Friday, October 8 2010 10:46
Central Bank of Armenia suggests adopting a new financial instrument - subordinated loan
ArmInfo. Today Vice Chairman of the Central Bank of Armenia Vache Gabrielyan submitted to the National Assembly of Armenia a package of amendments to the Civil Code of Armenia and the laws on payment and settlement systems and organizations, on banks and banking, on credit organizations, on insurance companies and insurance, on securities market, on bankruptcy, on bankruptcy of banks, credit organizations and insurance companies, on credit bureaus and on circulation of credit information.
Gabrielyan said that the amendments to the law on payment and settlement systems and organizations will allow enhancing financial stability and reliability by means of tougher licensing and control requirements. The minimum total capital for such organizations is 100mln AMD. There are also interim levels of 70mln AMD and 30mln AMD, which are to be specified.
The Central Bank reserves the right to set liquidity requirements for ensuring the solvency of payment and settlement systems. The bill gives a list of payment and settlement services to be brought into compliance with the EU's legislation and sets additional requirements for those wishing to join international payment and settlement systems with a view to ensure stability of regional transfers. The amendments also say that the bank accounts of payment and settlement organizations failing their obligations to individuals shall be blocked.
The amendments concerning the laws on credit organizations, on credit bureaus and on circulation of credit information are aimed at differentiating the functions of investment and credit companies. They say that investment companies will no longer be allowed to provide credit services and credit information while credit organizations will not be permitted to provide investment services.
The Central Bank believes that these changes will stabilize the system and will help to clearly differentiate the functions of credit an investment companies.
The amendments to the Civil Code also suggest creating a new financial instrument - subordinated loan. Such loans are good for forming or increasing a capital when the investor wants to make a long-term investment but does not want to deal with securities. This instrument is widely used in many countries. This is a very fast and flexible method of increasing a company's capital. "The shares of companies needing to increase their capitals are not very attractive for investors. Subordianted loan allows attracting long-term money without dealing with shares," Gabrielyan said.
He said that in 2009 some Armenian financial institutions borrowed such loans from their mother structures.
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