YEREVAN, July 3. /ARKA/. The National Assembly of Armenia on Friday adopted in the second and final reading the law on "Bank Restructuring" and a number of related laws during an extraordinary session.
The Deputy Chairman of the Central Bank of Armenia, Armen Nurbekyan, stated that the need for the law was prompted by recommendations from the World Bank and the IMF presented in 2018 as part of the Financial System Assessment Program (FSAP) for Armenia.
According to him, the current system does not provide sufficient mechanisms to respond to a significant deterioration in a bank's financial condition, and the only option left is liquidation.
He noted that this approach is considered controversial, as the liquidation process can be costly, lengthy, and detrimental to public interests.
“In many countries, an alternative approach is used — bank restructuring. In this case, the bank is not liquidated, but intermediate tools are used that allow maintaining financial stability while addressing insolvency issues,” Nurbekyan said.
The law proposes to introduce a bank restructuring institute, the exclusive competence of which will be assigned to the Central Bank of Armenia.
Among the main tools are the sale of the bank, the bridge bank mechanism, the separation of troubled assets, and other measures aimed at stabilizing the bank without liquidation.
To finance the restructuring process, a Restructuring Fund will be created, which will be formed from one-time, periodic, and additional contributions from commercial banks.
The target level of the fund is proposed to be set at no less than 0.5% of the total liabilities of the banking system, with the goal of reaching this level within 10 years after the law comes into force.
