Banking system & supervision

Ensuring a necessary environment for stability, liquidity, solvency, and the normal functioning of Armenian banking system is one of the key objectives of the Central Bank of Armenia, CBA (Armenian Law on "The Central Bank", Article 5). The task of the banking supervision policy of the Central Bank is to maintain an integral and fluent banking system in Armenia.
The Central Bank of Armenia is entitled to an exclusive right of supervising banking activities in Armenia (Armenian Law on "The Banks and Banking", Article 57).
The Central Bank carries out supervision of commercial banks in compliance with current Armenian laws and other regulations.

The Central Bank is authorized to:
license the activities of banks (Regulation 1 "Registration and Licensing of Banks, Foreign Bank Branches, Registration of Branches, Operational and Representative Offices");
supervise the activities of banks;
determine forms of statements and references and bank reporting to the CBA (Regulation 3 "Bank Statements, Reporting and Release");
apply sanctions to banks for violation of laws (Armenian Law on "The Banks and Banking", Chapter 7 and "The Code of Penalties for Banking Violations");
approve or waive major or more than 50 per cent acquisition in statutory fund or total capital of the bank;
determine the eligibility criteria for proposed bank management;
set prudential and other economic standards for banking, computation of such standards (Regulation 2 "Regulation of Banking, Prudential Economic Standards"), potential loss provisioning ("Classification of Loans and Receivables and Build-up of Reserves" and "Investment Securities Loss Reserve Fund"), etc.
The Bank Supervision General Department, an independent structural subdivision of the CBA, implements banking supervision. The Department incorporates: On-Site Inspection Department with its 3 units; Off-Site Supervision Department including unit of Reception of Reports and Documentary Supervision, unit of Report Review and Risk Control, and unit of Licensing and Bank Register.
The Bank Supervision General Department implements supervision of the banks before they begin their activities (preliminary approval of obtaining a license, registration and licensing) (Regulation 1 "Registration and Licensing of Banks, Foreign Bank Branches, Registration of Branches, Operational and Representative Offices").
Once a license for banking is granted, the supervision carries on. Banks submit statements, references to the Off-Site Supervision Department as required by Regulation 3. Current supervision is implemented by reviewing such reported data and producing concise weekly, monthly, quarterly, semiannual and annual reports.
The On-Site Supervision Department conducts regular inspections at banks pursuant to an inspection schedule prepared by the Department and approved by the CBA Chairman decree. These can be complex (regular and extra) and target inspections (Regulation 4 "Implementation of Bank Inspections").
Risks associated with the banking activities are evaluated and managed based on the results of Off and On-Site supervision (the GAP analysis, the CAMELS bank rating system, the UBPR bank performance report, passport, monitoring).

The Registration and Licensing Committee also sits at the CBA. The Committee deals with issues on:
preliminary approval to, and registration and licensing of, the banks and foreign bank branches;
registration of the branches, operational and representative offices, and foreign bank representations;
licensing of other parties;
qualification and professional integrity of bank management (except for board chairman and department heads of the bank);
granting certificate to bank auditors;
relations arising out of other CBA regulations.
Regulations, procedures relating to the CBA banking supervision and decisions on individual banks taken by the Central Bank are published in the monthly "The Central Bank Bulletin", under Armenian laws and other regulations.
The Bank Supervision General Department of the CBA also publishes a report each year describing the activities carried out during the year ("Banking System of Armenia: Development, Regulation, Supervision").