for 16.7 - 18.9%. As at January 1, 2019, this indicator totaled 17.7% (as at January 1, 2018, 16.7%).

As at January 1, 2019, the National Bank issued banknotes and coins of the 2009 Series in the amount of BYN3.7 billion.

20-ruble notes (28.7%), 50-ruble notes (26.6%), 10-ruble notes (20.2%), and 5-ruble notes (20%) accounted for the largest share in the total amount of banknotes of the 2009 series in circulation. 100-ruble notes totaled 4.4%. The share of 200-ruble notes and 500-ruble notes stood at about 0.1%.

Coins with the denomination of 1 kopeck accounted for the largest share in the total amount of kopecks of the 2009 series in circulation (28.9%). Coins with the denomination of 2, 5, 10, and 20 kopecks totaled 16.8%, 13.5%, 12.4% and 9.4% 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 16 names were put into circulation by the National Bank. 37,353 commemorative coins were sold in the domestic market, and 6,750 commemorative coins – in the external market by mints. In the domestic and foreign markets 9,540 ingot (investment) coins were sold.

With a view to preventing money counterfeiting the National Bank took preventive measures to inform households and 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 forging banknotes for the cashiers of the banks. As a result of the work done, 900 counterfeit banknotes were identified and withdrawn from cash circulation (1,034 counterfeit banknotes in 2017), including 475 US dollar notes, 270 Russian ruble notes, 117 euro notes, 17 Belarusian ruble

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notes (6 of them of the 2000 Series), and 21 notes denominated in other currencies.

In the year under review, within the framework of the implementation of the Decree of the President of the Republic of Belarus No. 45 “On the Establishment of an Open Joint Stock Company” dated February 1, 2018, the National Bank transferred operations involving collection, transportation, and storage of disposable funds and other valuables to outsourcing, and switched to a new mechanism of managing cash owned by the National Bank and stored at OJSC “Non-banking Credit and Financial Organization “Belincasgroup”). These measures will make it possible to reduce the total expenses of the National Bank and banks related to cash handling services, ensure rapid turnover of resources and reduce the cost of operations.

In 2018, 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 2.10).

2.11. Payment system

In 2018, 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 collection, accumulation and analysis of the indicators characterizing its state was performed.

In the reporting period, a number of regulatory legal acts were elaborated, which clarified certain aspects of conducting interbank settlements in Belarusian rubles, the functioning of the automated system of interbank settlements of the National Bank (hereinafter referred to as the “ASIS”), carrying out interbank settlements in the BISS*, rendering services when performing interbank settlements in the BISS, maintaining the reference book of banking identification codes, dealing with electronic documents in the National Bank’s central archive of interbank settlements.

                                                            * The key functional component of the ASIS of the National Bank of the Republic of Belarus is the BISS

(Belarus Interbank Settlement System). The BISS 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 (settlement and clearing system for securities, settlement systems for transactions using bank payment cards and an automated information system of a single settlement and information space) are effected on a real-time basis. The participants in the BISS are the National Bank, banks, non-bank financial institutions, and the JSC “Belarusian Currency and Stock Exchange”.

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The procedures for functioning of the instant payment system, maintaining the register of programming and software and hardware tools of the payment system’s participants and a number of standards for carrying out settlements were approved (Attachment 2.11).

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

2.11.2. Functioning and development of the ASIS

In 2018, 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 (until March 1, 2018 – the Settlement Centre of the National Bank).

Within the framework of implementing functions of technical operator, JSC “BISC” ensured 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.

The National Bank ensured compliance of the software and hardware complexes of the ASIS with the requirements of standards for performing settlements in ensuring the technical possibility of carrying out interbank settlements.

Unauthorized access to the ASIS, violation of security measures and information protection were prevented from happening.

As at January 1, 2019, the annual parameter of banks’ accessibility to the ASIS averaged 99.98% of the production time, with the level defined by Resolution of the Board of the National Bank of the Republic of Belarus No. 112 “On Approving the Quarterly Values of Key Performance Indicators of the National Bank of the Republic of Belarus for 2018” dated March 14, 2018 being not lower than 99.7%.

As at January 1, 2019, there were 35 direct participants of the BISS system, including 3 special participants and 27 indirect participants.

An increase in the number of direct BISS participants by 1 compared with 2017 was due to the accession of the Eurasian Development Bank (Almaty, Kazakhstan) and OJSC “Non-bank Credit and Financial Institution “Belincasgroup” to the system, as well as disconnection of OJSC “Non-banking Credit and Financial Organization “Home Credit” related to the merger with Closed Joint–Stock Company “Alfa-Bank”. The reduction in the number of indirect participants in the BISS system by 4 compared with 2017 was caused by the optimization of the branch network of JSC “Belagroprombank”.

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In the year under review, 78 million payment instructions worth BYN578.8 billion were effected in the BISS (Attachments 2.12 and 2.13). Compared with 2017, payment instructions effected in the BISS grew by 6.8% in terms of their number and by 2.3% in terms of their amount. The average daily turnover amounted to BYN2.3 billion in terms of payments value and 0.3 million in terms of their number.

In 2018, 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.

Within the framework of measures designed to mitigate operational risk in the ASIS, Contingency Plan for Business Continuity and Recovery Procedures of the ASIS, the lists of the ASIS’s crucial and reserve personnel, as well as instructions determining the actions of personnel in the event of failure and crisis situations in the operation of the ASIS, the procedure for preparing and verifying the operability of the software and hardware complex of the ASIS during the transition to the industrial mode of operation at the backup computer center were updated.

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 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.

In 2018, with a view to developing and streamlining the payment system with account of global trends, the National Bank in concert with the banking community took actions to ensure the establishment of the service of instant payments making it possible for the participants of the payment market to carry out payments on a 24-hour basis seven days a week in the mode which approximates the real time mode most closely. Resolution of the Board of the National Bank of the Republic of Belarus No. 540 “On Certain Issues of Functioning of the Instant Payment System and Carrying out Instant Payments” dated November 20, 2018 was adopted, which sets the relevant legal authorities implemented by the National Bank as the system owner and OJSC “BISC” as the technical operator of the system in the process of organizing the functioning of the instant payments system and conducting instant payments, as well as defines the requirements for banks that are members of the instant payments system to ensure a continuous process of performing instant payments in terms of the availability of appropriate software and hardware tools and timely updating of regulatory reference information.

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The conditions for conducting instant payments are determined in the agreement concluded between the bank - participant of the instant payments system and the payer.

The processing time of an instant payment in an instant payments system from the moment it is initiated by the payer to the arrival of funds to the beneficiary’s account should be no more than one minute.

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

The bank payment card (hereinafter – the “card”) is the payment

instrument, which is most frequently used for non-cash settlements by the households.

As of January 1, 2019, the number of bank payment cards that have been put into circulation totaled 15 million, of which 4.3 million cards of the domestic payment system BelCard (28.6% of the total number of cards) and 4.8 million cards of the payment system VISA (31.6% of the total number of cards), 4.7 million cards of the payment system MasterCard (31.5% of the total number of cards), and 1.2 million co-badging BelCard/Maestro cards (8.2% of the total number of cards).

As many as 4,249 ATMs, 3,103 self-service payment and reference terminals installed by banks, and 160,719 payment terminals operating in 121,296 trading (servicing) organizations were functioning in the Republic of Belarus as of January 1, 2019.

As at January 1, 2019, the share of non-cash transactions in the general volume of transactions involving this payment instrument amounted to 86.2% in terms of their number and 49.9% in terms of their amount (over 2017, these indicators stood at 83.1% and 44.7% respectively).

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

As of January 1, 2019, 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 Moscow–Minsk” JSC, CJSC ”Alfa-Bank“, and OJSC “BPS-Sberbank”. The following systems of settlements based on the e-money were operating: WebMoney Transfer, iPay, V-coin, e-Pay, “Berlio”, “MTS Money”, QIWIBel, “Rosberliocard”, Euroberlio, “eCard ABB”, “Yandex.Money”, 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 2018, 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

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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 40.9% (35.4% in 2017) (Attachment 2.14).

For the purpose of strengthening consumer rights protection and increasing the transparency of banking products provided by banks to natural persons and services rendered thereby, as well as within the development of open information APIs, a glossary of standardized terms used when issuing and servicing cards and a classifier of the terms of issue and servicing of cards, which, as it is planned, will be used in the future by consumers to choose the most acceptable banking products according to specified criteria, were formed.

2.11.4. Functioning and development of the interbank identification

system

In 2018, 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.

As of January 1, 2019, all banks load data into the interbank identification system. 7.66 million records of banks’ customers were downloaded, including 7.44 million records of natural persons. The number of registered users of the interbank identification system in 2018 increased 6.1 times and reached 161.3 thousand people.

In order to further develop the interbank identification system and increase the availability of financial services, a draft Decree of the President of the Republic of Belarus was prepared, which envisages the introduction of amendments to Decree of the President of the Republic of Belarus No. 478 “On the Development of Digital Banking Technologies” dated December 1, 2015, including in terms of expanding the list of organizations that will have access to customer information stored in the interbank identification system, by including persons performing financial transactions, government agencies and other organizations therein.

2.11.5. Introduction of international standards

In 2018, the National Bank carried out activities on implementing the

methodology of ISO 20022 “Financial services – Universal financial

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industry message scheme” in the country’s payment system (hereinafter – “ISO 20022”).

Resolution of the Board of the National Bank of the Republic of Belarus No. 628 “On Approval and Implementation of Standards for Conducting Settlements” of December 26, 2018 approved the standards for conducting settlements SCS 1.01-2018 “Banking Activities. Information Technologies. Money Transfers. Models” and SCS 1.02-2018 “Banking. Information Technology. Money Transfer at the Initiative of the Payer. Schemes Album”, which are basic to the process of developing financial messages based on ISO 20022, taking into account national specifics.

SCS 1.01-2018 “Banking Activities. Information Technologies. Money Transfers. Models” describes, at a review level, cash transfer models in accordance with the ISO 20022 standard methodology with regard to the requirements of regulatory legal acts of the National Bank and other legislative acts, money transfer processes, money transfer participants and their role, and the procedure for interaction and exchange of messages within these processes.

SCS 1.02-2018 “Banking. Information Technology. Money Transfer at the Initiative of the Payer. Schemes Album” describes, at a conceptual level, scenarios and credit transfer schemes, as well as establishes a list of electronic messages and the rules for their use.

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). The coordination of interaction included the exchange of draft documents, preparation of analytical information based on the materials submitted by experts, as well as conduct of videoconferences designed to exchange practical experience in this sphere.

2.11.6. Development of the single settlement and information space

In 2018, 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.

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As of January 1, 2019, the participants of the AIS “Settlement” were 23 settlement agents (banks) and the payment agent of RUE “Belpochta”. 16,836 service providers are connected to the system (in 2018, their number increased by 1,539 service providers).

In 2018, 455.97 million payments worth BYN9,895.5 million were conducted through the AIS “Settlement”. The increase in payments received accounted for 3% in terms of number and 24.7% in terms of the amount.

The average amount of one payment accepted through the AIS “Settlement” was BYN21.70.

In the reporting year, the share of payments made in a non-cash form through the AIS “Settlement” increased from 54.5% to 60.4% in terms of number and from 51.5% to 61.1% in terms of the amount. About 60% of payments were made using remote banking channels.

For the purpose of optimizing the costs of RUE “Belpochta”, following the proposal of the Ministry of Communications and Informatization, on March 1, 2018, a direct interaction procedure between OJSC “Non-bank Financial Institution “SSIS” as a settlement agent and RUE “Belpochta” as a paying agent in arranging payments acceptance by AIS “Settlement” was implemented. This measure made it possible to reduce the expenses of RUE “Belpochta” related to the organization of payment acceptance by BYN3.6 million.

In 2018, the share of payments made by RUE “Belpochta” in AIS “Settlement“, totaled 29.8% in terms of quantity and 23.3% 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, 2019, 315 organizations carried out settlement, accounting and charging of housing and communal services under 4.38 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 30,775 households obtained assistance in 2018 in the amount of BYN1.15 million in the form of partial payment of housing and communal services.

2.12. Financial literacy

In 2018, the activities on improving the population’s financial literacy

were carried out in accordance with the Joint Action Plan of Government Agencies and Financial Market Participants on Improving Financial

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Literacy of the Population of the Republic of Belarus for 2013-2018 approved by Resolution of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 31/1 dated January 17, 2013.

The Interagency Coordinating Council for Improvement of Financial Literacy of Population, which was established in accordance with Resolution of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 1009/15 “On Interagency Coordinating Council for Improvement of Financial Literacy of Population” dated November 2, 2012, coordinated the activities on enhancing financial literacy.

In the reporting year, with a view to increasing financial literacy of citizens of different age categories, as well as improving population’s access to financial services 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. The National Bank’s employees prepared and made a training presentation to the participants of the educational campaign to be used in the process of conducting thematic classes;

- a video blogger competition “Money Matters”, in which more than 260 creative works were presented, was held. Given the relevance of this form of creativity, it was decided to hold an annual competition of video bloggers as part of measures to improve financial literacy;

- a competition for the best work on economic theme among students of the Belarusian State University, educational institutions ”Belarusian State Economic University” and “Polessky State University”, studying at the first stage of higher education, was held;

- a republican competition on financial literacy among students of general secondary education, in four stages of which about 23 thousand students took part, was carried out. For the purpose of preparing for the competition, methodical recommendations and options for assignments on current financial topics were developed;

- a number of joint projects with the printed media (newspapers “Nastaunitskaya Gazeta”, “Znamya Yunosti”, weekly newspaper “7 Dnej”, and magazine “Chto Pochem”) 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 channel “Financial Literacy of Belarus” was created at the YouTube Internet site, where training video materials on financial and

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economic topics, as well as the works of the winners and participants of video blogger competition “Money Matters” are placed;

- financial literacy lessons with the involvement of volunteers from the students of the “Legal Clinic” training laboratory of the Belarusian State University were prepared and conducted in a number of educational institutions;

- organizational support for the implementation of the inclusive project of the rehabilitation facility for the visually impaired “Center of a Successful Person” and the Belarusian Association of the Visually Impaired “Learning to Manage Finances Yourself”, holding the III Open Olympiad of the Belarusian State University on the World Economy, the final of the fifth hackathon of financial technologies (Imaguru FinTech Global Hackathon) was provided; and

- participation of the team of children of the National Bank’s employees in the financial literacy competition “Young Financier” organized by the Association of Belarusian Banks was ensured.

In 2018, at the initiative of the National Bank, a research work on the topic “Development of Activities to Improve the Financial Literacy of the Population in the Republic of Belarus”, which summarized the results of the research and analyzed measures to improve the financial literacy of the population, was carried out. The study was conducted by the Institute of Sociology of the National Academy of Sciences of Belarus in the framework of the international technical assistance project “Improving Access to Financial Resources of the Rural Population of Belarus”, implemented by the Republican Microfinance Center with the financial support of the United States Agency for International Development.

Given the recommendations developed in the course of this study on priority areas of state policy in the field of improving financial literacy of the population and the proposed target indicators for evaluating the efficiency of these activities, the National Bank developed and submitted to the involved organizations for consideration and approval a Draft Plan of Joint Actions of Government Agencies and the Financial Market Participants on Improving the Financial Literacy of the Population of the Republic of Belarus for 2019–2024, based on which a systematic integrated work to improve the financial literacy of the population in the medium term will be built.

2.13. Research activities

In 2018, 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,

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banking, payment and financial systems. Research activities contributed to improving human resources and strengthening position of the National Bank in the academic community.

In the reporting year, employees of the National Bank fulfilled 28 studies. The results of studies were published in the section of “Scientific Publications” of the periodical “Bankauski Vesnik” (25 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: - ”Methodological Foundations of the Quarterly Projection Model of

the Monetary Policy of the Republic of Belarus”. Given the technical support of the IMF and experts from the Czech National Bank, an improved Quarterly Projection Model was tested, which describes the relationships between the main macroeconomic variables (inflation, GDP, exchange rate and interest rate) in the medium-term forecasting period. This model helps to understand what and why, from the point of view of the monetary policy, should be done in order to achieve the inflation target and stabilize the GDP dynamics;

- “Natural Interest Rate for the Republic of Belarus”. As part of the theme, the Laubach-Williams model was adopted for the economy of the Republic of Belarus, and a semi-structural model was developed that makes it possible not only to determine the neutral level of the interest rate of the overnight interbank credit, but also analyze the performance of the interest rate channel of the monetary policy transmission mechanism;

- “Sectoral Macroprudential Policy Instruments (LTV, LTI, DSTI) and the Possibility of Application Thereof in the Republic of Belarus”. The possibility of using special macroprudential measures aimed at preventing the accumulation of financial imbalances in certain sectors of the economy are analyzed: LTV (maximum limit on the ratio of loan amount and collateral value), LTI (maximum limit on the ratio of loan amount and borrower’s annual income) and DSTI (maximum limit on the ratio of funds spent on loan servicing and borrower’s income). The options for the configuration of these instruments given the financial sector characteristics are offered; and

- “The Financial Market and the Real Economy: Interrelation and Transmission of Shocks”. Using the logistic model of binary choice, the relationship between the financial market capacity and the economic growth sustainability is estimated based on international panel data. An attempt is taken to define economic cycles in the Republic of Belarus and their interrelations with financial cycles, the most important financial variables describing the state of the financial market. A non-linear connection between

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the real and financial sectors of the economy, as well as between economic and financial cycles, which has effect in both directions, is revealed.

In addition, in the year under review the researches aimed at addressing such topical issues as studying the monetary policy transmission mechanism, improving the system of indicators of early warning of economic vulnerability (credit impulse, early warning of the foreign exchange market destabilization), indicators and models of the credit cycle, equilibrium real effective exchange rate models, as well as examining the possibility of reducing the regulatory burden and improving financial inclusion, 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 conferences, peer-reviewed scientific articles, conducted a scientific management of diploma works and practical training of students and master degree’s students.

2.14. International cooperation

In 2018, 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 the interaction of the National Bank of the Republic of Belarus, the State Control Committee of the Republic of Belarus and the Federal Tax Service of the Russian Federation in the sphere of foreign exchange control;

- on agreed approaches to the regulation of foreign exchange relations and adoption of liberalization measures; and

- on audit activities in the territory of the Eurasian Economic Union.

In the reporting year, the National Bank carried out work to expand interaction with the central banks of other countries. Memorandums were signed and agreements on cooperation in various aspects of activities were

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concluded with the National Bank of Georgia, the National Bank of the Republic of Kazakhstan, and the Central Bank of the Russian Federation. The Governments and the central (national) banks of the EEU member states concluded an Agreement on the Harmonization of the Legislation of the Member States of the Eurasian Economic Union in the Sphere of Financial Market.

In 2018, 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 areas, payment and settlement relationships, countering computer attacks in the credit and financial field, functioning of the banking systems, the state of payment balances, the dynamics of gold and foreign exchange reserves and other issues were discussed at the meetings.

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), carried out with the aim of developing and implementing specific recommendations on the main directions of financial education policy, as well as providing technical assistance in conducting a scientifically grounded assessment of the efficiency of national strategies in the financial literacy sphere.

Representatives of the National Bank and the Ministry of Education took part in a conference and seminar on topical issues of organizing activities in the field of improving financial literacy of young people, held in June 2018 in Dilijan (Republic of Armenia), the OECD-Russia Global Symposium “Increasing Financial Literacy at the Global Level: Implementation and Innovation”, and the regional seminar on national strategies for financial education in the CIS, held in October 2018 in Moscow (Russian Federation).

Cooperation with the International Organization for Financial Education of Children and Youth (Children Youth Finance International) was carried out through the exchange of information, consultations, webinars, and development and implementation of training materials and guidelines.

In the reporting period, representatives of the National Bank participated in the activities of the Consultative Council of the central (national) banks on consumer rights protection and financial inclusion.

The cooperation with the Alliance for Financial Inclusion was continued by means of supporting its initiatives, participating in annually

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held forums and working group meetings, including the working group on consumer empowerment and market behavior.

Cooperation with the IMF and the World Bank was traditionally 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.

In 2018, within the framework of a two-year project, the IMF provided technical assistance to the National Bank aimed at improving the capacity of the Quarterly Projection Model (QPM).

In addition, the IMF visited the National Bank with technical missions on the following issues:

- auditing and improving the current information policy of the National Bank; and

- building the market of problem assets in the Republic of Belarus. On July 17-19, 2018, the National Bank, together with experts of the

IMF and the World Bank, held an international seminar-workshop on the restructuring of state-owned enterprises and handling problem assets.

In the reporting year, the preliminary and main missions 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.

Following the results of these missions, the IMF experts positively assessed the measures taken by the Government of the Republic of Belarus and the National Bank to stabilize the rate and reduce inflation, and noted that the country’s economy is in the process of a steady cyclical recovery of economic growth, including as a result of implementing a set of effective economic policies, aimed at preserving and strengthening economic sustainability based on efficient macroeconomic management to mitigate the effects of economic downturn and create the conditions for sustainable growth.

In 2018, with the active participation of the World Bank’s experts, the activities aimed at strengthening the financial protection system (drafting a legislative act on establishing a system of banks’ resolution, developing approaches to improving the deposit guarantee system, and strengthening the financial sector cybersecurity) and converging the national accounting system with IFRS were continued.

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 in the amount of USD2 billion. In 2018,

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the Republic of Belarus obtained the sixth tranche of the credit worth USD200 million.

In the reporting period, the negotiations with the management of the European Bank for Reconstruction and Development (EBRD) at the Annual Meeting of the bank’s Board of Governors, during visits to the Republic of Belarus of the EBRD’s Vice President being responsible for banking operations, representatives of the EBRD’s Board of Directors, as well as regular meetings at the expert level were held. In the course of such interaction, an analysis of the implementation of the directions of Cooperation Strategy for 2016-2019 was carried out, including the Memorandum of Understanding between the National Bank of the Republic of Belarus and the European Bank for Reconstruction and Development with respect to the privatization of “Bank Moscow–Minsk” JSC. The action plan designed to implement the measures provided for by 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 was signed.

Coordinated actions of the Government of the Republic of Belarus and the National Bank aimed at ensuring macroeconomic stabilization and financial sustainability of the country made it possible to improve the position of the Republic of Belarus in the classification of the Organization for Economic Cooperation and Development (OECD) by country credit risks (in January 2018, the Republic of Belarus was transferred to the sixth group). In July 2017, Fitch Ratings agency improved the outlook on the sovereign rating from “stable” to “positive”, confirming the rating at the level “B-”. Standard and Poor’s upgraded the sovereign rating of the Republic of Belarus from “B-” to “B” (October 2017), Fitch Ratings – from “B-” to “B” (January 2018), and Moody’s Investors Service – from “Caa1” to “B3” (March 2018).

A meeting of the working group on the accession of the Republic of Belarus to the World Trade Organization, as well as bilateral negotiations with the concerned WTO member countries to determine the conditions for the access of foreign suppliers of goods and services to the Belarusian market, including banking and financial services, were held.

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

Twinning. In 2018, 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, launched the twinning project “Strengthening the National Bank of the Republic of Belarus”.

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In the reporting year, 41 expert missions on 6 components were organized, 2 study visits to Germany and Poland were prepared, 6 seminars and 3 expert forums were held, in which 154 employees of the National Bank and 48 representatives of other agencies took part.

As part of the component “Banking Supervision”, the National Bank, in collaboration with international experts, developed and implemented a procedure for conducting a general supervisory review of banks, JSC “Development Bank of the Republic of Belarus”, non-bank financial institutions, providing for analysis and assessment of the business model, corporate governance, and capital adequacy and liquidity, as well as the internal procedures for assessing capital adequacy and liquidity applied at banks.

As part of the component “Financial Stability”, foreign experts noted that the processes organized by the National Bank to maintain financial stability comply with global standards. The expert reports contain recommendations on strengthening the legal and institutional framework for ensuring financial stability and developing the methodology of macroprudential analysis. In general, all initiatives and proposals of experts are supported by the management of the National Bank.

2.15. Staffing and staff training

In 2018, 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 727.5 staffing positions due to the implementation of:

- the measures stipulated by Decree of the President of the Republic of Belarus No. 371 “On the Belarusian Interbank Settlement Center” dated October 10, 2017 (270 units);

- the measures to establish OJSC “Non-bank Credit and Financial Institution “Belincasgroup” envisaged by Decree of the President of the Republic of Belarus No. 45 of February 1, 2018 (428.5 units); and

- other measures to optimize the functions performed by the National Bank and improve management processes (29 units).

The average age of civil servants remained unchanged compared with 2017 and stood at 42 years.

The share of the employees who have more than 10 years of work record in the banking sphere accounted for 58% of the total number of the National Bank’s personnel, including civil servants – 61%.

The National Bank’s civil servants that are graduates of the institutions of higher education accounted for 100%, of which 37% obtained the

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diplomas of additional higher education or retraining in other fields. 20 employees of the National Bank have a degree.

The National Bank’s employees were trained in the following areas: banking, development of management and communication skills, and computer training. The practice of organizing seminars on topics of interest for structural units was widely used (in particular, analysis of financial activities of enterprises, practical issues of applying international financial reporting standards, analysis of investment projects, and basis of business analysis).

In 2018, 1,282 employees were trained in the Republic of Belarus and 219 officials participated in international seminars and courses. With a view to automating the processes of recruiting, selecting, integrating and developing personnel, as well as planning, training and assessing its efficiency and that of activities on notifying of and evaluating compliance with the key efficiency indicators, the IT technologies were implemented in an intensive manner.

2.16. Internal audit

In 2018, internal audit activities of the National Bank were aimed at

improving the processes of internal control, risk management and corporate governance. International professional standards 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, and best international practices were applied in the course of audit organization and performance. The internal audit procedures took into account the results of structural changes and modifications in the functioning of processes at the National Bank.

The list of processes of the National Bank and objects in the field of information technologies for the purpose of conducting the audit thereof in 2018 (hereinafter – the “auditees”) was determined by Resolution of the Board of the National Bank of the Republic of Belarus No. 481 ”On Approving the Plan of Audits and Inspections of the Internal Audit Directorate for 2018 - 2020” dated December 4, 2017. 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 13 audit assignments (7 in the area of auditing processes and 5 in the field of information technologies), as well as reviewed the quality of implementation of internal audit recommendations.

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

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system in the National Bank’s activities. When performing engagements, the audited 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 organizing and conducting project activities on the creation and implementation of automated information systems, ensuring the security of information systems, and the effective organization of information technologies management processes.

According to the results of the audits performed, the owners and participants of the audited processes 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). For the purpose of minimizing risks in the National Bank’s activities, local regulatory legal acts were amended, measures aimed at optimizing the processes of the National Bank, increasing the efficiency and security of the National Bank’s information system functioning, as well as improving the internal control and risk management system were taken. The specialists of the Internal Audit Directorate controlled the timeliness, adequacy, and the entirety of follow-up of the recommendations, which were made based on the audits findings.

Over the year under review, the Internal Audit Directorate coordinated the activities on collaboration with the audit firm Ernst & Young LLC in the process of auditing the annual financial statements of the National Bank for 2017 and external audit company KPMG LLC when performing preliminary audit procedures for 10 months of 2018 as part of the audit of the annual accounting (financial) statements of the National Bank for 2018. Interaction with external audit organizations contributed to improving the control environment of the National Bank and the efficiency of external audit through the establishment of a constructive communication process between internal and external audits.

In the year under review, the Internal Audit Directorate developed the Policy on Organizing the Internal Control System at the National Bank of the Republic of Belarus, approved by Resolution of the Board of the National Bank of the Republic of Belarus No. 144 dated March 27, 2018. This local legal act defines the general principles of and requirements for organizing the internal control system, forming common approaches to the implementation of internal control processes, including the goals and objectives of the internal control system, as well as the responsibility and obligations of its participants. The document is applied to all activities of the National Bank, its functions and operations.

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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 2018 were performed.

According to the opinion of the audit firm KPMG LLC, the National Bank’s annual financial statements present fairly, in all material aspects, the financial position of the National Bank as at January 1, 2019, and its financial performance and change in the financial situation therein in 2018.

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Form 1

BALANCE SHEET as at January 1, 2019

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

No.

Item Index Note 2018 2017

1. ASSETS 2. Cash 1100 92,961 88,6123. Precious metals and precious stones 1101 4 4,451,964 4,047,6614. Securities 1102 5 2,140,951 2,261,8815. Funds with banks 1103 6 11,083,483 9,972,8336. Loans and other asset

operations with customers

1104 7 7,443 12,2497. Derivative financial assets 1105 – –8. Long-term financial investments 1106 8 293,607 233,3649. Fixed and intangible assets 1107 9 117,433 134,027

10. Other assets 1108 10 28,796 297,99011. TOTAL assets 110 18,216,638 17,048,61712. LIABILITIES 13. Cash in circulation 1200 3,765,675 3,102,57914. Precious metals and precious stones 1201 11 86,342 82,57515. Amounts due to international

financial institutions

1202 5,343 4,74516. Amounts due to banks 1203 12 5,830,480 5,115,21117. Amounts due to customers 1204 13 14,468,376 11,939,87818. Required reserves of banks 1205 380,285 313,89319. Securities of the National Bank 1206 14 2,255,547 4,606,82120. Derivative financial liabilities 1207 – –21. Other liabilities 1208 15 1,583 1,53622. TOTAL liabilities 120 26,793,631 25,167,23823. EQUITY 24. Statutory fund 1211 25,000 25,00025. Reserve fund and other funds 1212 832 83226. Accumulated deficit 1213 16 (12,012,687) (11,229,583)27. Balance sheet items revaluation reserve 1214 17 3,409,862 3,085,13028. TOTAL equity 121 (8,576,993) (8,118,621)29. TOTAL liabilities and equity 12 18,216,638 17,048,617

 

 

 

 

 

 

 

 

67

Form 2

INCOME STATEMENT

for 2018

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

No. Item Index Note 2018 2017

1. Interest income 2011 18 286,402 329,5352. Interest expenses 2012 18 (514,660) (860,645)3. Net interest expenses 201 18 (228,258) (531,110)4. Fee and commission income 2021 19 4,194 2,4345. Fee and commission expenses 2022 19 (1,763) (2,272)6. Net fee and commission income 202 19 2,431 1627. Net loss from foreign exchange

transactions 203

20 (307,654) (149,984)8. Net gain from operations with

precious metals and precious stones 204

21 4,834 1,1939. Net loss from operations with

securities 205

22 (41) (3,143)10. Net gain from operations with

derivative financial instruments 206

– –11. Dividend income 207 9,147 6,201

12. Net charge to provisions 208 23 (4) (1,315)13. Other expenses 2091 24 (352,032) (544,801)14. Other income 2092 24 84,633 89,24115. Other expenses, net 209 24 (267,399) (455,560)16. Allocations to the budget 210 (116) (166)17. LOSS 2 (787,060) (1,133,722)

  

 

 

 

 

68 Form 3

STATEMENT of changes in equity

in 2018

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

No. Item Index

Own equity items

Statutory fund

Reserve fund

Other funds

Retained earnings (loss)

Balance sheet items

revaluation funds

Total own equity

Section I. For the year preceding the reporting year 1. Balance as at January 1, 2017 3011 25,000 36,314 832, (10,132,365) 2,624,648 (7,445,571) 2. Change of equity items, including: 3012 – (36,314) – (1,097,218) 460,482 (673,050)

2.1. comprehensive income 30121 x x x (1,133,722) 460,672 (673,050) 2.2. distribution of profit 30122 – 639 – (639) x – 2.3. transfer of the amounts of revaluation of disposed property equipment

and intangible assets to retained earnings 30123 x x x 190 (190) – 2.4. other changes 30124 – (36,953) – 36,953 – –

3. Balance as at January 1, 2018 3013 25,000 – 832 (11,229,583) 3,085,130 (8,118,621) Section II. For the reporting period

4. Balance as at January 1, 2018 3011 25,000 – 832 (11,229,583) 3,085,130 (8,118,621) 5. Change of equity items, including: 3012 – – – (783,104) 324,732 (458,372)

5.1. comprehensive income 30121 x x x (787,060) 328,688 (458,372) 5.2. distribution of profit 30122 – – – – x – 5.3. transfer of the amounts of revaluation of disposed property equipment

and intangible assets to retained earnings 30123 x x x 3,956 (3,956) – 5.4. other changes 30124 – – – – – –

6. Balance as at January 1, 2019 3013 25,000 – 832 (12,012,687) 3,409,862 (8,576,993)

 

 

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Appendix to the Statement of changes in equity

INFORMATION on comprehensive income

for 2018

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

No.

Item Index Note 2018 2017

1. Loss 301211 16 (787,060) (1,133,722)2. Other components of comprehensive

income, including: 301212 17 328,688 460,6722.1. revaluation of fixed assets and non-

installed equipment 3012121 3 (5)2.2. revaluation of intangible assets 3012122 – –2.3. translation differences from foreign

exchange revaluation 3012123 – –2.4. revaluation of precious metals 3012124 328,773 460,0782.5. revaluation of securities 3012125 (88) 5992.6. 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 (458,372) (673,050)

 

 

70 Form 4

STATEMENT of the formation and use of reserves

for 2018

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

No. Item Index Statuto- ry fund

Reserve fund

Other funds

Fixed assets and non-installed

equipment revaluation

reserve

Intangible assets

revaluation reserve

Translation differences

from foreign exchange

revaluation fund

Precious metals and precious stones

revaluation reserves

Securities revaluation

reserve

Hedging instrument revaluation

reserve

Other balance sheet items

revalua- tion

reserve

Total

Section I. For the year preceding the reporting year 1. Balance as at January 1, 2017 4011 25,000 36,314 832 121,368 – – 2,503,986 (706) – – 2,686,794 2. Paid into reserves by

allocating profit 4012 – 639 – х х х х х х х 639

3. Paid into reserves by using other sources 4013

– – – 431 – – 2,665,668 1,024 – – 2,667,123

4. Reserves used 4014 – (36,953) – (626) – – (2,205,590) (425) – – (2,243,594)

5. Balance as at January 1, 2018 4015 25,000 – 832 121,173 – – 2,964,064 (107) – – 3,110,962 Section II. For the reporting year

6. Balance as at January 1, 2018 4011 25,000 – 832 121,173 – – 2,964,064 (107) – – 3,110,962 7. Paid into reserves by

allocating profit 4012 – – – х х х х х х х –

8. Paid into reserves by using other sources 4013 –

– – 71 – – 2,527,357 497 – – 2,527,925

9. Reserves used 4014 – – – (4,024) – – (2,198,584) (585) – – (2,203,193)

10. Balance as at January 1, 2019 4015 25,000 – 832 117,220 – – 3,292,837 (195) – – 3,435,694

 

 

71

Form 6

STATEMENT

of maintenance costs of the National Bank for 2018

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

No. Description of expenses Index

2018 Actually for 2017 Plan Actual

1. Maintenance costs total, 6011 141,341 104,441 90,301 including:

1.1. staff costs 60111 53,483 50,257 52,0211.2. expenses on the use of land, buildings,

structures and other fixed assets and stocks 60112 16,060 9,756 11,254

1.3. expenses on the consulting, audit, informational, marketing, advertising and other services received 60113 2,741 1,855 2,095

1.4. depreciation and amortization charges 60114 25,840 13,021 14,4701.5. costs arising from the disposal of long-

term financial investments and property 60115 21,502 14,118 1671.6. costs of operation of the payment system 60116 1,357 1,322 5151.7. other operating expenses 60117 20,358 14,112 9,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72  

Form 7

STATEMENT

of capital investments budget execution for 2018

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

No. Capital investment workstream Index 2018 Actually

for 2017 Plan Fact

1. Capital investments, total 7011 32,380 11,993 16,521

1.1. including:

capital construction and reconstruction 701101 4,507 3,458 2,6881.2. measures to develop the software and technical

infrastructure of the payment system 701102 3,909 1,206 2,9101.3. computer equipment, software and network

equipment 701103 19,257 5,471 8,3201.4. equipment to enhance safety and protect

information 701104 3,364 1,110 2,2831.5. cash registers and other equipment to work with

valuables 701105

–

–

–1.6. equipment to work with precious metals and

precious stones 701106 10 8 –1.7. vehicles 701107 365 353 –

including:

those for transporting valuables 7011071 – – – staff motorcars and other vehicles 7011072 365 353 –

1.8. maintenance equipment for vehicles and buildings 701108 70 66 52

1.9. other 701109 898 321 268

 

73 Form 8

 

STATEMENT

of profit and its allocation for 2018

 

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

No.

Description Index 2018 2017

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

requires approval:

221 – –2.1. cover for loss of past years 2211 – –2.2. statutory fund 2212 – –2.3. reserve fund 2213 – –2.4. other funds 2214 – –

3. Retained earnings of past year 3 3,956 1904. Allocation of profit of past years that requires

approval:

321

3,956

1904.1. cover for loss of past years 3211 3,956 1904.2. statutory fund 3212 – –4.3. reserve fund 3213 – –4.4. other funds 3214 – –

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Notes to the annual financial statements of the National Bank for 2018

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 dated October 25, 2000, laws of the Republic of Belarus 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 at January 1, 2019, the National Bank comprised a head office, five regional main departments and the 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, the Law of the Republic of Belarus "On Accounting and Reporting" No. 57-З dated July 12, 2013, the Instructions for the Procedure for Organizing Accounting Policy at the National Bank of the Republic of Belarus approved by Resolution No. 407 of the Board of the National Bank of the Republic of Belarus dated September 27, 2010, the Instructions for Recording in Accounting the Operations of the National Bank of the Republic of Belarus approved by Resolution No. 770 of the Board of the National Bank of the Republic of Belarus dated December 23, 2013, the Instructions for the Compilation and Presentation of the Annual Financial Statements by the National Bank of the Republic of Belarus approved by Resolution No. 633 of the Board of the National Bank of the Republic of Belarus dated December 28, 2011, the Instructions for Organizing Accounting at the National Bank of

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the Republic of Belarus approved by Resolution No. 419 of the Board of the National Bank of the Republic of Belarus dated September 30, 2010, the Instructions for Organizing of the Preparation of Separate Forms of Financial Statements of the National Bank of the Republic of Belarus in Accordance with the Legislation of the Republic of Belarus approved by Resolution No. 589 of the Board of the National Bank of the Republic of Belarus dated September 30, 2015, and the national standards of the financial statements adopted by the National Bank.

The annual financial statements of the National Bank for the year ended December 31, 2018 comprise:

- Balance sheet (Form 1); - Income statement (Form 2); - Statement of changes in equity (Form 3); - Statement of the formation and use of reserves (Form 4); - Statement of maintenance costs of the National Bank (Form 6); - Statement of capital investments budget executions (Form 7); - Statement of profit and its allocation (Form 8); and Notes to the annual 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 from and due to JSC "Development Bank of the Republic of Belarus" and JSC "Belarusian Currency and Stock Exchange" are recorded in the annual financial statements in the respective items specified for recording operations 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 2018, the National Bank applies the combined accounting system (centralized and decentralized) using the automated banking system "Transaction activities" and local program packages.

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3.1. Assets and liabilities denominated in foreign exchange

Assets and liabilities arising from dealing in foreign exchange are divided into monetary and non-monetary items for accounting purposes.

Transactions in foreign exchange resulting in monetary items are reported in two measurements – the amount in a foreign exchange and the equivalent amount in Belarusian rubles – and are recorded in accounting at the official exchange rate of the Belarusian ruble to the relevant foreign exchange 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 their amounts into Belarusian rubles at the official exchange rate at the date of recording, 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 exchange are charged to offset account for dealing in foreign exchange on a daily basis. Accumulated foreign exchange gains (losses) are recorded on the last working day and should be charged to the following accounts: - to the balance sheet account for recognizing the foreign exchange revaluation reserve (in case of a positive difference); 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 exchange if cash on the balance sheet account for recognizing the foreign exchange revaluation reserve is not available (in case of a negative difference) (Note 20).

The financial result of currency exchange operations arising from dealing in foreign currencies at the exchange rates other than the official exchange rate is charged to the gain or loss arising from dealing in foreign exchange on a daily basis (Note 20).

As at 31 December 2018, the official exchange rates used for translating the assets and liabilities denominated in foreign exchange were as follows:

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Currency

Official exchange rate, BYN

1 Australian dollar (AUD) 1.5215 1000 Armenian drams (AMD) 4.3969 100 hryvnias (UAH) 7.7943 10 Danish kroner (DKK) 3.3102 1 US dollar (USD) 2.1598 1 euro (EUR) 2.4734 10 zlotys (PLN) 5.7525 100 yens (JPY) 1.9570 1 Canadian dollar (CAD) 1.5869 10 Chinese yuans (CNY) 3.1445 10 Norwegian kroner (NOK) 2.4726 100 Russian rubles (RUB) 3.1128 100 soms (KGS) 3.0921 1000 tenges (KZT) 5.6713 1 pound sterling (GBP) 2.7309 10 Swedish kronor 2.4112 1 Swiss franc (CHF) 2.1925

3.2. Precious metals and precious stones

Transactions with precious metals in standard bars shall be recognized

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

Acquisition of precious metals in small bars shall be recorded at actual acquisition cost, previously sold precious metals in small bars shall be recorded at their acquisition price.

Commemorative, bullion (investment) coins made of precious metals that are minted by the National Bank are accounted for at their nominal value.

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 21).

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 recorded on balance sheet accounts at the date of revaluation are charged to:

the amount of a positive difference - balance sheet account for recognizing the precious metals revaluation reserve (Note 17); and

the amount of a negative difference - balance sheet account for

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recognizing the precious metals revaluation reserve; if cash on the balance sheet account for recognizing the precious metals revaluation reserve is not available - balance sheet account for expenses arising from dealing with precious metals.

Precious stones acquired by the National Bank are accounted for at their actual acquisition cost.

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 and carrying amount of precious stones. The amount of the financial result as of the date of consideration receipt shall be charged to the balance sheet accounts for income (expenses) arising from dealing with precious stones (Note 21).

Precious stones are not subject to mandatory regular revaluation.

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

under repo transactions or on behalf of the customers, are accounted for at their acquisition price, including income paid (accumulated) thereon in the form of interest, which shall be recorded separately. The amount of income on acquired securities 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 recognized at fair value shall be carried out on a monthly basis as at 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 22); and

- securities classified as "Financial assets available-for-sale" – on the balance sheet account for recognizing securities revaluation reserve (Note 17).

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.

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

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Gains or losses from sale of securities are recorded as gains or losses from dealing with securities (Note 22).

Securities received by the National Bank under repo transactions are recorded on the off-balance sheet accounts, and advances are recorded as financing transactions on the balance sheet accounts (Note 6).

Gains arising from financing under repo transactions are recorded as interest income (Note 18).

3.4. Securities of the National Bank

The National Bank issues securities bearing income in the form of interest or discount. Securities issued by the National Bank are recognized as they are placed (sold) at their nominal value. Expenses are recorded as interest expenses (Note 18). Upon issue of the securities bearing income in the form of discount, the amount of discount is recorded in deferred expenses and is subsequently charged to 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) by the National Bank having regard to the payments made.

3.7. Provisions

Special provisions for overall bank risks

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Special provisions for overall bank risks (hereinafter – the "special provisions") are accrued to cover potential losses with respect to the assets of the National Bank in accordance with certain local regulations of the National Bank.

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

Contributions to special provisions are charged to the expenses of the National Bank in full (Note 23).

Decrease (reversal) of special provisions accrued is charged to the income of the National Bank in the reporting period when such decrease (reversal) 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 financial investments in statutory funds

of legal entities A special provision is formed to cover possible losses from long-term

financial investments of the National Bank in statutory funds of legal entities (hereinafter – the "investment provision") in accordance with certain local regulations of the National Bank.

The investment provision is formed in Belarusian rubles. Contributions to the investment provision are charged to the expenses of

the National Bank in full. The accumulated amount of the investment provision is used to write off

the carrying amounts of investments upon the decision of the Board of the National Bank.

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 for occupational accidents and diseases to the budget of the

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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 the expenses of

the National Bank in full (Note 24): - 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 assets 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.

Measurement of the initial cost of fixed assets and intangible assets occurs 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 Revaluation of Fixed Assets, Income-Bearing Investments in Tangible Assets, Construction in Progress and Non-Installed Equipment" dated October 20, 2006.

The amounts of revaluation of disposed fixed assets recognized in the equity, except for fixed assets contributed as non-cash contributions in the

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statutory fund of another legal entity, are charged in full to the account for recording retained earnings (accumulated loss) of prior years.

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

The Instructions for 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, 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 Revocation of Certain Resolutions 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/amortized using a straight-line method and the amortization charges are charged 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 can be established and revised by the decision of the authorized commission.

The useful lives of fixed assets are as follows: - Buildings and structures – from 8 to 100 years; - Computers – from 3 to 12 years; - Motor vehicles – from 7 to 10 years; and - Other fixed assets – from 2 to 58 years. The useful lives for intangible assets are from 1 to 24 years.

3.9. Cash in circulation

The National Bank has an exclusive right to issue money and organize its circulation. Banknotes and coins issued into circulation by the National Bank, as well as commemorative, bullion (investment) coins and commemorative banknotes 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; - Amounts due to banks; - Amounts due to customers; and

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- 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; - Loan fund; - Accumulated deficit; and - Balance sheet items revaluation reserve. Information on the sources of formation and use of the reserves is

disclosed in the statement of changes in equity (Form 3) and the statement of the formation and use of reserves (Form 4).

3.12. Loss of 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 received and losses incurred 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 income statement (Form 2).

3.13. Income and expenses

The National Bank recognizes income and expenses in accordance with the requirements of the Instructions for Recognizing in Accounting Income and Expenses of the National Bank of the Republic of Belarus, Banks and Non- bank Financial Institutions of the Republic of Belarus approved by Resolution No. 125 of the Board of the National Bank dated July 30, 2009, on an accrual basis, the Instructions for 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 Instructions for the Procedure for Organizing Accounting Policy at the National Bank of the Republic of Belarus, and other regulations of the National Bank. Income and expenses are recognized in the

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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-dsp 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 18).

3.14. Taxation of the National Bank

In accordance with the Tax Code of the Republic of Belarus (Special

Part) dated December 29, 2009, 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

2018 2017

Gold, other precious metals and precious stones 1,421,659 1,313,187

Precious metal deposits 2,963,085 2,516,372Correspondent accounts in precious metals 67,220 218,102Total 4,451,964 4,047,661Provisions – –Total 4,451,964 4,047,661

An increase in the item mainly results from changes in the accounting

prices for precious metals in standard bars set by the National Bank.

5. Securities

2018 2017 Securities at fair value through profit or loss:

securities of foreign governments 286,394 272,981

securities of banks 83,779 62,238other securities 62,068 47,676Total 432,241 382,895Provisions – –Total 432,241 382,895Securities available-for-sale:

securities of banks 1,314,513 1,413,692

securities of the republican government bodies 330,864 454,261

85 2018 2017 securities of local government bodies 9,258 11,033securities of foreign governments 54,075 –Total 1,708,710 1,878,986Provisions – –Total 1,708,710 1,878,986 Total 2,140,951 2,261,881

Securities at fair value through profit or loss include bonds of foreign

governments, non-resident banks and non-resident financial institutions. 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.

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

Securities of non-resident banks, foreign governments and non-resident financial institutions were purchased in order to increase the effectiveness of managing foreign exchange denominated reserves.

Bonds of 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-dsp 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 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.

6. Amounts due from banks 2018 2017

Loans 149,568 227,128Deposits 6,600,971 5,920,949Amounts on correspondent accounts 3,254,772 2,710,185Amounts received under repurchase transactions 1,078,172 1,112,101Other amounts – 2,470Total 11,083,483 9,972,833Provisions – –Total 11,083,483 9,972,833

The item "Loans" includes liabilities under loans granted to:

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- Resident banks in order to finance investment import from the People's Republic of China, and subsequent lending aimed at completing investment projects; and

- The People's Bank of China (in Belarusian rubles) under a bilateral agreement on currency swap between the People's Bank of China and the National Bank of the Republic of Belarus.

The item "Deposits" includes amounts placed with non-resident banks under a term bank deposit and call deposit agreements in foreign exchange.

Foreign exchange denominated amounts placed on correspondent accounts with non-resident banks increased by BYN41,107 thousand and amounted to BYN2,522,417 thousand as at the reporting date. Foreign exchange denominated amounts placed on correspondent accounts with resident banks increased by BYN503,480 thousand and amounted to BYN732,355 thousand as at 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 current value of USD499.2 million (equivalent to BYN1,078,172 thousand). Fund placement transactions are intraday ones.

7. Loans and other asset operations with customers

2018 2017

Loans (borrowings) 529 602

Amounts due from (placed with) international financial institutions 6,911 11,640Other amounts 3 7Total 7,443 12,249Provisions – –Total 7,443 12,249

Amounts due from individuals (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".

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8. Long-term financial investments

2018 2017

Participation interests 62,443 9,205

Investments in legal entities 231,164 224,159Total 293,607 233,364Provision – –Total 293,607 233,364

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

Investment 2018 2017 Participation

interest in the statutory

fund, % (at par)

Carrying amount

Participation interest

in the statutory fund, % (at par)

Carrying amount

Participation interests OJSC “Non-Bank Credit and Financial Institution Belinkasgroup” 44.00 53,238 – –JSC "Banking Processing Center" 39.17 6,344 39.17 6,344Interstate Bank, Moscow 8.40 1 8.40 1JSC "Belinvestbank" 1.16 2,684 1.16 2,684JSC "Development Bank of the Republic ofBelarus" 0.01 176 0.01 176

Investments in legal entities JSC "Belarusian Currency and Stock Exchange" 99.98 14,326 99.98 13,917JSC "Bank Moscow-Minsk" 99.75 58,804 99.75 58,804JSC "Sanatorium Ozerny" 99.61 24,021 99.61 19,651JSC "Belarusian Interbank Settlement Center" 99.00 67,990 99.00 67,990JSC "Sanatorium Ruzhansky" 97.62 42,500 97.62 42,372JSC "Center for Banking Technologies" 94.10 434 94.10 217CJSC "Bank Finance Telenetwork" 64.50 958 64.50 675OJSC "Non-Bank Financial Institution "SSIS" 51.78 12,131 51.78 10,533State Institution "Agency for the Guaranteed Repayment of Natural Persons’ Bank Deposits" х 10,000 х 10,000

Increase in long-term financial investments of the National Bank resulted

from: - a cash and a non-cash contribution to the statutory fund of OJSC

"Non-Bank Credit and Financial Institution Belinkasgroup" in accordance with Edict No. 45 of the President of the Republic of Belarus "On Creation of an Open Joint-Stock Company" dated February 1, 2018;

- an increase in the nominal value of shares of JSC "Belarusian Currency and Stock Exchange", JSC "Center for Banking Technologies",

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CJSC "Bank Finance Telenetwork", and OJSC "Non-Bank Financial Institution "SSIS"; and

- additional issue of shares of JSC "Sanatorium Ozerny", JSC "Sanatorium Ruzhansky".

Cash contribution to form assets of the State Institution "Agency for the Guaranteed Repayment of Natural Persons’ Bank Deposits" is accounted for in the amount of cash transferred by the National Bank in accordance with Decree No. 22 of the President of the Republic of Belarus "On Safety Guarantees for Natural Persons’ Cash Placed on Accounts and/or Bank Deposits" dated November 4, 2008.

9. Fixed and intangible assets

2018 2017 Fixed assets 156,786 173,797Intangible assets 24,912 16,955Non-installed equipment and construction materials 6,704 23,251Investments in fixed assets and construction in progress 3,337 2,529Investments in intangible assets 3,625 5,372Total 195,364 221,904Depreciation and amortization (77,931) (87,877)Total 117,433 134,027

9.1. Value of fixed and intangible assets

Groups Balance as

at January 1,

2018

Additions (commissioned)

Disposals Change resulting

from revaluation

Balance as at

January 1, 2019

Buildings and structures 103,636 99 14,389 – 89,346Other fixed assets 70,161 18,994 21,720 5 67,440Intangible assets 16,955 8,360 403 – 24,912Non-installed equipment and construction materials 23,251 325 16,872 – 6,704Investments in fixed assets and construction in progress 2,529 23,628 22,820 – 3,337Investments in intangible assets 5,372 6,165 7,912 – 3,625Total 221,904 57,571 84,116 5 195,364

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9.2. Accumulated depreciation and amortization

Groups Balance as at

January 1, 2018

Accrued depreciation

and amortization

charges

Depreciation and

amortization charges on

disposed fixed assets

Change resulting

from revaluation

Balance as at

January 1, 2019

Buildings and structures 21,994 1,552 4,944 (2) 18,600Other fixed assets 54,559 6,057 17,653 4 42,967Intangible assets 11,324 5,412 372 – 16,364Total 87,877 13,021 22,969 2 77,931Net book value 134,027 х х х 117,433

In accordance with Edict No. 622 of the President of the Republic of

Belarus dated October 20, 2006, Resolution No. 21 of the Board of the National Bank of the Republic of Belarus "On Revaluation of Fixed Assets, Construction in Progress and Non-installed Equipment" dated January 19, 2018 and Resolution No. 38 of the Board of the National Bank of the Republic of Belarus "On Revaluation of Fixed Assets, Construction in Progress and Non-installed Equipment" dated January 21, 2019, 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 at January 1, 2018 and January 1, 2019.

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

- Buildings and structures – BYN602 thousand; - Other fixed assets – BYN23,597 thousand; and - Intangible assets – BYN8,641 thousand.

10. Other assets

2018 2017 Deferred expenses 24,547 289,837Accrued fees, other banking and operating income 1,233 3,331Settlements with debtors 398 1,621Other assets 2,624 3,245Total 28,802 298,034Provision (6) (44)Total 28,796 297,990

Decrease in the item "Deferred expenses" occurred because the value of

the shares of agricultural organizations transferred free of charge under Edict No. 593-dsp of the President of the Republic of Belarus dated December 23, 2011 and expenses associated with the creation of the material and technical

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base of Polesskiy State University educational institution were charged to expenses (Note 24).

11. Precious metals and precious stones

2018 2017

Precious metal deposits 39,932 36,888

Amounts on correspondent accounts 276 255Other amounts 46,134 45,432Total 86,342 82,575

Amounts placed by the Ministry of Finance on unallocated metals

accounts of customers are included in the item "Other amounts".

12. Amounts due to banks

2018 2017

Loans 1,203,911 1,122,302

Deposits 7,005 40,026Amounts on correspondent accounts 4,608,587 3,891,652Other amounts 10,977 61,231Total 5,830,480 5,115,211

Amounts of loans from non-resident banks, including the loan in Chinese

yuans under a bilateral agreement on currency swap between the National Bank of the Republic of Belarus and the People's Bank of China, are included in the item "Loans".

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 transferred by resident banks under transactions with securities and cash transactions.

13. Amounts due to customers

2018 2017

Deposits 3,294,812 1,980,573

Balances on current (settlement) accounts 7,268,469 6,775,171External government loans raised by the Republic of Belarus, the Government 3,887,640 3,156,320Other amounts 17,455 27,814Total 14,468,376 11,939,878

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The item "Other amounts" includes: - Budget funds of the Union State; - Non-budgetary funds on accounts of the Ministry of Finance; and - Accrued interest expenses in the amount of interest income on bonds

of local executive and regulatory authorities payable to the state budget.

14. Securities of the National Bank

2018 2017 Bonds 2,255,547 4,606,821Total 2,255,547 4,606,821

Securities issued by the National Bank include bonds in Belarusian

rubles and freely convertible currency providing for income in the form of discount, and bonds in freely convertible currency providing for income in the form of interest, maturing in 2019 and acquired by resident banks, non-resident banks and the State Institution "Agency for the 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 exchange reserves of the Republic of Belarus.

15. Other liabilities

2018 2017

Settlements with creditors 949 1,032

Accrued fees, other banking and operating expense 608 480Other liabilities 26 24Total 1,583 1,536

16. Accumulated deficit

2018 2017

Uncovered loss of prior years (11,229,583) (10,096,051)Loss of the reporting year (787,060) (1,133,722)Retained earnings on disposed fixed assets 3,956 190Total (12,012,687) (11,229,583)

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Loss of the National Bank for 2018 amounted to BYN787,060 thousand; specifically, income totaled BYN405,881 thousand and expenses totaled BYN1,192,941 thousand.

17. Balance sheet items revaluation reserve

2018 2017

Fixed assets and non-installed equipment revaluation reserve 117,220 121,173Precious metals revaluation reserve 3,292,837 2,964,064Securities revaluation reserve (195) (107)Total 3,409,862 3,085,130

Information on the sources of formation and use of the revaluation

reserve for balance sheet items is disclosed in the statement of changes in equity (Form 3) and the statement of the formation and use of reserves (Form 4).

18. Net interest expenses

2018 2017

Interest income on: 286,402 329,535operations with precious metals 6,206 7,535amounts due from banks 135,179 131,303securities at fair value through profit or loss 7,119 5,695securities available-for-sale 137,728 184,195settlements with customers 170 807

Interest expenses on: (514,660) (860,645)operations with precious metals (24) (43)settlements with banks (137,176) (196,237)securities of the National Bank (169,193) (446,087)loans received (59,666) (71,103)operations involving budget funds and other state funds (138,100) (111,216)amounts due to customers (3,030) (29,884)other amounts due to customers (1,063) (1,636)other (6,408) (4,439)Total (228,258) (531,110)

A decrease in interest income mainly results from the reduction in the year under review of the refinancing rate from 11% to 10% p.a. and the decrease in income on securities available-for-sale due to early repayment by JSC "Development Bank of the Republic of Belarus" of a part of its bonds held by the National Bank.

A decrease in interest expenses is mainly due to: - for settlements with banks – mainly results from the reduction of the

refinancing rate in 2018 and early repayment by JSC "Development Bank of

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the Republic of Belarus" of a part of its bonds, interest income under which is transferred by JSC "Development Bank of the Republic of Belarus";

- for securities of the National Bank – a decrease in the volume of issue of bonds in Belarusian rubles due to a decrease in the level of excess liquidity of the banking system and a planned decrease in the volume of issue of bonds denominated in foreign exchange;

- for loans received – discharge by the National Bank of its obligations; and

- for amounts due to customers – termination of the agreement for bank deposit in Belarusian rubles with the State Institution "Agency for the Guaranteed Repayment of Natural Persons’ Bank Deposits" in February 2018.

An increase in interest expenses on operations involving budget funds and other state funds results from the growth in amounts deposited by the Ministry of Finance in the National Bank.

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

19. Net fee and commission income

2018 2017

Fee and commission income on: 4,194 2,434account maintenance 1,343 328securities transactions 59 46transactions with foreign exchange 21 59provision of credit reports 2,730 1,919other 41 82

Fee and commission expenses on: (1,763) (2,272)account maintenance (747) (1,184)transactions involving bank cards (26) (19)transactions with foreign exchange (6) (5)consulting services and investment management provided by IBRD (573) (659)storage of documents and valuables (29) –other (382) (405)Total 2 431 162

An increase in fee and commission income on account maintenance

relates to introducing additional commissions for the maintenance of correspondent accounts in euro from November 1, 2017 and an increase in such income on provision of credit reports results from a larger number of credit reports provided.

A decrease in fee and commission expenses on account maintenance relates to closing of a number of correspondent accounts in foreign exchange

94

and in precious metals as part of optimization of the correspondent network of the National Bank to mitigate settlement risks and reduce the related financial expenses.

A decrease in fee and commission expenses on consulting services and investment management provided by the International Bank for Reconstruction and Development results from a decrease in investments.

Expenses on storage of documents and valuables are related to placement of cash of the National Bank to remote storage in OJSC “Non-Bank Credit and Financial Institution Belinkasgroup”.

20. Net loss from foreign exchange transactions

2018 2017

Gains from foreign exchange transactions: 10,890 16,988financial result from currency exchange transactions 10,890 16,988

Losses from foreign exchange transactions: (318,544) (166,972)translation differences from foreign exchange revaluation (314,442) (160,299)financial result from currency exchange transactions (4,102) (6,673)Total (307,654) (149,984)

An increase in translation differences from foreign exchange revaluation

is due to an increase in the rates of depreciation of the Belarusian ruble against major currencies.

21. Net gain from operations with precious metals and precious stones

2018 2017

Gains from operations with precious metals 2,269 1,314Gains from operations with precious stones 3,051 145Losses from operations with precious metals (478) (263)Losses from operations with precious stones (8) (3)Total 4,834 1,193

Income includes positive differences between the realizable value and

the carrying amount of precious metals and precious stones. An increase in gains from operations with precious metals results from

an increase in sales of small bars to legal entities and individuals in the domestic market.

An increase in gains from operations with precious stones resulted from renewal of the sale of precious stones by the lot principle in the foreign and domestic market.

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Losses from operations with precious metals mainly comprise expenses on the purchase 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.

22. Net loss from operations with securities

2018 2017

Gains from operations with securities: 5,279 2,278at fair value through profit or loss 5,190 2,278available-for-sale 89 –

Losses from operations with securities: (5,320) (5,421)at fair value through profit or loss (5,269) (4,543)available-for-sale (51) (878)Total (41) (3,143)

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.

23. Net charge to provisions

2018 2017 Charges to provisions: (19) (1,351)for securities transactions – (1,338)for settlements with customers (2) (13)for settlements with debtors (8) –for other transactions (9) –

Decrease in provisions: 15 36for settlements with customers 2 19for other transactions 13 17Total (4) (1,315)

The item reflects charges to provisions and decrease (reversal) of

provisions.

24. Other expenses, net

2018 2017 Other expenses: (352,032) (544,801)Long-term financial investments (218,679) (403,000)Staff costs (50,257) (52,021)

96 2018 2017

Creation of material and technical base for educational institutions (17,292) (5,535)Disposal of property (14,118) (32,757)Depreciation and amortization charges (13,021) (14,470)Gratuitous (sponsor) support (10,054) (1,432)Fixed assets and inventories (9,756) (11,254)Acquisition and maintenance of software (9,190) (4,646)Consulting, audit, informational, marketing, advertising and other received services (1,855) (2,095)Payment system operation (1,322) (515)Manufacture and delivery of banknotes and coins (546) (6,610)Transportation, delivery of documents (52) (287)Support to educational institutions – (4,650)Other (5,890) (5,529)

Other income: 84,633 89,241Long-term financial investments 34,348 45,473Provided rights to use software 10,286 –Sale of coins and banknotes 8,670 3,149Cash services to banks 8,144 7,000Transportation, delivery of documents 6,065 5,927Disposal of property 4,160 140Settlement services 3,663 19,088Leased property 2,952 547Services provided by the Settlement Center 618 3,995Other 5,727 3,922Total (267,399) (455,560)

Expenses on long-term financial investments comprise expenses to write

off shares in agricultural organizations recognized as deferred expenses in accordance with Edict No. 593-dsp of the President of the Republic of Belarus dated December 23, 2011.

The increase in expenses on the creation of the material and technical base of educational institutions is due to the allocation of the expenses on the creation of the material and technical base of Polesskiy State University educational institution to expenses in the whole amount, recognized as deferred expenses.

In accordance with Edict No. 108 of the President of the Republic of Belarus "On Changes in Edicts of the President of the Republic of Belarus" dated April 6, 2017, expenses on maintenance of Polesskiy State University educational institution shall be borne by the republican budget from January 1, 2018.

Other expenses mainly comprise communication fees, write-offs of acquired goods and produce of canteens, tools and administrative materials, medications, entertainment expenses, expenses for campaigns to enhance financial literacy, expenses to publish the Bankauski Vesnik magazine, member fee of the National Bank in the Alliance for Financial Inclusion.

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Income from long-term financial investments include income arising from the National Bank's non-cash contribution to the statutory fund of OJSC "Non-Bank Credit and Financial Institution Belinkasgroup".

An increase in income from the sale of banknotes and coins results from an increase in income from the sale of bullion (investment) coins of the National Bank.

An increase in income from disposal of property results from the sale of property of the National Bank required to support operations of JSC "Belarusian Interbank Settlement Center" and OJSC "Non-Bank Credit and Financial Institution Belinkasgroup".

Other income mainly comprises income from paid services, canteen services, leasing, compensation for utilities and other expenses. The increase in income is due to the allocation to income of amounts of the year 2000 type banknotes declared invalid (revoked as legal means of payment), the terms of liabilities for which have expired and which were not presented for exchange.

25. Statement of changes in equity.

Statement of the formation and use of reserves

In accordance with clause 33 of the Charter of the National Bank of the Republic of Belarus, the statutory fund of the National Bank comprises BYN25,000 thousand and is fully provided as at the reporting date.

Other funds formed in accordance with clause 34 of the National Bank's Charter comprise a loan fund totaling BYN832 thousand as at January 1, 2019.

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

BYN117,220 thousand. Revaluation of fixed assets retired in the reporting period in the amount of BYN3,956 thousand, which was transferred to retained earnings;

- revaluation reserve for precious metals amounted to BYN3,292,837 thousand. In 2018, an increase of BYN328,773 thousand results from the revaluation of monetary precious metals performed in proportion to changes in accounting prices; and

- securities revaluation reserve was negative at BYN195 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 22).

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-

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2021, which comprises a set of measures to cover the negative capital of the National Bank and to improve financial results.

Due to existing loss and the lack of own sources to cover it, the above Plan provides for the maximum utilization of internal and external resources to gradually achieve break-even operations and reduce accumulated deficit of the National Bank.

26. Statement of maintenance costs of the National Bank

In accordance with "Estimates of Current Expenses and Capital

Expenditures of the National Bank of the Republic of Belarus for 2018" approved by the President of the Republic of Belarus on December 29, 2017 (No. 09/520-166 P1884) and adopted by Resolution No. 2 of the Board of the National Bank dated January 4, 2018, the limit of expenses for maintenance of the National Bank was established at BYN141,341 thousand, while the actual amount was BYN104,441 thousand (73.9%).

Maintenance costs of the National Bank for 2018 totaled BYN104,441 thousand (8.8% of the total current expenses) and increased by BYN14,140 thousand compared with 2017.

Staff costs amounted to BYN50,257 thousand and are in line with the legislation and regulations of the National Bank concerning remuneration.

Expenses on the use of land plots, buildings, structures, other fixed assets and inventories amounted to BYN9,756 thousand. These expenses comprise cost of electricity, heating, water supply, security, alarm system, repair and maintenance, maintenance of vehicles, etc. A decrease in these expenses relates to lower costs of repair and maintenance, as well as operating costs related to creation of JSC "Belarusian Interbank Settlement Center" in accordance with Edict of the President of the Republic of Belarus No. 371 "On Belarusian Interbank Settlement Center" dated October 10, 2017 and OJSC "Non-Bank Credit and Financial Institution Belinkasgroup" in accordance with Edict of the President of the Republic of Belarus No. 45 dated February 1, 2018.

Expenses on consulting, audit, informational, marketing, advertising and other received services totaled BYN1,855 thousand.

Depreciation and amortization charges totaled BYN13,021 thousand. Depreciation and amortization charges were calculated based on the statutory rates. A benefit of BYN12,819 thousand results from the fact that at January 1, 2018 no revaluation was made with regard to fixed assets, non-installed equipment, installed equipment and ready-to-operate equipment recognized as construction in progress and investments in fixed assets.

Costs arising from the disposal of long-term financial investments and property totaled BYN14,118 thousand and comprised expenses on disposal of

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property of the National Bank as a result of its alienation or write-off. An increase in these expenses results from a non-cash contribution made in 2018 to the statutory fund of OJSC "Non-Bank Credit and Financial Institution Belinkasgroup" pursuant to Edict No. 45 of the President of the Republic of Belarus dated February 1, 2018.

Payment system costs totaled BYN1,322 thousand. An increase in these costs relates to payment system operation services provided to the National Bank by JSC "Belarusian Interbank Settlement Center".

Other operating expenses totaled BYN14,112 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 canteen services, administrative materials, medications, sports, recreation and cultural events, statutory payments to the budget, and other expenses. An increase in these expenses results from growing software maintenance service costs, as well as additional expenses for software support services of JSC "Belarusian Interbank Settlement Center", costs to determine the value of the assets transferred as non-cash contribution to the statutory fund of OJSC "Non-Bank Credit and Financial Institution Belinkasgroup" in accordance with Edict No. 45 of the President of the Republic of Belarus dated February 1, 2018.

27. 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 2018", the National Bank can use cash for capital expenditures in the amount of BYN32,380 thousand.

In 2018, capital expenditures of the National Bank totaled BYN11,993 thousand (utilization rate is 37.0%), with a benefit of BYN20,387 thousand.

In accordance with "Estimates of Current Expenses and Capital Expenditures of the National Bank of the Republic of Belarus for 2018", the capital expenditures in the reporting period comprised the following:

Capital construction and reconstruction – BYN3,458 thousand against planned BYN4,507 thousand (utilization rate is 76.7%), in particular:

- upgrading of the automated control system for engineering and technical systems and control systems for electric lighting in the building of the National Bank at 35 Mogilevskaya str., Minsk – BYN1,111 thousand;

- upgrading of the ventilation and air conditioning systems of the specialized financial institution building at 14 Lenina str., Minsk– BYN1,059 thousand;

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- reconstruction of certain premises on Floors 1 and 2 of the specialized financial institution building at 20 Nezavisimosty Ave., Minsk (second stage) – BYN591 thousand;

- upgrading of the air conditioning system in server rooms in the building of the National Bank at 6 Tolstogo str., Minsk – BYN199 thousand;

- upgrading of the electricity supply system in the building of the National Bank at 35 Mogilevskaya str., Minsk – BYN157 thousand;

- upgrading of the automatic gaseous fire suppression units in the buildings of the National Bank at 20 Nezavisimosty Ave. and 14 Lenina str., Minsk – BYN118 thousand; and

- other construction – BYN223 thousand. Measures to develop software and technical infrastructure for the

payment system – BYN1,206 thousand against planned BYN3,909 thousand (utilization rate is 30.9%), in particular:

- creation of a settlement system by direct debiting – BYN549 thousand; - upgrading of the distributed data center of the automated interbank

settlement system for an automated information system for presenting banking information and the automated banking system "Credit Register" – BYN452 thousand; and

- creation of an instant payment system (subsystems of the automated interbank payment system "miniBISS") – BYN205 thousand.

Hardware, software and network equipment – BYN5,471 thousand against planned BYN19,257 thousand (utilization rate is 28.4%), in particular:

- purchase and maintenance of licensed software – BYN1,925 thousand; - development of software applications in the blockchain network –

BYN426 thousand; - purchase of computer hardware and accessories – BYN423 thousand; - upgrading and development of the document information system –

BYN420 thousand; - creation of an automated information system for managing the budget

of the National Bank – BYN334 thousand; - upgrading of the corporate system of servers and server functions –

BYN300 thousand; - creation (acquisition) of an automated system for Personnel Directorate

and services for its implementation – BYN251 thousand; - upgrading and development of "Deals" software complex – BYN181

thousand; - implementation of a project management system – BYN155 thousand; - development of an automated system for regulation of the securities

market – BYN143 thousand; - creation of an automated system for operational risk management

system – BYN143 thousand;

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- introducing functional changes and additions to "Value Accounting" software complex – BYN125 thousand;

- development (acquisition) of software for designing and documenting financial messages created in accordance with the ISO 20022 methodology – BYN107 thousand; and

- other expenses – BYN538 thousand. Equipment to enhance safety and protect information – BYN1,110

thousand against planned BYN3,364 thousand (utilization rate is 33.0%), in particular:

- devices, software (including updates and licenses) and software and hardware packages for information safety – BYN337 thousand; and

- systems, hardware and software packages, and certain security, fire alarm, fire and emergency alert devices – BYN773 thousand.

Equipment for working with precious metals and precious stones – BYN8 thousand against planned BYN10 thousand (utilization rate is 80.0%).

Company cars and other vehicles – BYN353 thousand against planned BYN365 thousand (utilization rate is 96.7%), in particular:

- tractor with attachments – BYN49 thousand; and - company car Audi А8 L – BYN304 thousand. Maintenance equipment for vehicles and buildings – BYN66 thousand

against planned BYN70 thousand (utilization rate is 94.3%). Amounts allocated for this item were used to purchase equipment that supports the operation of buildings, technological equipment and other fixed assets.

Other capital expenditures – BYN321 thousand against planned BYN898 thousand (utilization rate is 35.7%). This item includes expenses to purchase communication equipment, office appliances, furniture, publications for the collection of reference information, R&D costs, and other expenses.

28. Segment information

For the purposes of management decision-making, 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, placement of foreign exchange funds on correspondent accounts with resident banks and non-resident banks, term deposits and call deposits with non-resident banks, provision of foreign exchange funds to non-resident banks under repurchase transactions, lending to resident banks in foreign exchange and lending to non-resident banks in Belarusian rubles, conducting operations with securities of foreign governments and securities purchased under the World Bank Treasury's Reserves Advisory and Management Program (RAMP) that the National Bank participates in,

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provision of cash to the International Bank for Reconstruction and Development under RAMP, investment of Chinese yuans into securities issued by banks of the People's Republic of China, placement of foreign exchange funds by resident banks on correspondent accounts, purchases and sales of precious metals and precious stones;

- formation of gold and foreign exchange reserves – attraction of funds (precious metals) on correspondent accounts of resident banks, on term deposits and unallocated metal accounts of customers, attraction of customers’ foreign exchange-denominated funds on current (settlement) accounts and call deposits, foreign exchange-denominated borrowings from foreign counterparties, conducting foreign exchange sale and purchase and conversion operations, issuance of foreign exchange-denominated bonds; and

- 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 information, 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.

2018 Management

of gold and foreign

exchange reserves

Formation of gold and foreign

exchange reserves

Regulating liquidity of the

banking system

Other (unallocated)

Total

Interest income 133,699 – 152,584 119 286,402Interest 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 1,048 – – 3,146 4,194

103 2018 Management

of gold and foreign

exchange reserves

Formation of gold and foreign

exchange reserves

Regulating liquidity of the

banking system

Other (unallocated)

Total

Fee and commission expenses (1,320) (177) – (266) (1,763)Net fee and commission income (272) (177) – 2,880 2,431Net loss from foreign exchange transactions – (307,654) – – (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 charge 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 128,768 (485,390) (30,083) (400,355) (787,060)Assets 14,669,017 1,320,027 1,262,557 965,037 18,216,638Liabilities 788,406 15,182,333 4,312,174 6,510,718 26,793,631

Income and expenses of the National Bank from operations with major

external customers for 2018 exceed 10% of the total respective income and expense and relate to the below segments:

- regulating liquidity of the banking system – interest income and interest expenses from transactions with JSC "Development Bank of the Republic of Belarus"; and

- other – interest expenses from transactions with the Ministry of Finance of the Republic of Belarus, fee and commission expenses from transactions with JSC "Belinvestbank", other income from transactions with JSC "JSSB Belarusbank" and JSC "Belarusian Interbank Settlement Center".

2017 Management

of gold and foreign

exchange reserves

Formation of gold and foreign

exchange reserves

Regulating liquidity of the

banking system

Other (unallocated)

Total

Interest income 145,499 – 182,921 1,115 329,535Interest expenses (4,437) (329,565) (390,943) (135,700) (860,645)Net interest expenses 141,062 (329,565) (208,022) (134,585) (531,110)Fee and commission income 144 – – 2,290 2,434Fee and commission expenses (1,844) (177) – (251) (2,272)Net fee and (1,700) (177) – 2,039 162

104 2017 Management

of gold and foreign

exchange reserves

Formation of gold and foreign

exchange reserves

Regulating liquidity of the

banking system

Other (unallocated)

Total

commission income Net loss from foreign exchange transactions – (149,984) – – (149,984)Net gain from operations with precious metals and precious stones 1,051 – – 142 1,193Net loss from operations with securities (3,143) – – – (3,143)Dividend income – – – 6,201 6,201Net charge to provisions – – – (1,315) (1,315)Other expenses – – – (544,801) (544,801)Other income – – – 89,241 89,241Other expenses, net – – – (455,560) (455,560)Allocations to the budget – – – (166) (166)Financial result 137,270 (479,726) (208,022) (583,244) (1,133,722)Assets 13,156,720 1,249,394 1,370,734 1,271,769 17,048,617Liabilities 584,841 15,892,714 4,187,403 4,502,280 25,167,238

29. Risk management

The Board of the National Bank approved the Risk Management Policy

of the National Bank 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, as well as regulate the major steps in the risk management process.

The risk management system is a combination of interrelated components, including the organizational structure, powers and responsibilities of officers, local regulatory legal acts that define risk management policies, rules and procedures, and the risk management process designed to achieve the goals and fulfill the objectives of the National Bank, and ensure the stability of its operations.

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.

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 successful achieving its goals and performing its functions.

The functional responsibilities for risk identification, assessment, response, control and monitoring are distributed according to the principle of avoidance of the conflict of interest among the Board of the National Bank,

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Risk Management Committee, Risk Management Department, Internal Audit Directorate, and other structural units of the head office and structural units of the National Bank (hereinafter - "structural units").

The Board of the National Bank carries out strategic management for all types of risks of the National Bank, which includes defining conceptual approaches to establishing the risk management system at the National Bank and 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.

Risk Management Committee is 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, as well as discuss and make risk response decisions based on the results of such monitoring.

Risk Management Department is responsible for organizing and coordinating the functioning of the risk management system at the National Bank.

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, participate in risk management within their functional duties, including ensuring compliance with local regulatory legal 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 profile According to Risk Management Policy, the significant risks of the

National Bank, taking into account its main objectives and functions, as well the list of the performed transactions, are:

- credit risk; - liquidity risk; - market risk (currency, interest rate, commodity risk); and - operational risk. The realization (change) of each type of risk may be caused by separate

risk sources or a combination of risk sources. Different but interrelated types of risks may be caused by the same source, since the realization of one risk may lead to the realization of other risks or a change in their level.

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Financial risk mitigation (reduction) instruments Mitigation of financial risks, the activities of the National Bank are

exposed to, is carried out by changing the likelihood of occurrence of the risk, changing the consequences of the risk, reducing the risk to a level not exceeding the established risk tolerance parameters, 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 allowable ratings for counterparties, issuers, and securities; - a list of counterparties for transactions with securities of foreign

issuers; - the structure of assets by currency (the required percentage shares of

foreign currencies in total assets denominated in foreign currencies); - the structure of assets in precious metals (the required percentage

shares of precious metals in total assets in precious metals); - criteria for banks to access liquidity support operations; - securing liabilities under transactions by collateral; - a list of acceptable collateral for obligations; - applying a collateral ratio for assets accepted as collateral; - differentiation of the collateral ratio depending on the type and nature

of transactions and the type of collateralized financial asset; - assessment and control of adequacy of collateral for obligations; - diversification of types of operations and their terms; - establishing and monitoring limits for counterparties; - making a special provision for possible losses from assets exposed to

credit risk; and - other instruments (measures). Risk control Risk control involves the implementation of measures designed to

mitigate (reduce) risk and contain it within the established risk tolerance parameters.

Based on the segregation of control functions by performance time, the National Bank's risks are subject to preliminary control (before starting 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

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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.

29.1. Credit risk

Credit risk is the risk that the National Bank will incur a loss or will not

receive income because its debtor fails to discharge its financial or other property obligations in accordance with contractual terms or legislation.

Based on the main objectives of the activities of the National Bank, as well as financial asset management models, credit risk is one of the significant types of risks.

Risk Management Committee coordinates credit risk management activities, and Financial Market Operations Committee coordinates activities on operations at the internal and external financial markets and makes operational decisions.

The National Bank uses the following instruments to manage and mitigate (reduce) credit risk:

- limits for counterparties; - limits for the volume of operations; - the list of acceptable collateral for obligations; - collateral ratios (discounts) for each type of collateral; - the list of acceptable long-term credit ratings in foreign exchange of

non-resident counterparties assigned by international agencies; - the list of ratings of securities and issuers assigned by international

agencies; - the list of counterparties for transactions with securities of foreign

issuers; and - restrictive conditions for counterparties. Limits for non-resident banks for transactions with gold and foreign

exchange assets are determined based on the analysis of their financial condition and business reputation, as well as international credit ratings, and are set by Risk Management Committee. The monitoring of compliance with the limits is carried out on a daily basis by the structural units that perform the operations and processes, as well as by Risk Management Department. The limits are reviewed by Risk Management Department at least once a quarter following the results of monitoring of the financial condition of the counterparties.

Aggregate and individual limits for resident banks on standing facilities designed to support current liquidity are determined in each specific case based on the tasks of the limits (achieving the operational benchmark of the monetary

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policy or mitigating (reducing) credit risk). These limits are set by Financial Market Operations Committee.

Limits for resident banks on bilateral operations designed to support current liquidity are determined on the basis of indicators, which are criteria for considering the suspension of banks' admission to monetary operations. The implementation of these criteria is monitored daily and analyzed on a monthly basis. These limits are set and monthly reviewed by Financial Market Operations Committee in the event of suspension of a bank's access to standing facilities and auction operations designed to support liquidity.

The list of liquid and acceptable collateral for obligations for monetary operations is established by the Board of the National Bank and includes collateral of securities included in the Lombard list of securities and guarantee deposits in foreign currencies. In relation to stabilization refinancing, the Board of the National Bank established a list of financial assets that can be used as a collateral for obligations, taking into account the scale of the National Bank’s preferences for collateral.

The collateral ratios (discounts) for each type of collateral for obligations are determined in order to maintain the sufficiency of collateral in respect of each acceptable type of securities, foreign exchange or another financial instrument. The amounts of discounts are set by the Board of the National Bank based on the suggestions of Risk Management Department. The structural units that perform the operations and processes assess and control the adequacy of the collateral based on special terms and established frequency.

Below is the analysis of credit quality of financial assets exposed to credit risk.

Item Neither overdue nor impaired

financial assets Impaired financial

assets

Overdue financial

assets

Total as at

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

Item Neither overdue nor impaired

financial assets Impaired financial

assets

Overdue financial

assets

Total as at 1 January

2018 High grade

Standard grade

Sub- standard

grade Securities 440,177 1,810,671 11,033 – – 2,261,881Amounts due from banks 9,168,791 804,042 – – – 9,972,833Loans and other asset operations with customers 11,640 – 609 – – 12,249

109 Item Neither overdue nor impaired

financial assets Impaired financial

assets

Overdue financial

assets

Total as at 1 January

2018 High grade

Standard grade

Sub- standard

grade Other financial assets – 2,040 1,270 9 1 3,320Total 9,620,608 2,616,753 12,912 9 1 12,250,283

The classification of neither overdue nor impaired financial assets as

assets of high, standard and sub-standard grades is based on the credit ratings of counterparties (issuers) of the National Bank assigned by international rating agencies.

Financial assets are rated with "High grade" if they are placed in securities with at least one rating at the minimum level of А3 (Moodyʼs Investors Service) or А- (Fitch Ratings or Standard & Poorʼs) and placed with counterparties having at least one long-term credit rating in foreign exchange at the minimum level of А3 (Moodyʼs Investors Service) or А- (Fitch Ratings or Standard & Poorʼs).

Financial assets are rated with "Standard grade" if they are placed in securities having at least one rating from Baa1 to B3 (Moodyʼs Investors Service) or from BBB+ to B- (Fitch Ratings or Standard & Poorʼs) and placed with counterparties having at least one long-term credit rating in foreign exchange from Baa1 to B3 (Moodyʼs Investors Service) or from BBB+ to B- (Fitch Ratings or Standard & Poorʼs).

"Sub-standard grade" includes assets which are placed in securities with ratings below B3 (Moodyʼs Investors Service) or B- (Fitch Ratings or Standard and Poorʼs) and placed with counterparties having long-term credit ratings in foreign exchange below B3 (Moodyʼs Investors Service) or B- (Fitch Ratings or Standard and Poorʼs) or unrated counterparties (except for central banks and state bodies).

When central banks or state bodies do not have a rating assigned by Moody’s Investors Service, Fitch Ratings or Standard and Poor’s, for such counterparties (issuers) the sovereign (country) credit rating of the corresponding country is used.

Impaired assets comprise assets for which special provisions have been accrued.

The special provision to cover possible losses on assets exposed to credit risk and lost income from such assets is determined based on the classification of assets depending on credit risk, the existence and duration of overdue debts. An additional criterion for the classification of assets placed with non-resident banks is the existence of a limit on transactions with gold and foreign exchange assets.

110

The special provision to cover potential losses on receivables is determined depending on the time since the date of late settlement of claims by the debtor, as well as the existence of additional criteria for a low probability of debt repayment.

The special provision is created in full. Information on the movement of the special provisions for the reporting

year is provided in the table below.

Provision Total as at

January 1, 2018

Creation (increase) of provision

Reduction (reversal)

of provision

Use of provision

Total as at

January 1, 2019

Provision for covering possible losses, 9 10 2 11 6including: from loans issued to natural persons – 2 2 – –from settlements with debtors 9 8 – 11 6Provision for lost other operating income 35 9 – 44 –Total, including for assets classified into the following risk groups: 44 19 2 55 6Group VI 44 х х х 6

Concentration of risk Concentration of risk is a concentration of requirements (liabilities) for

financial instruments regarding an individual counterparty or a group of interrelated counterparties, as well as counterparties belonging to particular geographic regions, as well as regarding an individual financial instrument, type of currency and other characteristics of exposed items that may result in the National Bank incurring losses or losing income.

The National Bank uses the following instruments (measures) to manage and control the significant concentration of financial risks:

- the required structure of the National Bank’s assets in foreign exchange;

- the required structure of the National Bank’s assets in precious metals;

- limits for operations with gold and foreign exchange assets with foreign counterparties;

- setting the maximum limit for operations with gold and foreign exchange assets for a commercial bank;

111

- setting the maximum limit for operations with gold and foreign exchange assets for the central bank;

- indicators characterizing the level of debt on liquidity support operations; and

- diversification of collateral. The National Bank monitors compliance with the established procedures

aimed at mitigating (reducing) the significant concentration of risks on an ongoing basis.

The table below shows maximum exposure to credit risk by types of financial instruments.

Item Total maximum risk exposure at the end of the reporting period

2018 2017

Securities 2,140,951 2,261,881Amounts due from banks 11,083,483 9,972,833Loans and other asset operations with customers 7,443 12,249Other financial assets 1,279 3,320Total financial assets 13,233,156 12,250,283Obligations related to provision of funds 27,781 50,554Total exposure to credit risk 13,260,937 12,300,837

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 provision. 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.

Information about the geographical concentration of financial assets and liabilities of the National Bank for the reporting year and comparable information for the preceding year are provided in the tables below.

Item Republic of Belarus

OECD CIS and other states

Total as at January

1, 2019 Financial assets

112 Item Republic of

Belarus OECD CIS and

other states Total

as at January1, 2019

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)

Item Republic of

Belarus OECD CIS and

other states Total as at 1

January 2018 Financial assets

Cash 88,612– –

88,612Securities 1,821,704 382,895 57,282 2,261,881Amounts due from banks 349,026 8,721,995 901,812 9,972,833Loans and other asset operations with customers 609 11,640 – 12,249Long-term financial investments 233,363 – 1 233,364Other financial assets 3,320 – – 3,320Total 2,496,634 9,116,530 959,095 12,572,259 Financial liabilities

Cash in circulation 3,102,579 – – 3,102,579Amounts due to international financial institutions – 4,745 – 4,745Amounts due to banks 3,880,588 – 1,234,623 5,115,211Amounts due to customers 11,939,876 2 – 11,939,878Securities of the National Bank 4,606,821 – – 4,606,821Other financial liabilities 150 333 – 483Total 23,530,014 5,080 1,234,623 24,769,717Net position (21,033,380) 9,111,450 (275,528) (12,197,458)

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29.2. 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 National Bank operates in the domestic and foreign financial markets in the legal status of the central bank and state body of the Republic of Belarus in accordance with its main objectives, as well as the objectives established by the Monetary Policy Guidelines of the Republic of Belarus for the next year. Accordingly, liquidity risk management is aimed at fulfilling the obligations of the National Bank and the Government of the Republic of Belarus.

The division of gold and foreign exchange 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 exchange 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 the Financial Market Operations Committee. Funds are transferred between tranches in order to comply with the established amounts taking into account information about upcoming payments or cash receipts by the National Bank and/or the Government of the Republic of Belarus. The deviation of the actual size of the tranches of gold and foreign exchange assets from the established limits is controlled on a daily basis.

The process of liquidity risk management also includes daily monitoring of a currency position, current liquidity and liquidity for longer time intervals, as well as an 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 (principal debt 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 at 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 – – – 797

114 Financial liabilities Less than 3

months From 3 to 12 months

From 1 year to 5 years

More than 5 years

Total as at January 1,

2019 Undiscounted financial liabilities, total 24,204,004 1,399,464 841,611 – 26,445,079

Financial liabilities Less than 3 months

From 3 to 12 months

From 1 year to 5 years

More than 5 years

Total as at January

1, 2018 Cash in circulation 3,102,579 – – – 3,102,579Amounts due to international financial institutions 4,745 – – – 4,745Amounts due to banks 4,054,323 102,279 1,084,993 – 5,241,595Amounts due to customers 11,940,975 – – – 11,940,975Securities of the National Bank 1,877,840 2,377,664 396,261 – 4,651,765Other financial liabilities 483 – – – 483Undiscounted financial liabilities, total 20,980,945 2,479,943 1,481,254 – 24,942,142

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 at January 1, 2019 27,781 – – – 27,781 As at January 1, 2018 50,554 – – – 50,554

29.3. 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 exchange resulting from adverse changes in foreign exchange rates.

In order to mitigate (reduce) currency risk in transactions with gold and foreign exchange assets, the Board of the National Bank has approved the regulatory structure of the National Bank's assets denominated in foreign exchange.

Currency risk is controlled by complying with 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 exchange-denominated monetary items at the end of the reporting period.

115

Currency 2018 2017

Change in official rate, %

Effect on equity, BYN

thousand

Change in official rate, %

Effect on equity, BYN

thousand USD +5 (195,716) +6 (298,505)EUR +8 5,501 -3 14,287RUB +5 (22,279) -1 5,688 USD +3 (117,429) +5 (248,754)EUR +6 4,126 -4 19,049RUB +3 (13,367) -4 22,753

All other variables are held constant.

29.4. 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 for 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.

The table below shows the sensitivity of the income statement for one year to possible changes in interest rates for financial instruments with a floating interest rate.

Currency 2018 2017

Changes in interest rate, basis points

Effect on profit (loss),

BYN thousand

Changes in interest rate, basis

points

Effect on profit (loss),

BYN thousand BYN – – -50 75USD +7 (605) +10 (986)EUR – – +70 4

BYN – – -150 226USD -7 605 -10 986EUR – – -70 (4)

All other variables are held constant.

29.5. Commodity risk

Commodity risk is the risk that the National Bank will incur losses or

lose income due to adverse changes in market prices for precious metals because of changes in the financial market conditions.

116

In order to mitigate (reduce) commodity risk in transactions with gold and foreign exchange assets, the Board of the National Bank approved the structure of assets in precious metals.

Commodity risk is controlled 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 effect on the equity of possible changes in accounting prices on precious metals.

Precious metals 2018 2017

Change in accounting price, %

Effect on equity, BYN thousand

Change in accounting price, %

Effect on equity, BYN thousand

Gold +2 79,876 +4 146,083Silver +4 411 +3 274Platinum +5 2,825 +3 1,322Palladium +9 10,403 +11 9,000

All other variables are held constant.

29.6. 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 practices and procedures or breaches by the National Bank's employees, and due to external factors.

Operational risk is managed through the procedures to identify, assess, control and monitor risks. The National Bank has procedures in place to collect data on operational incidents, systematize and analyze them. Based on the results of investigation of the circumstances of the incidents, measures are developed, if necessary, aimed at mitigating the negative consequences of the incidents, as well as at preventing similar events in the future. Operational risks are controlled through the implementation of measures aimed at mitigating (reducing) these risks and keeping them at an acceptable level.

30. Assessment of fair values 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);

117

- 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 at

January 1, 2019

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs

Assets measured at fair value 29.12.2018 548,168 1,261,919 – 1,810,087

Securities: at fair value through profit or loss 432,241 – – 432,241available-for-sale 115,927 1,261,919 – 1,377,846 Assets for which fair values are disclosed 29.12.2018 11,183,355 – 243,783

11,427,138

Cash 92,961 – – 92,961Securities available-for-sale – – 242,061 242,061Amounts due from banks 11,083,483 – – 11,083,483Loans and other asset operations with customers 6,911 – 443 7,354

Other financial assets – – 1,279 1,279

Liabilities measured at fair value 29.12.2018 – – – – Liabilities for which fair values are disclosed 29.12.2018 – 22,559,746 797 22,560,543

Amounts due to international financial institutions – 5,343 – 5,343Amounts due to banks – 5,830,480 – 5,830,480Amounts due to customers – 14,468,376 – 14,468,376Securities of the National Bank – 2,255,547 – 2,255,547Other financial liabilities – – 797 797

118 Item Item

valuation date

Fair value measurement techniques Total as at

January 1, 2018

Quoted prices at active markets

Significant observable

inputs

Significant unobservable

inputs

Assets measured at fair value 30.12.2017 440,177 1,367,443 – 1,807,620 Securities: at fair value through profit or loss 382,895 – – 382,895available-for-sale 57,282 1,367,443 – 1,424,725 Assets for which fair values are disclosed 30.12.2017 10,073,085 – 306,049 10,379,134

Cash 88,612 – – 88,612Securities available-for-sale – – 302,243 302,243Amounts due from banks 9,972,833 – – 9,972,833Loans and other asset operations with customers 11,640 – 486 12,126Other financial assets – – 3,320 3,320 Liabilities measured at fair value 30.12.2017 – – – – Liabilities for which fair values are disclosed 30.12.2017 – 21,666,655 483 21,667,138

Amounts due to international financial institutions – 4,745 – 4,745Amounts due to banks – 5,115,211 – 5,115,211Amounts due to customers – 11,939,878 – 11,939,878Securities of the National Bank – 4,606,821 – 4,606,821Other financial liabilities – – 483 483

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 exchange. As a rule, the fair value of bonds of foreign issuers is their public price quoted at the international market according to Bloomberg trade and information system.

Securities available-for-sale are represented by quoted bonds issued by foreign governments, banks of the People's Republic of China and bonds issued by local authorities and JSC "Development Bank of the Republic of Belarus" whose value is determined on the basis of inputs observable at the market.

Set out below is a comparison of the carrying amounts and fair values by classes of financial instruments that are not carried at fair value in the financial statements.

119

Item As at January 1, 2019 As at January 1, 2018

Carrying amount

Fair value Unrecogniz ed gain (loss)

Carrying amount

Fair value Unrecogniz ed gain (loss)

Financial assets 13,326,117 13,237,225 (88,892) 12,338,895 12,186,754 (152,141)

Cash 92,961 92,961 – 88,612 88,612 –

Securities 2,140,951 2,052,148 (88,803) 2,261,881 2,109,863 (152,018)Amounts due from banks 11,083,483 11,083,483 – 9,972,833 9,972,833 –Loans and other asset operations with customers 7,443 7,354 (89) 12,249 12,126 (123)Other financial assets 1,279 1,279 – 3,320 3,320 – Financial liabilities 26,326,218 26,326,218 – 24,769,717 24,769,717 –

Cash in circulation 3,765,675 3,765,675 – 3,102,579 3,102,579 –

Amounts due to international financial institutions

5,343

5,343

–

4,745

,4,745

–Amounts due to banks 5,830,480 5,830,480 – 5,115,211 5,115,211 –Amounts due to customers 14,468,376 14,468,376 – 11,939,878 11,939,878 –Securities of the National Bank 2,255,547 2,255,547 – 4,606,821 4,606,821 –Other financial liabilities 797 797 – 483 483 –Total unrecognized change in unrealized fair value х х (88,892) х х (152,141)

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 call 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.

Fair values of long-term financial investments are considered to be equal to their purchase price since such instruments do not have quoted prices at the active market.

120

31. Subsequent events In accordance with Resolution of the Board of the National Bank of the

Republic of Belarus No. 41 dated January 23, 2019, state registration of changes in the Charter of "Bank Moscow-Minsk" JSC in part of changing the bank’s name was made. The new name of the bank is: full –"Bank Dabrabyt" Joint-stock Company, short – "Bank Dabrabyt" JSC.

121

Conclusion

Measures taken in 2018 in the area of monetary policy were aimed at ensuring stability in the monetary sphere and, as a result, maintaining macroprudential soundness in the country as a whole.

The inflation target for 2018 was met. Inflation totaled 5.6%, with the prescribed parameter being no more than 6%.

The dynamics of money supply restrained inflationary processes and led to the maintenance of business and investment activity in the country by means of growth of bank lending proportionally to the legal and natural persons’ effective demand.

In the year under review, the task to maintain gold and foreign exchange reserves was completed. International reserve assets amounted to USD7.2 billion as at January 1, 2019, or 2.1 months of import. The Government and the National Bank of the Republic of Belarus repaid external and domestic liabilities in foreign exchange to the full extent.

The National Bank’s activities are still aimed at liberalizing foreign exchange system and reducing the use of foreign exchange in the economy. In 2018, the decisions to liberalize foreign exchange regime were taken, in particular, the restrictions related to the purpose-oriented purchase of foreign exchange by resident legal persons were cancelled, as well as the need to obtain permissions to open accounts in foreign banks by the natural persons and permissions to carry out foreign exchange transactions involving the capital movement by resident legal persons.

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 a 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 of the Republic of Belarus 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.

122

Attachment 1.1 to the Report of the National Bank

for 2018

MAIN macroeconomic parameters of social and economic development of the Republic of Belarus

in 2018

(in comparable prices, %) Indicators 2018 to

2017 For

information: 2017 to 2016

Gross domestic product (GDP) 103.0 102.5

GDP labour productivity 103.4 103.7

Industrial products 105.7 106.1

Profitability of sales in organizations of industry, % 9.3 8.4

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, % 18.6 17.4

Agricultural products 96.6 104.2

Export of goods and services according to the methodology of the balance of payments 114.9 122.1

Balance of foreign trade in goods and services, % of GDP 1.2 0.2

Reduction in GDP’s energy/output ratio +1.5 +0.5

Households’ disposable real money income 108.0 102.8

Foreign direct investments on a net basis according to the methodology of the balance of payments, USD bn 1.4 1.2

Placing houses in use at the expense of all financing sources, million square meters 4.0 3.8

123

Attachment 1.2 to the Report of the National Bank

for 2017

DYNAMICS of financial results of organizations

(BYN mln)

Indicators 2017 2018 Growth rates,

%

Proceeds from sale of products, goods, works, and services 192,011.0

222,283.9 115.8

Taxes and fees accrued from proceeds 22,525.3 26,894.1 119.4% of proceeds 11.7 12.1 х

Cost of sold products, goods, works, and services

153,798.9

178,474.6

116.0% of proceeds 80.1 80.3 х

Profit/losses (-) from sold products, goods, works, and services 15,686.8

16,915.1 107.8

Profit, losses (-) before tax 10,888.0 7,559.5 69.4

Net profit, losses (-) 8,446.6 5,159.3 61.1

Profitability of sales, % 8.2

7.6 х

Profitability of sold products, goods, works, and services, % 10.2

9.5 х

Share of loss-making organizations in their total number, % 15.2

15.2 х

Net loss amount of the loss-making organizations 2,572.0

5,015.5 195.0

Funds obtained from the budget to cover losses related to state regulation of prices and tariffs and to compensate for current expenses 1,881.4

1,978.3 105.1

124

Attachment 1.3 to the Report of the National Bank

for 2018

DYNAMICS

of the income, costs, deficit (-)/surplus(+) of the Republic of Belarus consolidated budget in 2017 – 2018

(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

Janu

ary

Janu

ary-

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ch

Janu

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il

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Janu

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Janu

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Janu

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ust

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tem

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Janu

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ober

Janu

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embe

r

Janu

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embe

r

Janu

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Janu

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ruar

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Janu

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Jana

ury

-Apr

il

Janu

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Janu

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Dec

embe

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2017 2018

Def

icit

(-),

sur

plus

(+)

Inco

me,

cos

ts

Income Costs Balance

125

Attachment 1.4 to the Report of the National Bank

for 2018

CHANGE in main indicators of the balance of payments in 2010–2018

(USD mln)

-9

-7

-5

-3

-1

1

3

5

7

9

2010 2011 2012 2013 2014 2015 2016 2017 2018Current account Financial account (given exclusive financing) Overall balance of payments Gross volume of reserve assets

126

Attachment 1.5 to the Report of the National Bank

for 2018

CHANGE in the index of the Belarusian ruble real effective exchange rate calculated using industrial products producer price index

(month to December 2010, %)

-30

-20

-10

0

10

20

30

40

127

Attachment 1.6 to the Report of the National Bank

for 2018

EXTERNAL DEBT of the Republic of Belarus in 2010 – 2018 (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

External debt Short-term external debt External debt/GDP ratio (the right-handed axis)

128

Attachment 1.7 to the Report of the National Bank

for 2018

INFORMATION

on foreign exchange purchase/sale by resident economic entities* of the Republic of Belarus in the domestic foreign exchange market in 2017 – 2018

(USD mln) Years Operations January February March April May June For the first half

of the year, total 2017 Sold 1,279.3 1,223.4 1,522.3 1,500.2 1,618.7 1,670.2 8,814.2

Purchased 1,292.3 1,228.7 1,587.3 1,374.6 1,707.8 1,742.0 8,932.6 Balance of sale and purchase 13.0 5.2 65.0 -125.7 89.1 71.8 118.5

2018 Sold Purchased

1,469.31,735.2

1,461.61,458.1

1,685.71,809.8

1,728.31,690.5

1,653.81,730.8

1,663.91,716.7

9,662.6 10,141.2

Balance of sale and purchase 265.9 -3.4 124.1 -37.8 77.0 52.8 478.6

Years Operations July August September October November December For the year, total

2017 Sold 1,573.7 1,536.5 1,485.3 1,577.6 1,481.9 1,709.6 18,178.7 Purchased 1,531.4 1,703.8 1,673.0 1,619.3 1,693.7 1,904.8 19,058.7 Balance of sale and purchase -42.2 167.3 187.8 41.7 211.9 195.2 880.0

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

                                                            * Economic entities – commercial and non-commercial organizations, independent entrepreneurs, and non-bank financial institutions.

129 Attachment 1.8

to the Report of the National Bank for 2018

INFORMATION

on foreign exchange purchase/sale by natural persons in 2017 – 2018

(USD mln) Years Operations January February March April May June For the first half

of the year, total 2017 Sold 564.4 583.6 680.6 650.8 730.3 750.4 3,960.1

Purchased 433.1 422.6 472.6 434.4 495.4 568.3 2,826.4 Balance of sale and purchase -131.3 -161.0 -208.0 -216.4 -234.9 -182.1 -1,133.7

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

Years Operations July August September October November December For the year,

total 2017 Sold 715.8 777.7 724.3 745.9 694.4 678.5 8,296.6

Purchased 607.3 628.7 528.1 598.1 629.5 719.5 6,537.7 Balance of sale and purchase -108.5 -149.0 -196.2 -147.8 -64.9 41.0 -1,759.0

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

130 Attachment 1.9

to the Report of the National Bank for 2018

DYNAMICS of the interest rate in the intraday interbank market and the interest rates on the National Bank’s operations

(% per annum)

6

8

10

12

14

01.0

1.20

18

01.0

2.20

18

01.0

3.20

18

01.0

4.20

18

01.0

5.20

18

01.0

6.20

18

01.0

7.20

18

01.0

8.20

18

01.0

9.20

18

01.1

0.20

18

01.1

1.20

18

01.1

2.20

18

01.0

1.20

19

Interest rate on standing facilities designed to maintain liquidityInterest rate on overnight interbank creditsInterest rate on standing facilities designed to withdraw liquidityRefinance rateAverage weighted rate on liquidity withdrawal auctionsAverage weighted rate on liquidity provision auctions

131 Attachment 1.10

to the Report of the National Bank for 2018

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

132 Attachment 1.11

to the Report of the National Bank for 2018

DYNAMICS of average interest rates on natural persons’ new term ruble deposits as of year-end

(% per annum)

15,6

55,3

42,445,3

35,6

24,6

14,3

7,59,8

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015 2016 2017 2018

133

Attachment 1.12 to the Report of the National Bank

for 2018

INFORMATION on securities market

(%) Structure of annual issue of the securities market’s main instruments

(%)

Dynamics of the change in the ratio of the securities market's main instruments

equities

corporate bondsbonds under local loans

government securities

0

20

40

60

80

100

2010 2011 2012 2013 2014 2015 2016 2017 2018

equities

corporate bonds

bonds under local loans

government securities

0

20

40

60

80

100

01.0

1.20

11

01.0

1.20

12

01.0

1.20

13

01.0

1.20

14

01.0

1.20

15

01.0

1.20

16

01.0

1.20

17

01.0

1.20

18

01.0

1.20

19

134 Attachment 2.1

to the Report of the National Bank for 2018

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 – 2018

(%, December to December)

-5

15

35

55

75

95

115

2010 2011 2012 2013 2014 2015 2016 2017 2018

Core inflation Administratively regulated prices Fruits and vegetables Consumer price index

135

Attachment 2.2 to the Report of the National Bank

for 2018

DYNAMICS of broad money supply in 2018

(BYN bn)

Indicators Actual as at Growth 01.01.2018 01.01.2019 BYN bn %

1. Cash in circulation - М0 2.35 2.99 0.65 27.52. Transferable deposits of 4.96 5.62 0.67 13.5

natural persons 2.19 2.76 0.57 25.9legal persons * 2.77 2.87 0.10 3.6

Monetary aggregate - М1 7.30 8.62 1.31 18.03. Other deposits of 6.38 7.38 0.99 15.6

natural persons 3.34 4.01 0.67 20.1legal persons * 3.04 3.37 0.33 10.7

4. Securities issued by banks (outside bank circulation) in national currency 0.38 0.90 0.52 135.8

Ruble money supply М2* 14.07 16.90 2.83 20.1Broad money - М3 39.85 43.23 3.38 8.5For information: Deposits in foreign exchange (USD bn) of 11.72 11.11 -0.61 -5.2

natural persons 7.39 7.13 -0.25 -3.4legal persons * 4.33 3.98 -0.35 -8.1

Deposits in precious metals (USD mln) 69.97 118.34 48.36 69.0

                                                            * Legal persons – commercial institutions, non-commercial institutions, and independent entrepreneurs, non-bank financial institutions.

136

Attachment 2.3to the Report of the National Bank

for 2018

Regulatory legal acts adopted in 2018 as part of endeavors to improve banking supervision

Resolution of the Board of the National Bank of the Republic of Belarus

No. 25 “On Organizing by Banks and Joint-Stock Company “Development Bank of the Republic of Belarus” of Internal Procedures of Capital Adequacy Assessment and Risks Management”.

Resolution of the Board of the National Bank of the Republic of Belarus No. 196 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 550 dated October 29, 2012” dated April 27, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 335 “On Amending and Modifying Certain Resolutions of the Board of the National Bank of the Republic of Belarus” dated July 27, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 426 “On Amending and Modifying Certain Resolutions of the Board of the National Bank of the Republic of Belarus” dated September 24, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 511 “On the List and Acceptable Combination of Banking Transactions Carried out by Non-bank Financial Institutions” dated November 5, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 571 “On Amending and Modifying Certain Regulatory Legal Acts of the National Bank of the Republic of Belarus” dated December 3, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 602 “On Determining the Value of the Indicator of the Share of Banks’ Non-performing Assets in the Assets Exposed to Credit Risk” dated December 14, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 632 “On Approving the Instructions on the Procedures for Carrying out the General Supervision Assessment” dated December 27, 2018.

137

Attachment 2.4 to the Report of the National Bank

for 2018

Regulatory legal acts adopted in 2018 in the area of combating money laundering, terrorism financing and financing proliferation of weapons of mass destruction

Resolution of the Board of the National Bank of the Republic of Belarus

No. 18 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 24 of January 18, 2017” dated January 19, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 62 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 818 of December 24, 2014” dated February 15, 2018.

138

Regulatory legal acts adopted in 2018 as part of endeavors to streamline the regulation of banking operations

Attachment 2.5to the Report of the National Bank

for 2018

Resolution of the Board of the National Bank of the Republic of Belarus

No. 35 “On Amending and Modifying the Instructions on Bank Transfer” dated January 29, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 149 “On Approving the Instructions on the Procedures for Lending Monetary Funds and Repaying (Redeeming) Thereof” dated March 29, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 203 “On Amending the Instructions on Issuing, Circulating and Repaying Deposit and Savings Certificates” dated April 28, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 451 “On Amending and Modifying the Instructions on Bank Transfer” dated October 5, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 455 “On Approving the Instructions on the Procedures for Carrying out Settlements by Means of Bank Payment Order” dated October 9, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 469 “On Amending and Modifying the Instructions on Savings Books Issued by Banks and Non-bank Financial Institutions of the Republic of Belarus” dated October 16, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 477 “On Amending and Modifying the Instructions on the Procedures for Lending Monetary Funds and Repaying (Redeeming) Thereof” dated October 19, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 478 “On Amending and Modifying the Instructions on Issuing, Circulating and Repaying Deposit and Savings Certificates” dated October 19, 2018.

139

Regulatory legal acts regulating the activities of forex companies, leasing and microfinance organizations, which were adopted in 2018

Attachment 2.6to the Report of the National Bank

for 2018

Resolution of the Ministry of Finance of the Republic of Belarus No. 73

“On Approving the National Accounting and Reporting Standard “Financial Lease (Leasing) and Acknowledge Invalid Certain Resolutions and the Separate Structural Element of Resolution of the Ministry of Finance of the Republic of Belarus” dated November 30, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 20 “On the Ceiling Amount of Interest in Annual Terms (Annual Interest Rate) on Microloans” dated January 19, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 132 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 67 of February 10, 2016” dated March 20, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 142 “On Amending and Modifying Certain Regulatory Legal Acts of the National Bank of the Republic of Belarus” dated March 23, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 153 “On Reporting of the National Forex Center, Forex Companies, Banks and Non-bank Financial Institutions on the Issues Related to the Activities on the Over-the-counter Forex Market” dated April 2, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 417 “On Amending and Modifying the Rules of Carrying out Leasing Activities” dated September 19, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 584 “On Amending Resolution of the Board of the National Bank of the Republic of Belarus No. 65 of February 10, 2016” dated December 7, 2018.

140

Attachment 2.7to the Report of the National Bank

for 2018

Regulatory legal acts adopted in 2018 as part of endeavors to streamline foreign exchange regulation and foreign exchange control Edict of the President of the Republic of Belarus No. 301 “On the Cancellation of Mandatory Sale of Foreign Exchange”, dated July 31, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 137 “On Amending and Modifying the Instructions on the Procedures for Carrying out Foreign Exchange Transactions with Participation of Natural Persons and Organizing Functioning of Exchange Offices and Cash Offices When Carrying out Such Transactions” dated March 21, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 348 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 52 of April 22, 2009” dated August 1, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 433 “On Certain Issues of Foreign Exchange Regulation Associated with the Cancellation of Mandatory Sale of Foreign Exchange” dated September 27, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 612 “On Certain Issues of Carrying out Foreign Exchange Transactions” dated December 19, 2018.

141

Attachment 2.8 to the Report of the National Bank

for 2018 DYNAMICS of financial stability indicators in 2018

Indicator Control value Actual value, %

01.01.2018 01.04.2018 01.07.2018 01.10.2018 01.01.2019 Regulatory capital adequacy (in banking sector as a whole)

no less than11.875

18.5 18.2 18.6 18.2 17.7

Liquidity coverage ratio (in banking sector as a whole)

no less than100.0

143.7 143.8 157.3 149.4 167.6

The average quarterly parameter of the availability of an automated system of interbank settlements for banks, % of its daily working time fund

no lower than 99.7

100.0 99.93 99.96 99.98 99.98

Deviation of the exchange rate in various segments of the domestic foreign exchange market from the Belarusian ruble official exchange rate

no more than 5.0 over the

quarter

0.1 (USD) 0.3 (EUR) 0.5 (RUB)

0.2 (USD) 0.4 (EUR) 0.6 (RUB)

0.4 (USD) 0.4 (EUR) 0.7 (RUB)

0.2 (USD) 0.4 (EUR) 0.6 (RUB)

0.2 (USD) 0.3 (EUR) 0.6 (RUB)

Reduction of term deposits excluding exchange rate revaluation (in the banking sector as a whole)

no more than 20.0 over the

quarter

-3.4 0.0 4.5 -0.5 -1.8

142

Attachment 2.9 to the Report of the National Bank

for 2018

Regulatory legal acts adopted in 2018 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. 33 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 740 of December 28, 2012” dated January 25, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 110 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 125 dated July 30, 2009” dated March 13, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 192 “On Amending and Modifying Certain Regulatory and Legal Acts of the National Bank of the Republic of Belarus” dated April 25, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 406 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 506 dated August 29, 2013” dated September 11, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 576 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 234 dated April 14, 2014” dated December 5, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 605 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 507 of November 9, 2011” dated December 18, 2018.

143

Attachment 2.10

to the Report of the National Bankfor 2018

Regulatory legal acts adopted in 2018 as part of endeavors to streamline cash money circulation

Resolution of the Board of the National Bank of the Republic of Belarus No. 187 “On Amending and Modifying the Instructions on Organizing Cash Activities at Banks and Non-bank Financial Institutions of the Republic of Belarus” dated April 24, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No.188 “On Approving the Instructions on the Procedures for Organizing Remote Safekeeping of Cash Monetary Funds and Other Valuables“ dated April 24, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 222 “On Amending and Modifying the Instructions on the Procedures for Carrying out Cash Transactions and Organization of Activities Involving Cash Monetary Funds by Operators of Postal Communications in the Territory of the Republic of Belarus“ dated May 10, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 229 “On Amending and Modifying the Instructions on the Procedures for Defining Fitness for Use as Currency and Exchange of Banknotes and Coins of the National Bank of the Republic of Belarus“ dated May 17, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 235 “On Modifying the Instructions on the Procedures for Carrying out Cash Transactions and Settlements Involving Cash in Belarusian Rubles in the Republic of Belarus” dated May 25, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 236 “On Using Check Books to Receive Cash and Annulling Certain Regulatory Legal Acts of the National Bank of the Republic of Belarus” dated May 25, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 237 “On Amending and Modifying the Instructions on the Procedures for Carrying out Cash Transactions in Foreign Exchange in Cash in the Republic of Belarus” dated May 25, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 439 “On Modifying the Instructions on the Organization of Cash Activities

144

at Banks and Non-bank Financial Institutions of the Republic of Belarus” dated October 1, 2018.

145

Attachment 2.11 to the Report of the National Bank

for 2018 Regulatory legal acts adopted in 2018 as part of endeavors to improve the payment system of the Republic of Belarus

Resolution of the Board of the National Bank of the Republic of Belarus

No. 8 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 472 dated August 7, 2015” dated January 12, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 52 “On the Services When Performing the Interbank Settlements in the BISS System” dated February 8, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 54 “On Amending and Modifying Certain Regulatory Legal Acts of the National Bank of the Republic of Belarus” dated February 13, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 77 “On Amending and Modifying Resolution of the Board of the National Bank of the Republic of Belarus No. 88 dated June 26, 2009, and Annulling Certain Resolutions of the Board of the National Bank of Belarus and a Separate Structural Element of Resolution of the Board of the National Bank of the Republic of Belarus No. 291 dated May 31, 2016” dated February 23, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 461 “On Amending and Modifying the Instructions on the Procedures for Work with Electronic Documents in the Central Archive of Interbank Settlements of the National Bank of the Republic of Belarus” dated October 15, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 499 “On the Register of Software and Hardware of the Participants of the Payment System in the Republic of Belarus” dated October 31, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 540 “On Some Issues of Functioning of the Instant Payments System and Conducting Instant Payments” dated November 20, 2018.

Resolution of the Board of the National Bank of the Republic of Belarus No. 628 “On Approving and Implementing the Standards of Conducting Settlements” dated December 26, 2018.

146

Resolution of the Board of the National Bank of the Republic of Belarus No. 636 “On the issues of Secure Circulation of Bank Payment Cards and Functioning of the Software and Hardware Infrastructure Objects, as well as Annulling Certain Regulatory Legal Acts of the National Bank of the Republic of Belarus” dated December 28, 2018.

147 Attachment 2.12

to the Report of the National Bank for 2018

DYNAMICS of number of payment instructions settled via the BISS in 2010 – 2018 (million units)

0

10

20

30

40

50

60

70

80

90

2010 2011 2012 2013 2014 2015 2016 2017 2018

148 Attachment 2.13

to the Report of the National Bank for 2018

DYNAMICS of amounts of payment instructions settled via the BISS in 2010 – 2018 (BYN bn)

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 2017 2018

149 Attachment 2.14

to the Report of the National Bank for 2018

DYNAMICS of share of non-cash transactions in 2010 - 2018 (%)

0

20

40

60

80

100

2010 2011 2012 2013 2014 2015 2016 2017 2018

Share of non-cash transactions in the total number of operations with cardsShare of non-cash transactions in the total volume of operations with cardsShare of non-cash turnover in retail turnover