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LEGAL ACTS
Introduction
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. |
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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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