Development of the Financial System
Transition to a Two-Tier Banking System (1991-1995)
The establishment of Armenia’s modern financial system began with the transition to a two-tier banking system between 1991 and 1995. Following the collapse of the Soviet banking system, Armenian banks were reorganized as joint-stock companies, marking the formation of the first commercial banks. Key legislative developments, including the adoption of the RA Law on the Central Bank of Armenia and the RA Law on Banks and Banking in 1993, laid the foundation for a regulated financial environment. In the same period, the introduction of Armenia’s national currency, the dram, and the implementation of the Central Bank’s first monetary policy program helped stabilize the economy by significantly reducing inflation.
Strengthening Armenia’s Financial Stability (1996-2008)
Between 1996 and 2008, Armenia’s financial system underwent significant structural transformation and expansion. The late 1990s saw the introduction of key banking laws, the development of the National Payment System, and the integration of global banking standards with the entry of HSBC into Armenia. In 2006, the Central Bank assumed broader regulatory responsibilities, overseeing the entire financial sector, ensuring financial stability, and introducing measures to combat money laundering and financial fraud. The establishment of the Deposit Guarantee Fund, ACRA Credit Bureau, and consumer protection initiatives contributed to building public trust in financial institutions. Additionally, the transition to an inflation-targeting monetary policy enhanced macroeconomic stability and fostered financial sector growth.
Adapting to Global Challenges: Armenia’s Financial System Since 2009
Since 2009, Armenia’s financial system has continued to grow and adapt to global economic challenges. Despite the global financial crisis, Armenian banks maintained solvency without government support, demonstrating the resilience of the system. Investments in financial infrastructure, such as the National Mortgage Company, the Office of the Financial System Mediator, and the Motor Insurers Bureau, have strengthened financial services and consumer protection. The entry of international asset management firms has supported the development of Armenia’s pension system, aligning the regulatory framework with global Basel banking standards. As a result, financial intermediation has expanded significantly, with financial system assets rising from 30% of GDP in 2008 to 116% in 2022, improving financial accessibility and inclusion across Armenia.
CBA’s Institutional Reforms and Innovations Since 2020
Since 2020, the Central Bank of Armenia has implemented several institutional development programs aimed at enhancing innovation, improving governance, and strengthening its ability to anticipate future challenges.
These innovative initiatives and tools include:
- Macroprudential Policy
- Structured Strategy
- Strategy Implementation
- Financial Stability Framework
- FPAS Mark II
- Risk-Based Supervision
- Payment Systems Development (PSD)
- Basel Compliance