Deposit Insurance Legislation of the Republic of Armenia
Law of the Republic of Armenia “On Guaranteeing the Compensation of Bank Deposits of Natural Persons”
The purpose of the Law is to help increase the reliability of the banking system of the Republic of Armenia, public confidence in the banking system, and ensure the protection of depositors’ interests.
The Law regulates relations pertaining to guaranteeing the compensation of bank deposits belonging to natural persons, including individual entrepreneurs, in the amount prescribed by the Law.
The Law establishes the functions, powers, structure, and management principles of the Deposit Guarantee Fund.
Law of the Republic of Armenia “On the Central Bank of the Republic of Armenia”
The Law contains an article on granting loans to the Deposit Guarantee Fund.
If the stability of the banking system of the Republic of Armenia (liquidity and/or solvency) may be jeopardized at the moment of occurrence of a compensation case, the Central Bank may grant the Deposit Guarantee Fund loans secured by a budget guarantee, in the manner and terms defined by its Board, in case of providing a budget guarantee provided for by Article 11.1 of the Law of the Republic of Armenia “On the Budgetary System of the Republic of Armenia”.
Law of the Republic of Armenia “On Bankruptcy of Banks, Credit Organisations, Investment Companies, Investment Fund Managers and Insurance Companies”
The Law establishes the concepts and signs of insolvency and bankruptcy of banks and credit organizations operating in the territory of the Republic of Armenia, the procedure and conditions for implementing measures aimed at preventing insolvency and bankruptcy, as well as the specifics of insolvency and bankruptcy proceedings, the grounds and procedure for recognizing the specified entities as insolvent and bankrupt, and types and methods of financial recovery. The specified Law also establishes the rights and obligations of bank depositors, creditors, the provisional administration, the liquidator, as well as other participants in relations connected with insolvency and bankruptcy.
The Law regulates the Deposit Guarantee Fund’s right of claim after compensating the guaranteed amount. Thus, the Fund acquires a right of claim against the bank being liquidated for the actually compensated amount in the order (priority) in which the given depositor (creditor) would have had the right to receive their deposit (account balance).
Law of the Republic of Armenia “On Foundations”
The provisions of the Law apply to the Deposit Guarantee Fund unless otherwise established by the Law of the Republic of Armenia “On Guaranteeing the Compensation of Bank Deposits of Natural Persons”.
Tax Code of the Republic of Armenia
According to the Tax Code of the Republic of Armenia, the Deposit Guarantee Fund is exempt from profit tax regarding the following income:
- regarding regular, non-recurrent, and extra guarantee contributions paid by commercial banks in the manner prescribed by the Law of the Republic of Armenia “On Guaranteeing the Compensation of Bank Deposits of Natural Persons”;
- regarding amounts compensated by the Fund to natural persons and received from banks based on the claim acquired against the banks;
- regarding income received from investments in the following assets:
- government securities of the Republic of Armenia;
- as a bank deposit and (or) bank account with the Central Bank of the Republic of Armenia and foreign high-rated prime banks;
- securities of the Central Bank of the Republic of Armenia;
- standard gold bullions;
- securities of governments and (or) central banks of high-rated countries;
- securities of high-rated prime organizations and (or) banks;
- other financial assets by the decision of the Board of Trustees of the Fund, with the consent of the Board of the Central Bank of the Republic of Armenia.
Law of the Republic of Armenia “On Attraction of Bank Deposits”
The Law regulates the disclosure of information by banks when attracting deposits, the procedure and conditions for providing such information, conditions for advertising deposit contracts, the procedure for calculating interest on deposits, as well as other legal relations protecting the rights and legitimate interests of depositors.
The Law contains a provision stating that if any advertisement, announcement, proposal, or offer by a bank regarding the attraction of deposits, as well as when signing deposit contracts or opening accounts in the territory of Armenia, mentions that deposit compensation is guaranteed by the Deposit Guarantee Fund, it must be stated in Armenian, in a clear manner without any confusing or misleading wording, and contain information on the amount of the guaranteed deposit in accordance with the Law of the Republic of Armenia “On Guaranteeing the Compensation of Bank Deposits of Natural Persons”. At the same time, the use of other languages is not prohibited.
