Wednesday, September 13 2017 19:07
Karine Melikyan

Armenian CB submitted a draft of amendments to the laws "On Banks and Banking Activity" and "On the Insurance Market" to the Parliament

ArmInfo. Central Bank of Armenia submitted to the parliament a draft of amendments and additions to the laws "On Banks and Banking Activity" and "On Insurance", aimed at ensuring at least 93% compliance of financial organizations with international standards. Nerses Yeritsyan, Deputy Chairman of the Central Bank of Armenia, stated in the National Assembly on September 13, presenting a package of planned changes in the first reading.

According to him, so that banks in case of external shocks could cover risks at the expense of capital, and not at the expense of customers, an additional buffer of capital is needed. In other words, along with the current norm of the minimum amount of capital, it is necessary to establish requirements for additional capital.

Besides, it is proposed to review the maximum loan size for one borrower, which, according to the current requirement, is a maximum of 20% of the capital. He explained this by the fact that in many countries there is a tendency to growth, up to 30%, and therefore it is necessary to establish a new restriction in order not to face losses after shocks.

The next change concerns the introduction of the concept of system (system-forming - ed.) Banks with the establishment of more rigid control over them, since in the event of shock, the impact of these cans on the market can be measured by serious losses. To limit the burden of lending, Central Bank proposes to establish a ratio of income to liabilities and collateral requirements.

Regarding the insurance market, the planned changes concern the establishment of mechanisms for the protection of responsible actuaries and internal audit, whose activities, despite being paid by insurance companies, should be independent. In addition, Central Bank proposes to establish standards for life insurance.

To note, 17 banks and 6 insurance companies operate now in Armenia, as well as 33 credit companies (including 3 leasing companies). The norm of the minimum amount of total capital from January 1, 2017 was set for banks at 30 billion AMD, against the previous 5 billion drams. There are no life insurance companies in Armenia yet.

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