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Parliament debated on Thursday a bill presented by the Central Bank on the introduction of a bank restructuring framework. Under the bill, the exclusive authority to restructure banks will be granted to the Central Bank.
Central Bank Vice Governor Armen Nurbekyan presented the legislation to lawmakers in its first reading.
The draft defines the procedures and conditions for restructuring banks operating in Armenia and branches of foreign banks.
According to Nurbekyan, under current regulations, if a financial institution faces financial difficulties, the only practical solution for stabilization is liquidation. The goal of the new law is to change this approach and create the possibility of restructuring a financial institution in crisis.
Nurbekyan said, “The bill on bank restructuring aims to change current regulations by enabling the restructuring of financial institutions facing a crisis.”
The need for the legislative package stems from recommendations made by the World Bank and the International Monetary Fund back in 2018 within the Financial Sector Assessment Program.
The aim of the draft is to introduce effective crisis management mechanisms aligned with international standards in order to ensure the stability of the financial system.
Improvements in legislation are necessary to ensure the continuity of critical banking functions and the stability of the financial system in the event of bank failures, the official said.
The bill also proposes introducing a broad set of tools to carry out bank restructuring in a way that minimizes the need for extraordinary state support and protects public funds.
The bill was earlier endorsed by the Committee on Financial-Credit and Budgetary Affairs.