YEREVAN, July 3. /ARKA/. At an extraordinary meeting on Friday, the National Assembly of Armenia adopted the law “On Bank Restructuring” and a number of related laws in the second and final reading.
Deputy Chairman of the Central Bank of Armenia Armen Nurbekyan stated that the need to adopt the law is due to the recommendations of the World Bank and the IMF, presented in 2018 within the framework of the Financial System Assessment Program of Armenia (FSAP).
According to him, the current system does not provide sufficient response mechanisms in the event of a significant deterioration in the financial condition of the bank, and in fact the only option remains liquidation.
He noted that this approach is considered controversial because the liquidation process can be costly, lengthy and detrimental to the public interest.
“In many countries, an alternative approach is used – bank restructuring. In this case, the bank is not liquidated, but intermediate instruments are used to simultaneously maintain financial stability and solve the problem of insolvency,” Nurbekyan said.
The law proposes to introduce an institution for bank restructuring, the exclusive competence to implement which will be assigned to the Central Bank of Armenia.
The main instruments include the sale of the bank, the bridge bank mechanism, the separation of problem assets and other measures aimed at stabilizing the bank without liquidating it.
To finance the restructuring process, a Restructuring Fund will be created, which will be formed through one-time, periodic and additional contributions from commercial banks.
It is proposed to set the target level of the fund at least 0.5% of the total liabilities of the banking system, with this level being achieved within 10 years after the law comes into force.
