Regulation and supervision
The Way We Regulate and Supervise
Regulation refers to the rules provided to financial service providers to guide them on how to maintain appropriate conduct with consumers. Some of them are adopted by the Parliament, like Laws and Civil Code, while the others are adopted by the CBA–Regulations /Կանոնակարգեր/ and Official Clarifications.
We are committed to having stringent regulations for ensuring consumer protection in the financial sector since it is a key enabler for the increased financial well-being of our consumers. Sound rules enhance consumer confidence when accessing financial products and services, but they are not effective if not implemented. With this purpose, we supervise and enforce the rules.
The Institutions We Regulate
We regulate the financial industry including banks, credit organizations, insurance companies, brokers and agents, payment companies, investment firms, pawn shops, exchange offices, pension and other asset managers, and more. Apart from setting rules, we also ensure that firms abide by them. For this purpose, we supervise and enforce. As supervisors, we check if they follow the rules and standards set by the CBA and the Parliament of Armenia. This is done through a strategy known as Risk-Based Supervision. This means that we spend more time supervising firms and industries that will pose the greatest potential risk and harm to consumers if they fail.
Its Operation in Practice
First, we review detailed applications from firms before deciding whether to give them a license to operate. We review the level of capital or financial resources the firm plans to inject into the business, what the proposed business model is, as well as its policies and procedures. We also ensure that managers of the firms are properly qualified and that the staff is of the right scale and quality for their job properly. That means, we control which firms and people can enter and stay in the market.
Second, we conduct ongoing supervisory work to monitor and engage with firms that operate in the market. Firms are required to provide such information to CBA. Then we check the given information to ensure that they abide by the rules and are financially sound. We also have a wide range of monitoring tools at our disposal which are used to monitor firms’ behavior. For example, we do mystery-shopping exercises to check that firms treat consumers fairly when buying financial products or services. Additionally, we carry out general reviews of particular topics and sectors within the financial industry; for instance, we monitor financial advertisements to check that they are fair and do not mislead you. We carry out on-site inspections to investigate particular topics or specific matters. Moreover, we analyze the consumers’ complaints to firms, mediators, and CBA to analyze the concerns and address them accordingly.
The CBA’s Approach to Dealing with Suspected Firm Violations
If there is a reason to believe that a firm or a person managing the firm is failing to bind their legal obligations, we will address the issue by instructing the firm to change its behavior or by reporting it to other relevant authorities. Often, however, it will require in-depth investigation by the Central Bank’s team of investigators, lawyers, financial analysts, accountants, and other specialists trained to gather evidence of potential wrongdoing. Among our investigative role, we can require the firm to hand over documents, compel the individuals to attend interviews if they are suspected of wrongdoing, and conduct inspections at the firm’s premises.
CBA Actions Against Wrongdoing
That is where our enforcement powers come in which allow us to issue a reprimand or fine against a firm or individual that has failed to comply with their requirements. In the most serious cases, we can withdraw a firm’s license to operate or ban an individual from working in the financial industry.
This process maintains high standards in Armenia’s financial industry to protect consumers when buying a financial product or service. This is a crucial role that the CBA holds–keeping a watchful eye over the financial industry.
Consumer Laws and Regulations
There is no concrete law that regulates all aspects of consumer protection; however, there is a wide range of legal documents that address one or another issue. The documents are structured into a hierarchy: the Constitution and Civil Code are the most supreme documents and the laws adopted by the Parliament. Based on these documents, the CBA can adopt regulations and official clarifications.
The legal documents that reflect most consumer protection issues.
Laws
- Law on Attraction of Bank Deposits
- Law on Consumer Credits
- Law on Home Mortgage
- Law on Financial System Mediator
Regulations
- Regulation 8/01 on Explanations and Examples of the Calculation of Annual Percentage Rate of Charge
- Regulation 8/02 on the Calculation of Annual Percentage Yield of Bank Deposits
- Regulation 8/03 on Information Publication by Banks, Credit Organizations, Insurance Companies, Insurance Brokers, Investment Companies, Central Depository and Payment and Settlement Organizations Implementing Money Remittances
- Regulation 8/04 on Minimum Conditions and Principles for Internal Rules, Regulating the Procedure of Examination of Complaints/Claims of Customers
- Regulation 8/05 Rules of Business Conduct of Financial Institutions”
- Regulation 8/05.1 “General Requirements to Information on How to Choose Pension Fund Manager and Pension Fund provided to Mandatory Funded Pension Contribution Scheme Participant by Runner of Register of Participants”
- Regulation 8/06 "Requirements for the methods and procedures of implementation of the rules of business conduct with guarantors by banks and credit organizations"
- Regulation 8/07 "minimum conditions and principles for the internal process of accounting, storage, and registration of complaints addressed to the participants of the financial system"
- On approving Regulation 8/03.2 "Rules for using the "Your Financial Directory" system by financial organizations and filling in data in the system"
- Regulation of self-regulation of communication with customers in the debt collection process
- Regulation of self-regulation of communication with clients in the process of debt collection