Friday, April 15 2011 15:03

Central Bank of Armenia suggests introducing a new financial instrument in Armenia - a subordinated loan


ArmInfo. Parliament of Armenia passed amendments and alterations to the laws "On settlement and payment systems and organizations", "On credit organizations", "On circulation of credit information" and "On Security market" in the second and final reading.

Vice Chairman of the Armenian Central Yeritsyan said that the bill introduces a new financial tool in Armenia - a subordinated loan. The package suggests facilitating the process of licensing of the settlement and payment systems. For instance, if the process of licensing is suspended, from now on one will not have to start everything anew in order to resume the process. The provisions concerning cheques, settlement cards, electronic money and other payment instruments implemented via the third persons are also excluded. The law restricts the activity of non-licensed organizations, and in this connection, the given provision of law simply becomes senseless.

The law "On settlement and payment systems and organizations" fixes a minimal amount of the total capital at 100 mln AMD, and the transition amounts for the future - at 70 mln and 30 mln AMD. As regards the time of application of this innovation, they are expected to be determined during the hearings. The CBA reserves the right to fix a liquidity ratio for the settlement and payment systems in order to ensure solvency, because cash funds are constantly needed for money transfers.

Yeritsyan said that the list of settlement and payment services is specified and brought in compliance with the European Union's legislation requirements. Additional requirements to those wishing to participate in the international settlement and payment systems have been fixed; particularly, a tough approach will ensure stability in regional transfers. According to the suggested amendments, the banking accounts of the settlement and payment organizations that failed to carry out their obligations to individuals will be blocked.

The amendments to the laws concerning credit organizations, credit bureaus, and circulation of credit information are aimed at dividing the functions in the activity of investment and credit companies. In particular, investment companies will not provide any credit services, and credit organizations will not provide any investment services. In this connection, the investment companies will be excluded from the list of organization providing credit information. The CBA attaches much importance to these amendments to stabilize the reliability of the system and clearly divide the functions of activity of the credit organizations and investment companies.

In addition, it is also suggested creating a new financial instrument for Armenia - a subordinated loan, which is especially significant when attracting and increasing the capital, when an investor wants to make long-term investments in the given sphere or an enterprise, but does not want to deal with securities. This tool is widely used in many countries and its introduction is of great importance to Armenia. A subordinated loan is a very flexible method for increasing the capital of the companies.
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