Our Governance
The Central Bank of Armenia operates based on three key principles that are essential to how it functions within the country's laws: independence, accountability, and transparency. These principles are crucial in shaping how the Central Bank interacts with the Government and Parliament.
The Central Bank of Armenia operates with a combination of public and private management. Here's why:
- Public Governance:
- It was established according to the law, and the Republic of Armenia is its sole owner and founder.
- Decision-making involves transparency and public consultations.
- The Bank presents the results of its activity and the logic of its policy through different channels, including regular reports to the Parliament and the public.
- It acts as a regulator and supervisor of private financial institutions.
- Corporate Governance:
- Independent from the public administration system.
- The separation of strategy from execution.
- Internal rules and procedures for decision-making.
- Risk management framework.
When crucial decisions are made, there's a balance between government authorities and private interests. This balance indicates that the Central Bank has a dual governance structure.
Independence
The independence of the Bank implies its ability to make decisions within the authority granted to it, free from government influence. While the law outlines the objectives of the Central Bank of Armenia, our institution independently devises strategies to attain these goals.
The Central Bank requires independence because it relies on specialized knowledge to carry out its assigned tasks, faces conflicts of interest, and can be subject to public oversight.
- Need for Specific Knowledge: Central banks often deal with complex economic and monetary issues. Independence allows them to make decisions based on their expertise and technical knowledge without undue political interference.
- Clash of Interests: Political authorities may have short-term goals driven by electoral cycles, while central banks often aim for long-term economic stability. Independence helps to mitigate conflicts of interest, allowing central banks to focus on their mandated objectives without succumbing to short-term political pressures.
- Public Control: While central banks are granted independence, they are typically subject to some form of public control or accountability. This ensures transparency and oversight, preventing abuses of power. Accountability mechanisms, such as regular reporting to government bodies or parliamentary committees, help maintain a balance between independence and accountability.
Accountability
Because money decisions are part of how the country manages its economy, the Bank isn’t completely separate from the government system. It is public policy institution and It's important for lawmakers to monitor the Bank's actions. The Parliament, which can change laws, has a lot of power in watching over the Bank's actions. That is why our Bank must report regularly to Parliament, as required by law.
To ensure that the Bank is performing effectively, Parliament needs ways to assess its work. To achieve this, specific goals are established by law of the Central Bank of Armenia, and the Bank follows these targets when making decisions.
Transparency
Transparency is about ensuring that everyone knows why the Bank makes its decisions. This is important because it allows people to hold the Bank accountable. That's why our Bank shares information in clear and timely ways with the public, so everyone can stay informed about what's happening.
The effectiveness of our Bank relies on how people view it. That's why it's crucial for us to clearly state our goals. When people, like those in the market, understand the reasons behind our decisions, such as setting interest rates, it promotes understanding of our actions. We are committed to explaining all our plans and decisions to ensure transparency.
The Bank's choices don't just impact prices and production; people's expectations matter too. How people interpret information can influence the Bank's decision-making process. That's why we consistently communicate the outcomes of our research and analytical work, which form the basis for our decisions, through various channels such as the press and social media.
We issue reports and statements to help the public understand the Bank's activities. Events like press conferences and news statements are ways we explain the reasons behind the decisions made by the Central Bank of Armenia.
The Board
The Central Bank of Armenia is governed by its Board. Board consists eight members and is responsible for developing strategy and making crucial decisions about the bank's strategy and policy.
In order to achieve the main objectives assigned to the Bank, the Board makes important decisions on monetary policy and ensuring the stability of the financial system, issues licenses, and, within the framework of corporate governance, approves the bank's strategy, budget, and annual report.
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Risk Management
In the Central Bank of Armenia, the Risk Management activities are coordinated by the Risk Management Center, which is responsible for establishing and maintaining a comprehensive framework for identifying, assessing, monitoring, and reporting key non- financial risks. Oversight of the Bank’s arrangements for risk management is undertaken by the Risk Management Committee (RMC) chaired by the Governor.
Internal Audit
The internal audit is an activity designed to provide to the Board of the Central Bank, the Governor of the Central Bank and the Audit Committee an independent and impartial assessment regarding the effectiveness of internal control of the Central Bank, risk management and corporate management. The Central Bank’s internal audit operates independently and reports to the Board.
Audit committee
The Audit Committee, consisting of non‑executive Board members, supports the Bank’s Board in carrying out its oversight role and audit‑related powers. The Audit Committee exercises control over the function of internal audit, review the results of activities of external assurance service providers, including external auditors, as well as perform other functions provided for by the Charter of the Audit Committee.
Executive Committee
The Bank's everyday activities are managed by the Executive Committee, following the goals set by the Board. This committee is made up of the Governor, two Deputy Governors. If needed, committee members may involve department directors in the discussion of issues.
To carefully examine important matters and decision-making on critical and complex issues, our Bank has set up special committees with expertise in both policy and operational areas. These committees include:
- Financial Stability and Special Regulation Committee
- Licensing and Supervision Committee
- Steering Committee
- Investment Committee
- The Budget Committee
- Procurement Committee,
These committees are composed of bank employees with the necessary knowledge and experience.
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Social Responsibility
We aim to be a responsible and sustainable institution, value our people, support the community, and protect our environment.
Considering our critical role in environmental preservation, we have dedicated ourselves to improving our performance in this crucial role. Our Environmental, Social, and Governance (ESG) framework serves as the guiding compass in our efforts to safeguard the environment. Through responsible policies and strategic initiatives, we aim to minimize waste and promote sustainable practices in our operations.
We actively support the community we operate in, recognizing that its prosperity is intricately linked to ours. One of our flagship projects that impact regional and social development, creating educational and regional growth opportunities, is the Dilijan Project. Through our investments, we are creating meaningful growth opportunities, fostering economic development, and contributing to the overall well-being of the region.
The Central Bank of Armenia is not merely a financial institution; it also aims to be the driving force for positive change. Through our environmental, social, and governance framework, we are promoting a sustainable future that prioritizes the well-being of our people, the growth of our community, and the protection of our sustainable environment.