CBA Introduces Deposit Insurance System
In a move to strengthen banking regulation and protect depositors’ interests, the Central Bank of Armenia (CBA) has established a deposit insurance system. The system is mandatory for all banks operating in the country and aims to ensure that depositors are protected in case of bank insolvency or bankruptcy.
Deposit Insurance Fund
The Deposit Insurance Fund (DIF) is responsible for managing the funds and paying compensation to depositors in case of a “compensation event”. A compensation event occurs when a bank is recognized as insolvent or bankrupt, and it is unable to pay back deposits within the period set by law and contracts.
Compensation Limits
The guarantee of deposit compensation covers deposits up to certain limits:
- AMD 16 million: for Armenian dram-denominated deposits
- AMD 7 million: for foreign currency-denominated deposits
- Up to AMD 16 million: for a combination of Armenian dram and foreign currency-denominated deposits, if the dram-denominated deposit exceeds AMD 7 million
Exceptions
The guarantee does not apply in certain cases, including:
- Depositors who are bank managers or their family members
- Significant shareholders of the bank or their family members
- Depositors who have disclaimed their ownership rights
- Funds recognized as proceeds of illegal activities, unless otherwise proved by the depositor
- Deposits with interest rates at least 1.5 times higher than similar bank deposits
Bank Secrecy
The CBA has also introduced strict rules on bank secrecy to protect customer information. The general rule is that disclosure of bank secrecy is prohibited, and breach of this rule may incur criminal liability.
However, there are certain circumstances under which disclosure of bank secrecy is allowed, including:
- Customer consent
- Disclosure to the CBA or Fund during supervision
- Disclosure for the purpose of protecting a customer’s interests in court proceedings
- Disclosure to tax authorities, law enforcement agencies, and credit bureaus
Consequences of Violating Bank Secrecy
The violation of bank secrecy rules may lead to civil liability, including compensation of damages. The CBA takes strict measures to ensure that banks comply with these regulations to maintain public trust and confidence in the financial system.
The introduction of this deposit insurance system and bank secrecy rules demonstrates the CBA’s commitment to protecting depositors’ interests and maintaining a stable and secure banking environment in Armenia.