PART ONE: GENERAL PROVISIONS
Article 1: Central Bank of the Republic of Armenia
The Central Bank of the Republic of Armenia (hereafter referred to as the Bank of Armenia) is the central bank of which the assets are owned by the Republic of Armenia.
The Bank of Armenia is a legal entity of which the bylaws, with the agreement of the Presidium of the Supreme Council of the Republic of Armenia (Presidential office of the Parliament), are approved by the President of the Republic of Armenia.
The Bank of Armenia shall operate in compliance with the legislation in force and with its by-laws. The Bank of Armenia and its branches and subsidiaries shall own a seal bearing the coat of arms of the Republic of Armenia and their name.
The Bank of Armenia's head office shall be located in Erevan.
Expenses incurred by the Bank of Armenia shall be covered from the Bank's own income. The Bank of Armenia shall not accept any liability for obligations binding on the Government of the Republic of Armenia and the Government of the Republic of Armenia shall in no way be liable for the obligations binding on the Bank of Armenia, except in cases where the Government or the Bank of Armenia agree to assume such liabilities for management purposes.
The Bank of Armenia shall represent the Armenian Republic's interests in dealings with international banks and other international financial institutions, and in its relations with the central banks of countries where international transactions are performed through central banks.
The Bank of Armenia may enter into agreements with other central banks in order to form international banking groups.
Within the limit of its prerogatives, the Bank of Armenia shall issue instructions and methodological guidance, with which all banks, businesses and other organisations performing their activities in the Republic of Armenia shall be required to comply.
Article 2: Objectives of the Bank of Armenia
The principal tasks of the Bank of Armenia shall be as follows:
- ensuring the stability of the national currency in domestic and foreign money markets,
- fostering the financial, monetary and credit conditions likely to generate a stable and normally functioning economic system in Armenia,
- defending the interests of the banks, financial institutions and credit institutions of Armenia,
- defending creditors and depositors by regulating and controlling related activities,
- introducing an interbank settlement system.
Article 3: Functions of the Bank of Armenia
The functions fulfilled by the Bank of Armenia shall be as follows:
- Creation and regulation of the issue of money, within the framework defined by law, and organisation of the circulation of money,
- Implementation of credit policy,
- Organisation of interbank settlements, Servicing the public debt,
- Management of reserves of precious metals, precious stones and foreign currencies,
- Issue of licences authorising the holder to perform banking transactions in foreign currency inside and outside national territory,
- Control the activity of banks, credit institutions, benevolent funds, insurance and retirement funds, investment companies and other organisations performing their activities in the territory of the Republic of Armenia,
- Preparation of banking statistics,
- Establishment of banking services for the Government of the Republic of Armenia and other State bodies,
- Determination of the amount of the obligatory reserves of the Bank of Armenia,
- Implementation of the policy of deregulation of financial markets.
In dealings with Armenian banks, the Bank of Armenia shall be the country's highest financial authority.
Article 4: Share capital and funds of the Bank of Armenia
The share capital of the Bank of Armenia shall be State owned. It should be sufficient to enable the Bank of Armenia to fulfill its commitments. The Supreme Council of the Republic of Armenia (Parliament) shall determine the amount of the share capital of the Bank of Armenia. The Bank of Armenia shall establish reserves which must never fall below the amount of the share capital.
The Bank of Armenia may set up various funds for specific purposes; the rules governing the creation and utilisation-of these funds shall be laid down in the bylaws of the Bank of Armenia.
Article 5: Profits realised by the Bank of Armenia and their allocation
The Bank of Armenia's profits shall be generated by its activities. Profits are defined as the difference between the Bank's income and expenses.
The Bank of Armenia shall be exempt from all taxes and customs duties.
The year-end profit after appropriations to the various funds provided for shall be transferred to the State budget.
The Bank of Armenia shall not be authorised to acquire interests in commercial banks and other financial institutions, except in the cases provided for in its bylaws.
Article 6: Governing law and reporting of the activities of the Bank of Armenia
The Bank of Armenia shall operate solely in accordance with the law of the Republic of Armenia. It shall be subordinated to the Supreme Council of the Republic of Armenia (Parliament) to which it shall submit activity reports. In performing its activities, the Bank of Armenia shall be independent from the government bodies.
Its financial year shall begin on January 1 and end on December 31. No later than April 1 of each year, the Bank shall submit a financial report for the past year to the Supreme Council of the Republic of Armenia (Parliament) for appraisal and approval. This report shall contain information on the banking system of the Republic of Armenia, the economic situation, the turnover of capital in the money market, the balance of payments, the activities of the Bank of Armenia, the bank's balance sheet and profit and loss account. The annual financial report, balance sheet and profit and loss account must be audited by the body of approved auditors.
At the end of each quarter, the Bank of Armenia shall publish quarterly financial information in the press as well as the following information:
- an overview of the state of the banking system,
- comments on the money supply,
- a description of the activity of banks,
- statistical information on banks,
- annual accounts.
PART TWO: STRUCTURE, MANAGEMENT AND STAFFING OF THE BANK OF ARMENIA
Article 7: Structure of the Bank of Armenia
The Bank of Armenia shall be a centralised institution made up of a head office, branches and representative offices.
The conditions under which the branches, agencies and representative offices open, close and do business shall be defined in the by-laws of the Bank of Armenia.
The branches (agencies) of the Bank of Armenia shall be independent financial entities with administrative autonomy. Their by-laws shall be subject to the approval of the Bank of Armenia.
The agencies of the Bank of Armenia shall represent the Bank of Armenia.
Article 8: Board of Directors of the Bank of Armenia Functions
The Board of Directors of the Bank of Armenia shall be the highest management authority. It shall assume liability for the policy implemented by the Bank.
The Board of Directors of the Bank of Armenia shall perform the following functions:
a) Acquiring knowledge of the proposed principles of State credit policy,
b) Determining, in view of the State budget, the categories and volumes of transactions to be performed by the Bank of Armenia in securities and foreign exchange markets,
c) Determining interest rates for the transactions performed by the Bank of Armenia, taking into account the State budget,
d) In the context of the approved credit policy programme, deciding the levels of compulsory reserves and other economic obligations binding on banks,
e) Determining the means by which documentary credits in domestic and foreign currency can be settled, except where the legislation of the Republic of Armenia has introduced specific provisions in this respect,
f) Laying down rules for foreign currency transactions performed by the Bank of Armenia,
g) Reviewing the Bank's annual activity reports,
h) Deciding the levels of salaries and bonuses and disciplinary measures concerning the Bank's staff,
i) Preparing expenditure budgets for the Bank of Armenia.
Article 9: Composition and organisation of the Board of Directors
The Board of Directors of the Bank of Armenia shall have eight members:
a) the President of the Bank of Armenia (Governor),
b) the Vice-President,
c) six directors including:
- two appointed by the Government of the Republic for a five year term of office,
- two appointed by the Supreme Council of the Republic of Armenia (Parliament) for a five year term of office. The members of the Board of Directors appointed by the Presidential Office of the Supreme Council (Parliament) may not simultaneously hold office as members of the Supreme Council of the Republic of Armenia (Parliament).
- two other directors appointed by the President (Governor) of the Bank of Armenia for a five year term of office.
Only nationals of the Republic of Armenia may become members of the Board of Directors of the Bank of Armenia.
The Board shall be authorised to deliberate whenever a quorum of two thirds of its members is achieved.
The President of the Bank of Armenia shall have a casting vote.
Article 10: President of the Bank of Armenia (Governor)
The routine management of the Bank shall be handled by its President (Governor).
The President of the Bank of Armenia and the VicePresident shall be appointed by the Supreme Council of the Republic of Armenia (Parliament), at the proposal of the President of the Republic, for a seven year term of office.
The President of the Bank of Armenia (Governor) and the Vice-President may be dismissed by the Supreme Council of the Republic of Armenia (Parliament), on its own initiative or at the request of the President of the Republic.
The duties of the President of the Bank of Armenia shall be as follows:
a) Preparing agendas for meetings of the Board of Directors,
b) Chairing meetings and signing decisions made by the Board of Directors,
c) Implementing decisions of the Board of Directors, giving instructions and issuing recommendations concerning their implementation,
d) Organising economic studies and preparing methodological guidance for the banking activities,
e) Appointing and dismissing managers of the branches, offices and subsidiaries of the Bank of Armenia,
f) Presenting to the Supreme Council of the Republic of Armenia (Parliament) the Bank of Armenia's Annual Report and proposed credit policy for the following year,
g) Representing the Bank of Armenia nationally and internationally,
h) Taking part as advisor in deliberations of the Government of the Republic of Armenia,
i) Exercising the other powers conferred on the President by the regulations of the Bank of Armenia.
Article 11: Staff of the Bank of Armenia The staff of the Bank of Armenia shall include employees of the head office, branches, offices, subsidiaries and agencies of the Bank of Armenia. Members of staff shall be forbidden from performing any other professional activity not expressly provided for, excluding activities of a scientific, pedagogic or artistic nature. They shall be forbidden from having dealings with commercial banks and financial institutions, from taking part in their management and receiving supplementary income for such services . Staff shall be bound by an obligation to keep secret all information not intended to be made public. Staff shall be authorised to obtain loans only from the Bank of Armenia. PART THREE: RELATION5HIP BETWEEN THE BANK OF ARMENIA AND THE GOVERNMENT OF THE REPUBLIC OF ARMENIA Article 12: Cooperation between the Bank of Armenia and the Government of the Republic of Armenia Within the limits of the authority vested in it by this law, the Bank of Armenia shall participate in preparing the economic programme of the Government of the Republic of Armenia. The Bank of Armenia shall assist the Government of the Republic of Armenia in implementing the economic measures which it has decided, on condition that these measures do not violate the by-laws of the Bank of Armenia. Any conclusions made public by the Bank of Armenia concerning proposed credit regulations shall be reviewed by the Supreme Council of the Republic of Armenia (Parliament) and the Government. Article 13: Loans extended by the Bank of Armenia to the Government of the Republic of Armenia The Bank of Armenia may extend loans to the Government of Armenia for a maximum one year term and for an amount not exceeding 25% of the budgeted revenue of the Government. The terms of these loans shall be stipulated in written agreements concluded by the Bank of Armenia and the Government. These agreements shall indicate the amounts of loans, the maturity dates and the interest rates applicable. If necessary, loans may be increased. The maturity date of a loan may be deferred, but only by decision of the Supreme Council of Armenia (Parliament). The Bank of Armenia may in a pre-established manner, acquire securities issued by the Government of Armenia on first issue, and in accordance with the limits concerning the duration and amount of loans. Article 14: Banking services provided by the Bank of Armenia to the Government of the Republic of Armenia The Bank of Armenia shall provide banking services free of charge to the Government and, in this context, shall provide treasury management and accounting services to the Government of the Republic of Armenia as well as managing other Government transactions. At the Government's request, the Bank of Armenia shall service the domestic and foreign public debt, free of charge, handle the placement of Government securities, pay interest, manage the refinancing and amortisation of borrowings and handle the accounting and other transactions provided for in its by-laws. All of the Government's assets shall be recorded in the accounts held by the Bank of Armenia or other banks made responsible for keeping these accounts by the Bank of Armenia. No interest shall be payable in exchange. The Bank of Armenia shall manage the country's reserves of precious metals and stones, as well as the official foreign currency reserves. PART FOUR: RIGHT TO ISSUE MONEY AND ORGANISE THE MONEY SUPPLY Article 15: The currency unit of the Republic of Armenia The official currency unit of Armenia is the "dram". Its structure, security, distinguishing symbols, rules of issue and area~ of circulation shall be regulated by the law relating to the monetary system of the Republic of Armenia. Article 16: Issue of money The Bank of Armenia shall have the exclusive right to bring into circulation and withdraw paper money in the context of its legal prerogatives. The Bank of Armenia shall regulate the issue of representative money by using the credit regulation process. Article 17: organisation of the money supply In order to organise the money supply, the Bank of Armenia shall: determine the operating conditions of treasury transactions performed within the Republic's economy, organise the production of banknotes and coins, establish paper money reserves (banknotes and coins), define the principles of credibility of the State currency as well as the order of changes in and the destruction of that currency. A AMYOT 12 PART FIVE: REGULATION OF CREDIT Article 18: Implementation of credit policy Credit policy shall be implemented by regulating and managing the money supply. Regulation of credit shall primarily be achieved by regulating economic growth, bringing about changes in economic structures and mastering inflation, with the global objective of achieving an equilibrium in the balance of payments. Article 19: Draft cEedit policy and preparation procedure Credit policy shall include: the analysis of the economic situation and budget indicators relating to the social and economic development of the Republic of Armenia, maximum credit limits for capital expenditures and the money supply, regulation of credit extension methods. The Bank of Armenia shall submit the draft credit policy to the Supreme Council of the Republic of Armenia (Parliament) for approval at the same time as the draft State budget and social programme. Article 20: Responsibility for implementation of credit policy The Bank of Armenia shall assume liability for the implementation of credit policy and shall cooperate with the Ministry of Finance and other authorised bodies, in this field.-It-shall regulate the policies applied in the fields of finance, foreign exchange and credit. When the State budget is submitted by the Government to the Supreme Council of the Republic of Armenia (Parliament), the Bank of Armenia shall report on the implementation of the credit programme for the past year AMYOT and present a draft credit programme for the next budge year. Article 21: Means utilised to implement credit policy The policy of regulation of credit shall be implemented by both direct and indirect means. The principal indirect means used to regulate credit shall be as follows: Changes in the accounting system applicable within the Republic of Armenia, A refinancing system, Changes in the standards governing the reserves of commercial banks, as defined by the Bank of Armenia, Changes in the standards governing compulsory investments in securities issued by the Republic of Armenia. The principal direct means used to regulate credit shall be as follows: --- Limitation of the volume of loans available for capital expenditure projects and of loans extended by commercial banks and other financial institutions, Limitation of asset and liability transactions relating to bank interest, Limitation of commissions received by commercial banks and other financial institutions when acting as intermediaries. The above methods may be applied to the different banks, types of credits, branches and administrative authorities. Use of the direct methods by the Bank of Armenia is considered to be the ultimate means of recourse. As a general rule, such methods shall be applied for a six month period. This period may, however, be extended by decision of the Supreme Council of Armenia (Parliament). AMYOT PART SIX: FOREIGN EXCHANGE POLICY OF THE BANK OF ARMENIA Article 22: The Bank of Armenia's role as executive body implementing the Republic~s foreign exchange policy The Bank of Armenia shall execute the Armenian Republic's policy with regard to foreign exchange. The Bank of Armenia shall: determine the conditions for trading of gold and foreign currency within Armenian territory, supervise the implementation of the Republic of Armenia's foreig~ exchange policy, issue licences to perform transactions in gold and foreign currency to banks and other financial institutions, define the parity of the Armenian currency in relation to foreign currencies, regulate the market, exchange rate for the currency, manage the Republic of Armenia's national reserves of precious metal and foreign currency. PART SEVEN: OPERATIONS OF THE BANK OF ARMENIA Article 23: Portfolio transactions The Bank of Armenia shall settle cheques and ordinary and endorsable trade bills and notes bearing the signatures of three individuals known to be solvent; such bills and notes must have a maximum maturity of three months. Article 24: Securities transactions During the period of issue, the Bank of Armenia may acquire securities in accordance with the provisions of Article 13 of this law. In order to regulate credit and the foreign exchange market, the Bank of Armenia may purchase, keep in reserve and sell: a) cheques and promissory notes in accordance with ~ of this law, b) Government securities, c) other securities. The Bank of Armenia may extend loans: to banks and other financial institutions outside the scope of its credit policy, for a maximum duration of five months, to members prevailing in the money market. of its staff at the interest rates The credits shall be materialised in precious metals and foreign currency and guaranteed by securities meeting the criteria of article 23 and paragraph b of the second part of article 23 of this law. A AMYOT Article 26: Deposit transactions The Bank of Armenia may take deposits in local currency or foreign currency from banks and other financial institutions. The Bank of Armenia may hold on account monetary deposits made by members of its staff. The Bank of Armenia may open current accounts in the names of legal entities and private individuals. Article 27: Interbank settlements The Bank of Armenia shall organise transactions between banks by means of relevant accounts or by other means used in international practice. Article 28: Dealing in foreign currency, precious metals and precious stones The Bank of Armenia shall be authorised to purchase and sell foreign currency, precious metals and precious stones for--its own needs or on behalf of the Government or other organisations of the Republic of Armenia in the context of reciprocal rendering of services. These transactions may be performed in the spot or forward markets with the aim of achieving the objectives of the foreign exchange policy. Article 29: Reserves of foreign currency, precious metals and precious stones The Bank of Armenia shall manage the reserves of foreign currency, precious metals and precious stones owned by the Republic of Armenia, recorded among its assets and enabling it to meet its obligations. The distribution and safe custody of these reserves shall be managed by the Bank of Armenia or by other banks and financial institutions recommended by the Bank of Armenia. AMYOT In the event of a reduction in the reserves of foreign currency, precious metals or precious stones, or if such a reduction is likely, insofar as this is contrary to the terms of the international agreements entered into by the Republic of Armenia, the Bank of Armenia shall provide explanations and submit appropriate recommendations to the Supreme Council of the Republic of Armenia (Parliament).- ~ Article 30: Other transactions performed by the Bank of Armenia The Bank of Armenia may also take the following actions: take assets on deposit including precious metals, precious stones, currency, securities and documents, perform on a commission basis the sale or purchase of assets or rendering of other services provided for in its by-laws, on behalf of the Renl1hl ;~ ~f or other State bodies, ~ A ' ~ I G I I ' a. . extend guarantees and issue recommendations. PART EIGHT: SUPERVISION AND ORGANISATION OF THE ACTIVITIES OF BANKS AND OTHER FINANCIAL INSTITUTIONS BY THE CENTRAL BANK Article 31: Principles underlying the relationship between the Bank of Armenia and other banks and financial institutions The Bank of Armenia shall contribute to the promotion of fair competition among banks and other financial institutions. The Bank of Armenia shall not be authorised to intervene in the routine business of banks and other financial institutions, except in the cases provided for by law. The Bank of Armenia shall regulate and supervise their activities with the aim of ensuring monetary stability. The objective of the regulatory and supervisory duties exercised by the Bank of Armenia shall be to ensure the stability of the credit system and to defend the interests of lenders and depositors. Article 32: Granting of liences to perform banking and foreign exchange transactions In the framework of the legislation of the Republic of Armenia relating to banks and the banking activities, the Bank of Armenia shall grant licences to perform banking transactions. The licences granted by the Bank of Armenia to perform foreign exchange transactions in Armenia and abroad shall be issued in accordance with the rules laid down by the Bank of Armenia. Article 33: Rights of the Bank of Armenia in the fi eld of insurance and the establishment of guarantee funds The Bank of Armenia shall define the means by which reserve and guarantee funds shall be established by drawing on the profits of banks and other financial institutions, in order to cover their potential losses. .~ A AMYOT Article 34: Economic rules governing the functioning of banks and other financial institutions The following basic rules shall be defined in respect of Armenian banks and other financial institutions: - minimum share capital, - equity to assets ratio, - liquidity ratios, - the volume of compulsory reserves with the Bank of Armenia, - the maximum required level of coverage with gold of loans extended, - the ratio of customer deposits to equity. Article 35: Supervisory functions fulfilled by the Bank of Armenia In order to fulfill the supervisory role imposed on it by banking law, the Bank of Armenia or any other body of auditors, appointed by it, may perform inspections in any bank or financial institution active in the territory of the Republic of Armenia. Article 36: Prerogatives of the Bank of Armenia concerning the prevention of breaches of banking law In the event of a breach of banking law by a bank, the Bank of Armenia shall issue mandatory instructions requiring the violation to be remedied within a specified time limit. Should the bank fail to comply with the standards defined by law or with instructions, not submit reports or endanger the interests of its depositors and lenders, the Bank of Armenia shall be entitled to: a) bring the matter to the attention of the founders and shareholders in order to obtain action to redress the bank's financial situation, restructure it or liquidate it, AMYOT 2 o b) apply the following sanctions: a fine, an increase in the compulsory reserves ratio, appointment of a temporary administration, with the approval of the Board of Directors, repeal the licence granted to the bank authorising it to perform banking transactions, seize the bank's accounts. Article 37: Powers to combat monopolies The Bank of Armenia shall be entitled to put an end to any activity which aims to restrict fair competition or to prevent the reduction of bank commissions and interest rates. In order to combat such action, it may take a bank to court or to arbitration. Article 38: Settlement of disputes Decisions taken by the Bank of Armenia may be appealed before the relevant court or through Government arbitration. A AMYOT PART NINE: BAN~ ACCOUNTING AND REPORTING REGULATIONS Article 39: Bank accounting regulations The Bank of Armenia shall issue bank accounting regulations. Article 40: Bank reporting The Bank of Armenia shall define the content and format of the reports and other information to be submitted by banks. PART TEN: DISSOLUTION OF THE BANK OF ARMENIA Article 41: Dissolution of the Bank of Armenia The Bank of Armenia may be dissolved only by a law voted by the Supreme Council of the Republic of Armenia (Parliament). In the event of dissolution, the assets, rights and obligations of the Bank of Armenia shall be transferred to its successor appointed by the abovementioned law. The President of the Republic of Armenia L. TER PETROSSIAN Signed in Erevan on April 27, 1993 President of the Republic 0771 - 1 H.O. - 55 Seal of the Division of registers and translations Cabinet of the President of the Republic of Armenia Translated into English from a French translation of the Armenian original by~ Messrs. Edward A. Fisher, Vartan Ozinian and Hratchia Tchoulakian of the Groupe Amyot Paris A AMYOT