Core Functions
The financial system plays a pivotal role in modern economies, and its stability and integrity are safeguarded through a variety of regulatory frameworks and mechanisms. These mechanisms include monetary policy, payment and settlement systems, financial supervision, consumer protection, and the prevention of money laundering and terrorism financing, all of which are crucial for the smooth operation of economic activities.
Monetary policy
In Armenia, the Central Bank is responsible for setting and implementing monetary policy with the primary goal of maintaining price stability. This is achieved through an annual inflation target of 3%, which helps anchor expectations and guide economic decisions. By adjusting interest rates—the price of money—the Central Bank influences borrowing, spending, and investment, ultimately shaping inflation trends. Through a transparent and structured approach, the Central Bank of Armenia makes informed monetary policy decisions, communicates them effectively, and ensures accountability to the public, fostering economic growth and financial stability.
Financial stability
Financial stability is essential for a strong and resilient economy, ensuring that financial institutions, markets, and infrastructure can withstand shocks and disruptions. In Armenia, the Central Bank is responsible for maintaining financial stability, alongside its role in ensuring price stability. Through macro-prudential policies, risk assessments, and stress testing, the Central Bank monitors potential threats to the financial system and takes proactive measures to mitigate risks. A dedicated Financial Stability and Special Regulatory Committee supports this effort by analyzing financial conditions and recommending policy actions to safeguard the stability of the entire financial system.
Payment and Settlement Systems
Payment and Settlement Systems are essential components that enable the transfer of money between individuals, businesses, and governments. These systems ensure the efficient exchange of goods and services, facilitate international remittances, support financial inclusion, and assist central banks in implementing monetary policy. Given their central role in economic stability, payment and settlement systems must be secure, reliable, and efficient to foster growth and sustain financial stability.
Money Circulation
Money Circulation is another core function managed by central banks, ensuring that cash remains a reliable means of payment. The Central Bank of Armenia oversees the production, distribution, and regulation of currency, ensuring that it meets the needs of the economy while maintaining high-quality standards. By managing currency circulation, central banks help maintain financial stability, safeguard public trust, and provide mechanisms for damaged or worn currency exchange.
Financial Supervision and Regulation
Financial Supervision and Regulation are central to maintaining a sound financial system. The Central Bank's role in setting regulatory standards ensures that financial institutions are adequately capitalized, manage liquidity efficiently, and adhere to sound risk management practices. Furthermore, consumer protection is prioritized to ensure fair treatment and prevent abusive practices. Through risk-based supervision, the Central Bank ensures financial institutions operate in a safe and sound manner, contributing to overall market integrity.
Consumer Protection
Consumer Protection is an essential mandate for the Central Bank of Armenia, ensuring that financial service providers act fairly and transparently. By setting regulatory standards, addressing complaints, and promoting financial education, the Central Bank helps consumers make informed decisions and protects them from fraudulent activities. With a focus on financial literacy, the bank empowers individuals to improve their financial well-being through education and accessible resources.
Combating Money Laundering and Terrorism Financing
Combating Money Laundering and Terrorism Financing is critical to safeguarding the financial system from illicit activities. Money laundering allows criminals to legitimize proceeds from illegal activities, while terrorism financing supports unlawful actions that destabilize economies and societies. Through its Financial Monitoring Center (FMC), the Central Bank of Armenia plays a key role in preventing these threats by gathering and analyzing financial intelligence, collaborating with law enforcement, and ensuring compliance with international standards.
Together, these functions form the backbone of a robust financial system, promoting transparency, fairness, and stability in both the financial sector and the broader economy. By continuously monitoring and regulating financial activities, the Central Bank of Armenia ensures that its financial infrastructure supports growth, innovation, and the safety of the public.