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Central Bank Tightens Grip on Banking Sector with New Regulations
In a move to strengthen oversight and prevent financial instability, Armenia’s Central Bank has introduced new regulations governing the acquisition of participations in bank statutory funds.
Acquisition of Participations in Statutory Funds
According to Article 18 of the new rules, any person or related party seeking to acquire a participation in a bank’s statutory fund must first obtain the preliminary consent of the Central Bank. This requirement applies to transactions that result in a significant participant’s share dropping by more than:
- 75%
- 50%
- 25%
- 10%
The Central Bank will examine all documents submitted for review and may waive the application if it determines that the transaction poses no risk to prudential economic standards or the financial stability of the bank.
Acquisition of Shares from Significant Participants
In addition, the regulations impose limits on the acquisition of shares from significant participants. The Central Bank must be notified of any transaction exceeding:
- 20% of the statutory fund
- More than 50% requires prior approval
New Charter Requirements
The new regulations also introduce stricter requirements for bank charters.
Article 20: Charter Provisions
A bank’s charter must include provisions outlining:
- The bank’s organizational structure
- Management bodies
- Decision-making procedures
- Types of shares, their nominal value, and the rights of shareholders
Banks are required to provide copies of their charter to any person requesting it within five days. The cost of providing a copy cannot exceed the self-cost of the document.
Managing Bodies
Article 21: Managing Bodies of Banks
The regulations outline the managing bodies of banks, including:
- General meeting of participants
- Board
- Executive director or chairman of the directorate
- Chief accountant and internal audit department
These new rules aim to enhance transparency and accountability in Armenia’s banking sector, ensuring that financial institutions operate safely and efficiently.