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The Central Bank of Armenia (Armenian: Հայաստանի Կենտրոնական Բանկ, romanizedHayastani Kentronakan Bank) is the central bank of Armenia with its headquarters in Yerevan. The CBA is an independent institution responsible for issuing all banknotes and coins in the country, overseeing and regulating the banking sector and keeping the government's currency reserves. The CBA is also the sole owner of the Armenian Mint.

The bank is engaged in policies to promote financial inclusion and is a member of the Alliance for Financial Inclusion.[2]

On July 3, 2012 the Central Bank of Armenia announced it would be making specific commitments to financial inclusion under the Maya Declaration.

On September 28, 2012 at the Global Policy Forum 2012, the bank made an additional commitment under the Maya Declaration to encourage the roll out of private sector products that respond to the needs of the poor, with an emphasis on innovative channels like mobile and electronic money. And to also implement a swift, effective, and free complaint-handling system via the financial mediator office, and improve the regulatory framework so that consumers have the information, protection, and ability to access all services.

The current chairman of the CBA is Arthur Javadyan.

Purpose

Values and beneficiaries of the Central Bank
Directions of strategic developments of the Central Bank
Organizational chart of the Central Bank of Armenia

Mission of the Central Bank

  • to be a prestigious, transparent, independent, knowledge-based and effective entity that understands and appreciates development trends in international financial community
  • to maintain institutional capacities in order to promptly respond to changes in economic landscape and effectively influence economic processes
  • to always support a sustainable macroeconomic development of Armenia while remaining a key partner to the Government in facing economic challenges

Key tasks of the Central Bank

  • to maintain stability of the financial sector
  • to provide issuance of national currency and ensure cycle of it
  • to combat money laundering and terrorism financing
  • to manage international reserves of Armenia
  • to regulate and oversee other areas of competence as provided under Armenian constitution and laws

Structurefinancial inclusion and is a member of the Alliance for Financial Inclusion.[2]

On July 3, 2012 the Central Bank of Armenia announced it would be making specific commitments to financial inclusion under the Maya Declaration.

On September 28, 2012 at the Global Policy Forum 2012, the bank made an additional commitment under the Maya Declaration to encourage the roll out of private sector products that respond to the needs of the poor, with an emphasis on innovative channels like mobile and electronic money. And to also implement a swift, effective, and free complaint-handling system via the financial mediator office, and improve the regulatory framework so that consumers have the information, protection, and ability to access all services.

The current chairman of the CBA is Arthur Javadyan.

The Central Bank Board is the highest body of the management of the Central Bank. The Central Bank Board consists of the chairman, his two deputies and 5 members of board. Chairman of the Central Bank and Deputy Chairmen of the Central Bank are included in the Central Bank Board according to position. The Chairman of the Central Bank is the highest official of the Central Bank. The Chairman is responsible for the fulfillment of the objectives set by this law. In the absence of the Chairman or if he is incapable to perform his duties, he is substituted by one of his deputies, and in case of absence, or impossibility to govern by the deputies, the eldest member of the Central Bank Board shall act in his place. The Chairman is appointed by the National Assembly, at the presentation by the President, for a period of 6 years, and The Deputy Chairmen are appointed by the President, for a period of 6 years. The Central Bank Board members are appointed by the President of Armenia for a period of 5 years. Members of the Central Bank Board cannot hold any other paid position in the Central Bank. The Chairman of the Central Bank coordinates and ensures the work of the Central Bank, represents the Central Bank in the Republic and abroad, as well as in the international organizations, implements other rights assigned exclusively to the Central Bank Board. The Chairman, his deputies as well as Board Members cannot be members in management of any party, may not hold another state title, or perform other payable work, except for the scientific research, pedagogical and creative activities.

Maintaining Financial Stability

Main body responsible for financial stability in Armenia is the Central Bank, as provided for by the Republic of Armenia Law “On Central Bank”. One of the CBA's objectives is maintaining the stability and appropriate functioning of the financial system of Armenia, including providing the stability, liquidity, solvency and appropriate functioning of the banking system. Central Bank of Armenia implements the above-mentioned task through its efforts of risk assessment and risk reduction, financial system regulation and supervision functions, payment system oversight and, in exceptional circumstances, by acting as lender of last resort, and resolution work to deal with distressed banks.

Introduction to Financial Stability

The Central Bank of Armenia defines financial stability as a condition where financial system is able to withstand shocks and disruptions so that the system maintains a sufficient level of liquidity, adequately performs transactions and transmissions and facilitates allocation of savings to investment opportunities in the economy. In its most common definition, financial stability means the stability of key financial institutions and financial markets, and does not in any way rule out bankruptcy on the part of individual financial institution as well as severe fluctuations in asset values. Financial stability implies identification of sources of major risks, imprudent financial risk management, not efficient pricing of assets and implementation of appropriate policies.

A stable financial system is a key ingredient for a healthy and successful economy. Every one needs to have confidence that the system is safe and stable, and functions are proper to provide vital services to the economy. Safeguarding and maintaining the stability of financial system is of primary importance to central banks of most countries. This is because low inflation and unemployment and fast economic growth, as common objectives of monetary and other state authorities, cannot be achieved in the modern economy without a developed and stable financial system through which the effects of monetary policy measures can be effectively channeled to other economic sectors.

Instruments used by Central Bank to maintain financial stability

The Central Bank has a variety of instruments for maintaining financial stability. Such instruments are:

  • risks analyses and assessment
  • market intelligence, that is creating widespread transparency with regard to central bank's objectives, publicly identifying risks, encouraging financial market participants to increase their awareness of these risks to act accordingly
  • payment system oversight and development
  • market operations and liquidity assistance
  • acting as lender of last resort
  • financial Stability committee
  • other

In order to identify probable risks affecting financial system, the Central Bank analyses a number of indicators of local and external financial system, as well as of the real sector, monitors financial markets, and oversights payment systems. At this stage, the Central Bank analyses financial system pillars (financial institutions, financial infrastructure and financial markets), as well as developments in macro economy. The Central Bank draws on analysis of all factors that might directly or indirectly affect stable functioning of the financial system. Another important tool to assess financial stability is indicators of financial soundness endorsed by IMF.

The Central Bank also uses internationally known stress-testing models to assess the vulnerability of financial system in time of probable risks materialising. Stress scenarios are simple “what if” events, which allows to assess the costs of financial system or individual participants.

In maintaining financial system's stability an important aspect is risk controlling. The Central Bank carries out risk controlling by implementing prudential and macro prudential policies, as well as supervision of the financial system. Prudential regulation presumes setting a certain regulatory framework for an individual institution in order to keep risks affecting an individual institution's stability under manageable limits. Macro prudential policy itself means using prudential instruments, which will provide the stability of the financial system as a whole. Macro prudential regulation is aimed to minimize systemic risks.

Central Bank policies addressed to maintaining financial stability

Central Bank policies to maintain financial stability fall into three types.

  • When the financial system is characterized as stable, or in other worlds the fluctuations of main indicators are within allowable band, a preventive policy will need to be implemented. Implementation of such a policy implies monitoring a number of macro prudential indicators on an ongoing basis. It is necessary to capture the financial sector's direct and indirect international exposures in both quantitative and qualitative terms. Preventive policy is addressed to financial stability by using available supervisory and regulatory tools.
  • When financial system fluctuations are within the target band yet tend to infringe it, which might cause high volatilities in certain financial or non financial sector, then corrective policy will be applied. Actions arising out of the above policy cover activities such as examining new financial market instruments and risk analysis methods, studying loan loss provisioning practices, discussing new capital adequacy requirements and adopting international reforms and implementing appropriate supplements. This in fact provides for an opportunity to extend available instruments and improve regulatory framework.
  • In case the fluctuations of financial system are beyond the level allowed and the system is not able to perform its key functions, a recovering policy will be implemented. Recovering measures commonly include an extended variety of anti-crisis measures. Extraordinary anti-crisis measures taken by the Central Bank are: extended opportunities for banks to borrow from the central bank, policy of quantitative easing, emergency liquidity assistance under its function of lender of last resort, etc.

Financial Stability Committee

In 2011 the Central Bank established a consultative body that is the Financial Stability Committee. The main task of the Committee is assessment of financial stability. The Committee identifies probable risks that threaten the financial stability and the main channels of its influence, debates the main measures addressed to the providing of financial stability, suggests the scope of further policy directions and other necessary actions. The committee sessions take place every quarter. In extraordinary situations a special session is convened on the basis of chairman's verbal decision.

  • The Committee is available with the structure as mentioned below:
  • Committee chairman
  • Chairman of Central bank
  • Committee deputy chairman
  • Deputy Chairman of Central Bank
  • Committee members
  • Head of Financial system stability and development department
  • Head of Monetary policy department
  • Head of Financial Supervisory department
  • Head of Financial department
  • Head of Financial system regulation department

Financial Stability Report

The Central Bank or Armenia publishes the results of ongoing analyses in the Financial Stability Report. Financial stability report is published on an annual basis starting from 2007 and on a semiannual basis, starting from 2010. Main goal of the Financial Stability Report is to focus on current developments in real and financial sectors that could undermine the financial stability. The report presents the Central Bank's assessment of financial stability, main risks threatening the financial stability and measures underway to prevent and reduce these risks. The publication of Financial Stability Report allows improving awareness of financial institutions, companies, entrepreneurs and general public concerning measures taken by authorities to ensure financial system stability. On the other hand, the purpose of providing information on risk origins and vulnerability of financial stability is to help people for taking decisions in various situations. The risks affecting financial stability of Armenia can emerge in local economy, foreign economy and it financial system itself. Taking into account the aforementioned, the possible risks affecting financial stability of Armenia are presented in 5 areas:

  • Risks derived from the developments of world economy (macro economy and financial markets)
  • Risks derived from the developments of Armenian macroeconomic environment
  • Risks derived from the developments of Armenian macroeconomic environment
  • Risks derived from the developments of financial institutions of Armenia
  • Risks derived from the developments of financial infrastructures.

The Central Bank of Armenia continuously carries out extensive work in order to make financial stability report more informative and extended in accordance with international practice and in face of new challenges.

Introduction to Financial Stability<

The Central Bank of Armenia defines financial stability as a condition where financial system is able to withstand shocks and disruptions so that the system maintains a sufficient level of liquidity, adequately performs transactions and transmissions and facilitates allocation of savings to investment opportunities in the economy. In its most common definition, financial stability means the stability of key financial institutions and financial markets, and does not in any way rule out bankruptcy on the part of individual financial institution as well as severe fluctuations in asset values. Financial stability implies identification of sources of major risks, imprudent financial risk management, not efficient pricing of assets and implementation of appropriate policies.

A stable financial system is a key ingredient for a healthy and successful economy. Every one needs to have confidence that the system is safe and stable, and functions are proper to provide vital services to the economy. Safeguarding and maintaining the stability of financial system is of primary importance to central banks of most countries. This is because low inflation and unemployment

A stable financial system is a key ingredient for a healthy and successful economy. Every one needs to have confidence that the system is safe and stable, and functions are proper to provide vital services to the economy. Safeguarding and maintaining the stability of financial system is of primary importance to central banks of most countries. This is because low inflation and unemployment and fast economic growth, as common objectives of monetary and other state authorities, cannot be achieved in the modern economy without a developed and stable financial system through which the effects of monetary policy measures can be effectively channeled to other economic sectors.

The Central Bank has a variety of instruments for maintaining financial stability. Such instruments are:

  • risks analyses and assessment
  • market intelligence, that is creating widespread transparency with regard to central bank's objectives, publicly identifying risks, encouraging financial market participants to increase their awareness of these risks to act accordingly
  • payment system oversight and development
  • market operations and liquidity assistance
  • acting as lender of last resort
  • financial Stability committee
  • otherIn order to identify probable risks affecting financial system, the Central Bank analyses a number of indicators of local and external financial system, as well as of the real sector, monitors financial markets, and oversights payment systems. At this stage, the Central Bank analyses financial system pillars (financial institutions, financial infrastructure and financial markets), as well as developments in macro economy. The Central Bank draws on analysis of all factors that might directly or indirectly affect stable functioning of the financial system. Another important tool to assess financial stability is indicators of financial soundness endorsed by IMF.

    The Central Bank also uses internationally known stress-testing models to assess the vulnerability of financial system in time of probable risks materialising. Stress scenarios are simple “what if” events, which allows to assess the costs of financial system or individual participants.

    In maintaining financial system's stability an important aspect is risk controlling. The Central Bank carries out risk controlling by implementing prudential and macro prudential policies, a

    The Central Bank also uses internationally known stress-testing models to assess the vulnerability of financial system in time of probable risks materialising. Stress scenarios are simple “what if” events, which allows to assess the costs of financial system or individual participants.

    In maintaining financial system's stability an important aspect is risk controlling. The Central Bank carries out risk controlling by implementing prudential and macro prudential policies, as well as supervision of the financial system. Prudential regulation presumes setting a certain regulatory framework for an individual institution in order to keep risks affecting an individual institution's stability under manageable limits. Macro prudential policy itself means using prudential instruments, which will provide the stability of the financial system as a whole. Macro prudential regulation is aimed to minimize systemic risks.

    Central Bank policies to maintain financial stability fall into three types.

    • When the financial system is characterized as stable, or in other worlds the fluctuations of main indicators are within allowable band, a preventive policy will need to be implemented. Implementation of such a policy implies monitoring a number of macro prudential indicators on an ongoing basis. It is necessary to capture the financial sector's direct and indirect international exposures in both quantitative and qualitative terms. Preventive policy is addressed to financial

      In 2011 the Central Bank established a consultative body that is the Financial Stability Committee. The main task of the Committee is assessment of financial stability. The Committee identifies probable risks that threaten the financial stability and the main channels of its influence, debates the main measures addressed to the providing of financial stability, suggests the scope of further policy directions and other necessary actions. The committee sessions take place every quarter. In extraordinary situations a special session is convened on the basis of chairman's verbal decision.

      • The Committee is available with the structure as mentioned below:
      • Committee chairman
      • Chairman of Central bank
      • Committee deputy chairman
      • Deputy Chairman of Central Bank
      • Committee members
      • Head of Financial system stability and development department
      • Head of Monetary policy department
      • Head of Financial Supervisory department
      • Head of Financial department
      • Head of Financial system regulation department

      Financial Stability Report

      The Central Bank or Armenia publishes the results of ongoing analyses in the Financial Stability Report. Financial stability report is published on an annual basis starting from 2007 and on a semiannual basis, starting from 2010. Main goal of the Financial Stability Report is to focus on current developments in real and financial sectors that could undermine the financial stability. The report presents the Central Bank's assessment of financial stability, main risks threatening the financial stability and measures underway to prevent and reduce these risks. The publication of Financial Stability Report allows improving awareness of financial institutions, companies, entrepreneurs and general public concerning measures taken by authorities to ensure financial system stability. On the other hand, the purpose of providing information on risk origins and vulnerability of financial stability is to help people for taking decisions in various situations. The risks affecting financial stability of Armenia can emerge in local economy, foreign economy and it financial system itself. Taking into account the aforementioned, the possible risks affecting financial stability of Armenia a

      The Central Bank or Armenia publishes the results of ongoing analyses in the Financial Stability Report. Financial stability report is published on an annual basis starting from 2007 and on a semiannual basis, starting from 2010. Main goal of the Financial Stability Report is to focus on current developments in real and financial sectors that could undermine the financial stability. The report presents the Central Bank's assessment of financial stability, main risks threatening the financial stability and measures underway to prevent and reduce these risks. The publication of Financial Stability Report allows improving awareness of financial institutions, companies, entrepreneurs and general public concerning measures taken by authorities to ensure financial system stability. On the other hand, the purpose of providing information on risk origins and vulnerability of financial stability is to help people for taking decisions in various situations. The risks affecting financial stability of Armenia can emerge in local economy, foreign economy and it financial system itself. Taking into account the aforementioned, the possible risks affecting financial stability of Armenia are presented in 5 areas:

      • Risks derived from the developments of world economy (macro economy and financial markets)
      • Risks derived from the developments of Armenian macroeconomic environment
      • Risks derived from the developments of Armenian macroeconomic environment
      • Risks derived from the developments of financial institutions of Armenia
      • Risks derived from the developments of financial infrastructures.

      The Central Bank of Armenia continuously carries out extensive work in order to make financial stability report more informative and extended in accordance with international practice and in face of new challenges.

The list of achievements included making a comprehensive analysis of the risks of financial institutions and introducing tools for financial stability monitoring. The financial stability report publication has improved. There were simulation games organized for working out response and other relevant action to emergency situations. A system was introduced to assess risks spilling over to the financial system from external and real sectors, through macro-prudential analyses (quantitative methods, stress tests). The crises management concept and systemic bank disclosure methodology were developed and are currently in use.

A concept of introducing the new Basel Principles (Basel 3) was developed in order to align the regulatory framework of the Armenian banking system with internationally accepted principles. Work to implement a new model (risk-based supervision) is underway. The joint World Bank and International Monetary Fund team also conducted an assessment of the financial system of Armenia under the Financial Sector Assessment Program in 2012, which marked notable improvements and progress in the field of regulation and supervision of the financial system compared to the 2005 assessment. In particular, the latest assessment indicates that the financial system of Armenia meets the abovementioned principles by nearly 93% which means the country fits the ranking as compliant or largely compliant.

A timetable of implementation of the framework Solvency 2 in the Republic of Armenia was developed and approved. The relevant works for the organization of the timetableindicated events have begun; most particularly the “Non-Life Underwriting Risk Assessment Manual” has been developed and is currently on a pilot stage. In 2012, the total evaluation of Electronic Payment System of the Central Bank in accordance with international principles, set by the Bank for International Settlements, was completed. Based on the results of the evaluation, the EPS has been estimated to be reliable and risk-free in the financial stability aspect. These evaluation results also served a basis for the World Bank activities conducted under FSAP in 2012.

2. Main development goals
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