Kyrgyz banks will have to explain what they are charging fees for

The National Bank of Kyrgyzstan has put forward amendments to the rules for pricing banking and payment services. In short, if the document is adopted, banks, microfinance companies, and payment service providers will find it much harder to charge high interest rates on loans and hidden fees — the regulator will require them to show the calculations.

The proposed amendments concern a set of three documents that regulate competition, define market dominance, and establish pricing rules.

You can’t just say, “The annual rate is 39% — because we decided so.”

The main innovation is the introduction of a transparent loan pricing system. Every bank, microfinance organization, or payment company will now be required to have an internal methodology for calculating interest rates. Moreover, they must not only develop such a methodology but also have it formally approved by the board of directors (or management, if it’s not a bank), apply it in daily operations, and document it in a separate file titled “Interest Rate Calculation.”

That is, each loan interest rate must be broken down into its components:

• how much it costs the bank to attract funds (deposits, borrowings);
• what credit default risks it factors in;
• what actual operational costs are associated with issuing and servicing the loan;
• separately, the bank’s margin (profit).

And the regulator explicitly prohibits including unrelated costs — such as bonuses for top management, marketing, branding projects, capital investments, and so on. The interest rate may only include expenses directly related to the loan itself.

It may seem like a technical detail, but in reality, it’s a blow to the traditional “we just decided this way” approach. For example, if a bank issues a consumer loan at 40% per year, it now has to explain exactly how it arrived at that 40%. And these explanations can be verified.

Moreover, if a bank raises deposits at an excessively high cost and then passes this inflated expense onto the borrower, the National Bank reserves the right to intervene. In such cases, it can calculate the cost not based on the bank’s internal resource pricing, but using the market-average benchmarks published by the regulator. This mechanism protects borrowers from the inefficiencies of the bank itself.

A monopoly is not just about “who has the largest market share”

The second important part is the revision of the concept of market dominance.

Previously, it was simple — a large market share meant dominance. Now the National Bank openly acknowledges that the banking market no longer exists solely through branches and terminals. Services are moving into mobile applications and payment service ecosystems, and this is precisely where a new form of monopoly emerges — a technological one.

The regulator proposes to look not only at market shares in traditional products but also at factors such as:

• the dependence of clients on a specific mobile bank or e-wallet;
• control over remote service channels and APIs;
• “bundling” of products, where a user is effectively locked into one ecosystem and cannot switch to a competitor without incurring losses.

In other words, if a fintech company or bank is not just large but controls critical infrastructure (payment channels, an app that has become “essential”), this is now also considered dominance.

Why is this important? Because with such dominance, the regulator gains the right to intervene in pricing. This can include setting limits on interest rates, fees, and tariffs for a particular player if, in the National Bank’s view, they are abusing their market position.

The document explicitly states that if an institution holds more than a 35% share in a mass-market service used by nearly all client categories, the National Bank of the Kyrgyz Republic may establish price corridors, including for services provided through remote channels.

This goes beyond mere supervision — it is a measure designed to prevent a situation where a single digital player dictates the rules for the entire market.

The National Bank is moving into banks’ advertising texts

The third focus area is protecting consumers from misleading advertising and hidden terms.

The regulator notes that misleading advertising of banking and payment services is part of the competition problem. Banks, payment system operators, and microfinance organizations are prohibited from:

• promising terms or conditions that do not reflect reality;
• hiding fees and “additional charges” in fine print;
• forcing extra products on clients under the guise of mandatory credit conditions;
• locking the client into an unprofitable package.

In essence, the National Bank is signaling that aggressive marketing with attractive rates “from 9%,” which ultimately turn into 40%, will be considered not only a consumer protection issue but also an instance of market abuse.

Collusion against competition under a separate regulatory framework

The National Bank of the Kyrgyz Republic explicitly defines what it will consider as anti-competitive collusion.

The following are prohibited:

• agreements between banks and payment operators on the interest rates they charge are prohibited;
• market division by territory, products, or customer segments (for example, “you work with SMEs in the south, I handle retail in Bishkek”) is prohibited;
• barriers preventing new entrants from accessing the payment infrastructure.

It is important to note that “coordinated actions” can also come under scrutiny, even if there is no formal agreement.

At the same time, joint technical initiatives (such as unified standards, shared APIs, or joint infrastructure procurement) are not prohibited. However, the National Bank stipulates that these are permissible only if they do not stifle competition.

If the regulator detects signs of abuse, it will be able to issue an order to adjust the margin, reduce a tariff, limit a commission, or, in extreme cases, suspend certain operations.

This implies two things for the market.

Firstly, banks and fintech companies are facing, for the first time, the requirement not just to “be profitable,” but to justify their profitability. They will need to explain not only to shareholders but also to the regulator why a client is being charged a particular amount.

Secondly, consumers effectively gain protection against “unfair pricing,” where interest rates are inflated with hidden fees.

Why is the National Bank doing this now

The explanatory note explicitly states that the current regulations were written in the era of the “classic bank branch.” Today, the market has shifted to smartphones, creating two immediate problems:

• The first issue is that remote services and payment applications have effectively started to replace traditional banking infrastructure, yet they have been subject to much lighter regulation.
• The second issue is that pricing has become non-transparent, especially in consumer lending and microfinance, where the final cost of the loan for the client often became clear only after signing the agreement.

The new version of the regulations is designed to close both of these gaps.

The National Bank expects the reform to reduce the cost of banking and payment services, increase competition for customers, and ease social tensions arising from debt.