It is no wonder that 20 years after "the epoch of financial pyramids" Central Bank of Armenia launches a legislative fight against them

ArmInfo. 20 years after the bubbles of financial pyramids emerged and burst with "a public bang", the Armenian Parliament has started considering the amendments to the Criminal Code that aim to toughen the penalty for organization of monetary bubbles. The relevant bill has been prepared by the Central Bank of Armenia (CBA).    

In his speech in Parliament, CBA Deputy Chairman Nerses Yeritsyan told about the notorious mechanism of formation of the pyramids and their negative consequences for the economy. He noted that the criminal legislation of the country lacks any articles stipulating penalty for the very "construction" of financial pyramids, but there is a good international practice. He stressed the significance of the fact that not the pyramid participants but its organizers must be held accountable and this circumstance should be reflected in the legislation accurately and clearly.

According to ArmInfo experts, the adoption of amendments to the Criminal Code regarding the "financial pyramids" is connected with the adoption of a package of legislative initiatives aimed at regulating and developing the market of financial derivatives in Armenia. It is commonly known that in international practice financial pyramids are currently being built with the help of derivatives. They lead to the collapse of transnational financial companies and become an igniter for the global financial crises. The problem is that the current legislation does not differentiate the derivatives from other financial instruments, whereas some derivatives have a number of peculiarities and a different mechanism of regulation. The new legislative package aims to fill this gap in line with international standards. This will allow not only the Armenian market participants, but also foreign investors to work with derivatives. The CB initiative is to design banking, corporate, and insurance derivatives.

To note, the EBRD and Armenia are working closely together and in March 2016 they signed a Memorandum of Understanding about actions in partnership between the EBRD and the CBA, including the reform of the derivatives market. Jacek Kubas, representing the EBRD Local Currency and Capital Market Development Team and in charge of the programme, said: "This reform is very important for market participants, including the EBRD, as it will open the doors for hedging tools, including foreign currency and interest rate and allow banks and corporates to properly manage their risks".