PART ONE: GENERAL PROVISIONS
Article 1: Banks of the Republic of Armenia
Banks shall be financially independent legal entities which are authorised to take deposits and distribute financing in their own name, as well as performing other banking transactions provided for by law.
Banks shall be independent from the legislative and executive administrative bodies and their activities shall be governed by this law and by other legislation, as well as by their by-laws.
Employees of the State and directors of public administrations shall be authorised to take part in the management of banks only as partners or shareholders, except if the Armenian Central Bank appoints a temporary management or a liquidation committee.
Banks shall not be liable for obligations binding on the Government of the Republic of Armenia. The Government of the Republic of Armenia shall not be liable for the obligations of banks, except in cases where a bank has agreed to assume such liability. Similarly, the Government of the Republic of Armenia may assume such liabilities under exceptional circumstances.
The term "Bank" or any other group of words with the same meaning may be used only in the names of companies registered with the Central Bank of Armenia.
Article 2: The banking system of the Republic of Armenia
The banking system of the Republic of Armenia includes:
- the Armenian Central Bank,
- the Armenian banks (which may be limited liability companies, cooperatives, partnerships, foreign companies or joint ventures), branches of banks, representative agencies, etc..
Article 3: Categories of banks
Banks shall be classified according to:
- the ownership of their share capital
- their legal form:
. limited liability company
. cooperative
. partnership
. foreign company
. joint venture.
- their field of activity (specialised or general purpose)
- their target customer base.
Specialised State-owned banks may be set up in order to finance national expenditure programmes and other projects, in compliance with legislation in force.
Article 4: Banking groups
Banks may form groups with responsibility for defending their interests, coordinating banking activity, exchanging information, training bank managerial staff and defining a banking policy.
Banks shall be forbidden from using such associations to:
- establish a monopoly,
- regulate interest rates and commissions and restrict competition among banks.
Article 5: Banks' by-laws
Banks shall perform their activities in accordance with by-laws, which shall be approved by their shareholders (partners).
Each bank's by-laws shall include:
- its name and registered office,
- a list of its activities,
- the amount of its share capital, a list of its funds and how they were raised,
- confirmation that the bank has the status of a legal entity,
- the structure, form and powers of the bank's management,
- the means by which the bank's activities can be wound
Article 6: Banking transactions
Banks shall be authorised to perform the following transactions:
a) Taking deposits and distributing funds from such deposits
b) Raising of financing and extension of loans
c) Performing settlements based on orders received from customers and other banks (correspondents)
d) Opening and managing accounts for customers and other banks (correspondents)
e) Financing investments at the request of investors or their representatives
f) Issuing, purchasing (at its own cost), selling and settling payment orders and instruments (cheques, letters of credit, drafts, shares, bonds and notes, etc.)
g) Extending guarantees and security and assuming other duties on behalf of third parties, at their request
h) Acquiring the right to claim payment for commercial transactions or other services rendered; assuming the risks relating to debt collection and collecting the corresponding amounts (factoring)
i) Buying (at their own expense) and selling foreign currency
j) Acting on customer orders to take on deposit and place securities, providing securities management services (under asset management agreements)
k) Providing advice or consulting services
l) Acquiring (for their own account) equipment and machinery (leasing) (and) renting equipment and machinery (leasing)
m) Buying, selling and taking on deposit precious metals and stones, as well as other valuables
Acting on instructions received from the Bank of Armenia, banks may perform treasury management transactions.
The transactions listed in this article may be performed by banks both in the legal currency of the Republic of Armenia and in foreign currency.
Banks may perform transactions in foreign currency only if they hold a corresponding licence from the Central Bank of the Republic of Armenia.
Activities relating to securities brokerage services may be performed only after obtaining the licence required by the regulations of the Central Bank of Armenia.
Banks shall be forbidden from performing non-banking activities, including insurance related services.
PART TWO: FORMATION AND WINDING UP OF BANKS
Article 7: Founders and shareholders (owners)
Exceptionally, legal entities and individuals of both Armenian and foreign origin, as well as entities status, shall be authorised to contribute to the share capital of banks.
The founders and shareholders (owners) of a bank may not include representative councils and their executive bodies, social, political and welfare organisations, benevolent organisations and social funds.
The value of the contribution of any single founder (owner) may not exceed 35% of the bank's share capital.
Article 8: Documents to be provided in order to obtain a licence to perform banking operations
In order to obtain a licence to perform banking operations and transactions, the following documents must be submitted:
a) a licence application,
b) a copy of the by-laws and other constitutive documents
c) an economic study of factors justifying the formation of the bank (forecast balance sheet and profit and loss account)
d) a report by a bank, audit firm or financial institution, mandated by the founders, describing their financial position and assets; individuals shall be required to produce a declaration of revenues
e) information on the professional skills of the proposed heads of management (President and Chief Accountant)
f) information on the payment of the minimum share capital.
Article 9: Presentation of documents required to obtain the licence to perform banking operations
Banks shall operate in accordance with a licence issued by the Central Bank.
The documents required in order to obtain this licence shall be sent by registered mail to the Armenian Central Bank.
The Central Bank shall accept the founders' application, if, at the time of submission of the application, the share capital of the bank corresponds to the minimum statutory amount defined by the Central Bank. At least 75% of this minimum amount must be paid in by the founders.
Article 10: Additional documents required from foreign banks, joint ventures and branches of foreign banks, in order to obtain the licence to perform banking operations
The following documents shall be required from foreign banks, joint ventures and branches of foreign banks, in addition to those already listed in article 8 of this law, in order to obtain the licence to perform banking operations. a) Foreign legal entities shall be required to supply: - minutes of the decision taken by the management of the foreign founder shareholder (or owner) to participate in the formation of a branch of the foreign bank in the Republic of Armenia, - a written declaration by the founder or shareholder (or owner) of the foreign bank, with full management powers, indicating that it has no objection concerning the participation in the formation of a bank in the Republic of Armenia, or a declaration from the duly authorised body or legal department certifying that such authorisation is not necessary in accordance with the legislation of the country of origin of the founder or shareholder (owner). b) Foreign nationals: - a certificate issued by a leading bank of the country of origin attesting the solvency of the individual in question, - guarantees from at least two foreign legal entities concerning the individual's financial standing. In order to ensure that there is equality of competition among all banks, the Armenian Central Bank may request additional information or documents from the founders, foreign banks, joint ventures and shareholders (owners) of branches of foreign banks. Article 11: Period allowed for review of licence applications and obligations of the Central Bank The period allowed for the review of licence applications by the Central Bank of Armenia shall be one month from the date of receipt of the documents provided for by law. If the application has not been examined at the end of this period, the founders may serve notice on the Central Bank of Armenia, who shall have to pay compensation amounting to 0.01% of the share capital per further day's delay. The application shall be considered to have been reviewed from the date of postage of a registered letter to the founders of the bank. Article 12: Reasons for refusal of a licence The Central Bank of Armenia may refuse to issue a licence for the following reasons: a) failure of the by-laws or other constitutive documents to comply with legislation in force, b) proven lack of professional skills on the part of the bank's management (President and Chief Accountant). Article 13: Registration When it issues the licence, the Central Bank of Armenia shall register the bank and inform it of its registration number. Registration of the bank shall confer legal personality on it. Banks shall not be obliged to register with the municipal and regional executive committees. Article 14: Formalities for setting up bank branches, subsidiaries and representative agencies Banks registered in the Republic of Armenia shall be authorised to set up branches, subsidiaries and representative agencies both in the Republic of Armenia and abroad. These shall not have separate legal personality. They shall be registered by the Central Bank of Armenia (if set up within the territory of the Republic of Armenia) or in accordance with the legal procedure in force in the country of formation if they are located abroad. Bank branches and subsidiaries shall be authorised to perform banking transactions from the time of their registration. Representative agencies shall fulfill; a role of observation of financial markets and shall be authorised to conclude agreements in the name of the bank, as well as performing other similar duties, but shall not be authorised to perform banking transactions. The following documents shall be required in order to register a branch, subsidiary/representative agency: - an application from the parent bank - a copy of the by-laws of the parent bank - a list of authorised activities (except for representative agencies). Article 15: Withdrawal of licences The licence to perform banking operations may be withdrawn by the Central Bank of the Republic of Armenia in the following cases: a) the documents submitted to obtain the licence do not appear to be authentic, b) the licensee does not begin to perform banking operations within one year from the date of its registration c) the share capital has not reached the required legal level within one year of the bank's registration d) the entity performs activities forbidden under article 6 of this law e) there is proof of violation of the legislation intended to prevent monopolies. The licence may also be considered void in the cases provided for in paragraph 2 of article 36 of the law of the Republic of Armenia relating to the Central Bank of the Republic of Armenia. Banks holding a licence declared void shall not be authorised to perform the activities provided for in this law, except in the cases provided for by law, and shall be wound up in accordance with the legislation applicable in their specific case. Article 16: Obligation for banks to inform the Central Bank of changes in their constitutive documents Banks shall be obliged to inform the Central Bank of changes in their constitutive documents (including changes in the amount of their share capital) within one month of the date of such change, attaching copies of the amendments authenticated by a notary. If the provisions of article 12 of this law apply to the amendments, the licence may be considered void in accordance with the provisions laid down in the second part of article 15 of this law. Article 17: Winding up of banks The activities of banks may be wound up in accordance with this law and the law of the Republic of Armenia relating to the Central Bank of Armenia, as well as in the other cases provided for by the legislation of the Republic of Armenia. Article 18: Means of recourse against the decisions of the Central Bank of the Republic of Armenia Banks and their founders may appeal against the decisions of the Central Bank of the Republic of Armenia before the relevant courts or may request arbitration. PART THREE: FINANCIAL RESOURCES OF 8ANKS AND DEFENCE OF CUSTOMERSI INTERESTS Article 19: Compliance with banking standards In order to ensure their liquidity and safeguard the interests of their customers, banks shall be required to comply with the standards laid down by the Central Bank of Armenia, in accordance with the provisions of the law of the Republic of Armenia relating to the Central Bank of the Republic of Armenia, and similarly to establish insurance and reserve funds. Article 20: Secrecy commitment Banks shall have a secrecy commitment vis-a-vis their customers and correspondent banks with regard to their deposits, accounts and transactions. Banks may be held liable for the publication or disclosure of banking secrets by any other means, in accordance with the legislation of the Republic of Armenia. Information on legal entities, the status of their accounts and their banking transactions may be provided to the supervisory bodies, arbitration tribunals and examining jurisdictions, and depending on the circumstances, to the Central Bank of the Republic of Armenia, as well as to the tax authorities with regard to tax matters. Information on the accounts and deposits of private individuals may be communicated to those individuals and their legal representatives, as well as to tribunals and examining jurisdictions within the scope of their competence, and where it is possible to proceed with the seizure and placing under seal or blockage o fthe monetary and other assets (including securities) recorded in the accounts of or deposited by such individuals. In the event of death of an individual, information on the status of his or her accounts and deposits may be communicated to his or her successors in law, whose identity shall be confirmed by a State notary with responsibility for execution of successions, or by the equivalent departments of foreign consultants. ,~ AMYOT Article 21: Seizure, penalties and forced execution relating to funds and other assets deposited with a bank _ The seizure of funds and other assets deposited with banks of the Republic of Armenia by legal entities and by foreign or international organisations shall be possible only by decision of a court or arbitration tribunal. Execution shall be possible only on presentation of legal documents attesting the judgment or arbitration decision, or at the request of tax authorities, in accordance with the legal procedure in force. Notice of penalties shall be served by producing the legal documents issued by the court or arbitration tribunal, or at the request of the State Tax Department, in accordance with the legal provisions in force. The seizure of funds or other assets deposited with a bank by individuals or the application of penalties shall only be possible by order of court. Collection of debts shall be possible on presentation of a decision having force of law rendered by a court or in accordance with the legislation of the Republic of Armenia. PART FOUR: RELATIONS BET~EEN BANKS AND THEIR CUSTOMERS Article 22: Loans, deposits and other interbank transactions Banks may lend or deposit amounts to or with other banks and perform the reciprocal transactions provided for in their by-laws, on predetermined terms. In order to be in a position to extend loans to customers and meet their other obligations, banks may solicit a loan from the Central Bank of the Republic of Armenia, if their own funds are insufficient. The terms of such transactions shall be defined by the Central Bank of the Republic of Armenia. Article 23: Interest rates applicable to bank loans Banks shall themselves determine the interest rates applicable to bank loans and the amount of commissions charged for banking services. Article 24: Nature of contractual relationships The relationship between a bank and its customers shall be contractual. Customers shall themselves choose a bank for their credit and cash transactions. They may open one account and make use of banking services rendered by one or several banks. In certain specific cases, a person may be authorised to open several accounts by the Central Bank of the Republic of Armenia. Article 25: Categories of accounts Banks shall open accounts in accordance with the rules laid down by the Central Bank of Armenia and the regulations in force. If certain accounts have not been defined by the Central Bank of Armenia, no matter what their type, banks shall be authorised to perform AMYOT ~A~ AMYOT transactions by applying the means usually employed in the banking community. Article 26: Loan repayment guarantees The bank may secure repayments of loans on maturity by a system of pledging of assets or guarantees or by any other usual means of guaranteeing the execution of obligations. The bar.k may also extend loans without guarantee/unsecured loan. PART FIVE: SAVINGS Article 27: Receipt of deposits and depositors Deposits made by Armenian residents may be accepted by specialised savings bank as well as by other banks. Banks shall be free to determine the terms on which they take deposits from residents. Depositors may be Armenian nationals, foreign nationals or without nationality. Depositors shall be choose the bank with which they make deposits and may deposit funds with one or several banks. Depositors may manage their savings as they wish, receive interest or adopt other solutions proposed by banks. They may also perform forward transactions. -- PART SIX: BANK ACCOUNTING AND REPORTING, SUPERVISION OF BANKING ACTIVITIES Article 28: Bank accounting and reporting The financial year of banks shall begin on January 1 and end on December 31. Banks shall submit reports in accordance with the procedure laid down by the Central Bank of the Republic of Armenia. At the end of an accounting period, banks shall prepare and publish half-yearly and annual reports, within three months at most, in accordance with the procedure defined by the Central Bank of the Republic of Armenia. Halfyearly and annual reports shall include a balance sheet, profit and loss account and other accounting information. The bank's annual report shall be audited by an audit firm. The annual report shall be made available to all shareholders and interested parties. Article 29: Supervision of banking activities The Central Bank of the Republic of Armenia shall supervise banking activities performed in the territory of the Republic of Armenia. Banks shall be obliged to submit statistical reports and other information to the Central Bank of the Republic of Armenia, in accordance with the procedure and deadlines laid down by the Central Bank. Information resulting from the banking industry supervisory process shall be considered as subject to the banking secrecy commitment. The Central Bank shall have the authority to inspect the operations of banks, including their foreign branches, without prior notice.