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Introduction
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In 1996, the National Assembly of Armenia endorsed a set of laws to regulate the
relations in the banking system. These were the Armenian Laws on: "The Central Bank", "Banks and
Banking", and "Bank Secrecy", which heralded the beginning of the banking system in Armenia. |
| The Armenian Law on "
The Central Bank" sets
out the objectives, authority, structure and management of the Central Bank. The Law provides that
the Central Bank is a legal entity, the sole founder of which is the Republic of Armenia. The key
objective of the Central Bank is ensuring price stability, which is achieved by developing,
approving and conducting monetary policy programs. The Law further provides that the objectives of
the Central Bank include creation of requisite conditions for stability, liquidity, solvency and
normal functioning of the banking sector, and creating and developing an efficient payment and
settlements system. The Law specifies the Central Bank's relationship with Government authorities,
banks and other legal entities; it regulates the authority of the Central Bank as a currency agent,
the circulation of the Armenian currency, currency control, and other relations essential to the
economy. |
| The Armenian Law on "
On Banks and
Banking" regulates the activities of Armenian banks. The Law determines registration,
licensing, regulation and termination of activities of banks, their branches, foreign bank branches
and all affiliations, and terms of supervision of banking. It explicates the definitions 'bank',
'banking activity', 'bank deposit' and some other definitions; it regulates the corporate structure
and management and the scope of financial, investment and subscription activities, and the
prudential economic standards. |
| The Armenian Law on
"On Bankruptcy of
Banks, Credit Institutions and insurance companies" provides the definitions and features of
insolvency and bankruptcy of banks and credit institutions operating in Armenia, the terms and
conditions for implementing relevant preventive measures, and the peculiarities of insolvency and
bankruptcy proceedings; it provides for the grounds to recognize a bank/credit institution
insolvent, the ways of financial rehabilitation. The Law also determines the rights and liabilities
of bank depositors and creditors, the temporary administration and the receiver, and other parties
of a bankruptcy process. |
| The Armenian Law on
"Banking
Secrecy" designed to enhance customer confidence in the banking system and encourage the
investment process determines the scope of information considered as bank secrecy, the legal
grounds and procedure to divulge, maintain and provide such information; it provides for the rights
and liabilities of parties under relations concerning bank secrecy, as well as the liability for
infringement of this Law. It clearly describes the procedure and terms for providing information
considered as bank secrecy to criminal prosecutors, court, tax authorities, heirs of customer and
other parties. |
| The period 2002-2003 was momentous as a number of essential changes and innovations occurred in
the banking legislation. On 29 May 2002, the Armenian Law on
"On Credit
Organizations" which gave the Central Bank authority to license and supervise the activities of
credit institutions in Armenia. |
| Consistent with the legislative changes, the Central Bank initiated the drafting of appropriate
regulatory and legal papers. This allowed specifying the terms and conditions for banks, branches
of foreign banks and credit institutions in Armenia to implement compulsory measures in combating
circulation of criminally obtained funds and terrorism financing. |
- The changes introduced in March 2004 allowed regulation of four
sets of issues:
- The procedure of carrying out inspection by the Central Bank was determined;
- The Central Bank determined the grounds, terms and conditions for holding the Central
Bank-licensed parties liable;
- Changes were made to the procedure of creation of FX revaluation reserves of the Central
Bank;
- The issues relating to the introduction of the deposit guarantee scheme, particularly the
failure by the Deposit Guarantee Fund to remunerate a deposit and the events of deposit
remuneration, were explicated in light of the Armenian Law on
"On Bankruptcy
of Banks, Credit Institutions and Insurance companies".
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| In March 2004,
the changes in the
Armenian Law on
"On Banks and
Banking" were attributable to the adoption of the Basle Principles of Banking Supervision and
the resultant refinements in the prudential economic standards. In this connection, some other
changes were made to
the Armenian Law on
"On Credit
Organizations". |
| The
changes in the
Armenian Law on
"On Banking
Secrecy", considering the internationally accepted principles, define that the information on
non-diligent debtor available with the Credit Registry will be published. |
| The Armenian Law on "Amendments and Addenda to the Armenian Law on
"Bankruptcy of
Banks, Credit Institutions and Insurance companies", was adopted to introduce important
international principles in the legislation governing bankruptcy. This ensures the openness of
process of the Central Bank-appointed temporary administration; clears up one of the grounds for
insolvency, i.e. the depletion of 50 and more percent of core capital; describes the stock-taking
and evaluation of the assets of a bank by the temporary administration. The Law explicates the
mechanisms of sale of a bank, which were not regulated previously. The provisions saying that the
Central Bank decisions shall not be appealed are removed from the Law. What's more, the grounds and
procedure for appealing such decisions are defined. The priority of satisfaction of creditor claims
was determined. |
| The activity of banks and credit institutions in Armenia is governed also by the Civil Code of
Armenia, the Armenian Laws on "Funds Transfer by Payment Order",
"On Currency Regulation
and Currency Control", "Joint Stock Companies", "Companies with Limited Liability" and other
laws and regulations pursuant to these laws. |
| Starting 2004, the banking legislation entered a new phase of development. In November 2004,
the Armenian Law on
"On Combating
the legalization of Proceeds from crime and financing of Terrorizm" was adopted, which
necessitated making a number of changes in the banking laws. Particularly,
changes and
supplements were made to the Armenian Law on
"The Central Bank"
vesting the Central Bank with another role of organizing and regulating the fight against
legalization of criminally obtained proceeds and terrorism financing. Changes were made in other
laws as well providing that the notaries, state registers of property rights, registries of legal
entities, insurers, pawnshop organizers and other parties under the law shall report the
information specified in the above said law to the Central Bank. |
| On 24 November 2004, the Armenian Law on
"On Currency Regulation
and Currency Control" in a new edition was adopted that explicated the definitions 'resident
and non -resident', 'current currency transactions', 'movement of capital' and 'financial currency
transactions'. It determined the cases of implementing transactions in Armenian currency and
foreign currency in the territory of Armenia. It further provided that all pecuniary quotations in
the sale of property, rendering of services and works should be made in the Armenian Dram. The Law
delineates the scope of the bodies performing currency control. |
| In November 2004, the Armenian Law on
"Payment and
Settlements Systems and Payment and Settlements Organizations" was adopted aiming at regulating
and developing the payment and settlements systems in order to ensure stable and reliable financial
and banking sectors in Armenia. |
| In November 2004, the National Assembly endorsed the Armenian Law on
"Guarantee of
Remuneration of Bank Deposits of Individuals" pursuing to contribute to the reliability of the
banking system, enhance the household confidence and defend the depositor interest. The Law
provides a comprehensive regulatory framework for the guarantee of remuneration of the bank
deposits of individuals. Upon the entry of this Law into effect, the Central Bank's decision on
approving the Central Bank Regulation 20 "Mandatory Guarantee of Physical Entity Bank Deposits and
Accounts" operated revoked. |
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All questions send to
E-mail:Nellykirakosyan@cba.am
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Address:
Republic of Armenia, Yerevan,
Vazgen Sargsyan str. 6,
Phone: (374-10) 583 841
Fax: (374-10) 523 852
E-mail: mcba@cba.am
S.W.I.F.T.CBRAAM22
webmaster@cba.am
©
2002-2009
RA Central Bank of Armenia
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Updated 30.01.2009
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