The Armenian Parliamentary Committee on Financial-Credit and Budgetary Affairs has approved in the first reading the draft law "On Bank Restructuring" and a package of related amendments. The document aims to create a new mechanism for dealing with troubled banks, which should replace the approach primarily based on liquidation.
According to Armen Nurbekyan, Deputy Chairman of the Central Bank of Armenia, the initiative was developed taking into account the recommendations of the World Bank and the International Monetary Fund, formulated back during the country's financial system assessment (FSAP) in 2018. It was then noted that the banking system lacked sufficient tools to respond to a significant deterioration in the financial condition of credit organizations.
Currently, in critical situations in Armenia, only the liquidation procedure is effectively applied, which can be lengthy and costly. The new draft law proposes an alternative – bank restructuring, where the credit organization is not closed but undergoes managed recovery under the control of the Central Bank using special stabilization tools.