Armenian Banking Regulations: New Law Defines Procedures for Banks, Licensing, and Compliance

Subtitle

The National Assembly of Armenia passes a new law to establish a legal framework for banking operations in Armenia.

Introduction

The Republic of Armenia’s National Assembly recently passed law No. [number] on banks and banking. This law sets out procedures for the registration, licensing, regulation, and supervision of banks in Armenia, applying to all banks registered locally, branches of foreign banks, and representative offices.

Banking System and Legislation

Components

The banking sector in Armenia comprises the Central Bank, banks registered locally, branches of foreign banks, and representative offices. Their activities are governed by:

The present law
Central Bank Law
Bankruptcy Law
Banking Secret Law
Other relevant legislation

Objective and Scope

The primary objectives of the law are:

To develop the banking system
To ensure safety and regular operations
To create an environment for free economic competition among banks

Definitions and Prohibitions

Bank

A bank is defined as a legal entity licensed to perform banking transactions, including taking deposits, extending loans, and investing funds on behalf of clients. Performing banking transactions without a banking license is strictly prohibited.

Deposits

A bank deposit is funds provided to a bank in accordance with a banking deposit contract. It does not assume any risk for the depositor nor is it meant to serve as compensation for any activities or rendered services, nor is it intended to be a means to acquire property or property rights.

Use of the Word “Bank”

Only licensed banks, their branches, and representative offices and entities explicitly mentioned in the law or international agreements can use the term “bank” or its derivatives as part of their title. Banks are also prohibited from using misleading or disorienting words that may create a false impression about their financial performance or legal status.

Banking Unions and Associations

Banks may form and participate in non-profit banking unions and associations for systematizing their activities, exchanging information, and addressing other banking objectives collectively. Banking unions and associations cannot be involved in banking transactions and must notify the Central Bank within ten days of their registration.

Linked Persons and Significant Equity Interests

Definitions

Affiliated persons: Family members, co-business owners, those having sufficient equity interests in the bank.
Significant participation: Owning 10% or more of voting stocks or having influence over decision-making and application or target setting.

Powers of Banks

Managers of banks have the authority to manage and allocate their fixed assets, including property revaluation, with independence from external influence. The Central Bank and banks are not responsible for each other’s obligations unless by mutual agreement.

Conclusion

The new banking regulations law in Armenia sets out procedures for registering, licensing, and supervising banks in the country. By following the prescribed guidelines, Armenia aims to promote a safe and competitive banking sector while maintaining transparency and investor protection, and establish a robust banking system and maintain financial stability.