Central Bank Tightens Grip on Bank Ownership

The Central Bank of Armenia has introduced stricter regulations to ensure the stability and integrity of the country’s banking sector. One of the key measures is a requirement for individuals or entities seeking to acquire shares in authorized capital stock to obtain prior consent from the Central Bank.

Background

According to Article 18 of the Law on Banking, any individual or entity looking to acquire a qualifying holding in a bank’s authorized capital stock must first receive approval from the Central Bank. This is intended to prevent individuals or entities with questionable financial backgrounds or those who may pose a risk to the bank’s stability from gaining control.

Grounds for Rejecting an Application

The Central Bank has identified several grounds for rejecting an application, including:

• If the individual or entity is in a poor financial position
• If their acquisition of shares could worsen the bank’s financial situation
• If the activities of the acquirer or their affiliated persons may impede the exercise of effective control by the Central Bank

Extending Regulations to Offshore Zones

The regulations also extend to natural persons with permanent residence or conducting business in offshore zones, as well as legal entities established or registered in those zones. These individuals and entities must obtain prior consent from the Central Bank before acquiring shares in a bank’s authorized capital stock.

Changes to Article 181 of the Law on Banking

Article 181 of the Law on Banking has been amended to require prior consent from the Central Bank for any individual or entity seeking to acquire other shareholdings (non-qualifying holdings) in a bank’s authorized capital stock. This includes situations where an individual or entity acquires shares from a qualifying participator and reduces their shareholding below certain thresholds.

New Regulations on Charter of Banks

The Central Bank has also introduced new regulations governing the charter of banks, which must define:

• The full and short trade name of the bank
• Registered office
• Organizational and legal form
• Other key information

Strengthening Oversight

These measures are designed to strengthen oversight and ensure that Armenia’s banking sector remains stable and secure for depositors and investors alike. By tightening regulations on bank ownership, the Central Bank aims to prevent potential risks and maintain the integrity of the financial system.

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