financial sector : banking sector : non-bank financial institutions : multilateral sources of funding : ebrd activities in armenia

Non-Bank Financial Institutions

Non-banking financial institutions, such as leasing organizations, insurance companies and investment funds are either non-existent or at a very early stage of development. A Securities Commission was established in August 2000, following the adoption of the law on Securities Market Regulation. The law provides for protection of investors' rights, fraud prevention, full transparency, and competition.
So far, legislation for non-bank financial institutions is limited. The government has focused on establishing the main legal and regulatory pillars for capital market development. However, much work remains to be done to finalize the overall legal and policy framework, to develop and strengthen the supporting institutions needed for the growth of capital markets, and to create an environment to encourage market activities.

Stock Market

Volume on the capital markets has modestly increased, but the regulatory framework is still largely under preparation. There are three stock exchanges in Armenia, and one exchange with a stock department. The leading stock exchange is the Yerevan Stock Exchange. The others are the "Adamand" Yerevan Commodity and Stock Exchange, the Gyumri Stock Exchange and the United Stock Exchange. Foreigners may freely invest on the stock exchanges. The number of firms listed on the largest one, the Yerevan Stock Exchange, had increased from nine in 1996 to 91 by October 1999. Listed firms include the Abovian brewery and the Armavir machine tool plant. Total capitalization is about US$ 17 million. The second largest exchange, the Adamand, has about 45 companies listed.
Trading volumes are low and are concentrated in Treasury bills. A Treasury bill market has been in operation since September 1995. T-bills are offered at weekly auctions. The T-bill market provides a source of budget financing and allows the CBA to conduct open market operations.
The RA Law on Securities market regulation was adopted on July 06, 2000.

Investment Funds

At the end of 1994 an Investment Fund Decree was adopted, whereby investment funds may own up to 40 per cent of shares in any given enterprise. Most of the existing investment funds deal in short-term government securities.

Insurance

The insurance industry is regulated by the Law on Insurance, adopted in November 1996. The Ministry of Finance and Economy is responsible for supervision of the insurance industry and for regulating it. Over 20 insurance companies offer coverage for financial risk, deposits, credit, exchange transactions, transportation of cargo, etc. Foreign insurance companies may advertise their services in Armenia, and if established and licensed in the country, may sell insurance policies. There are no restrictions on reinsurance or on foreign insurance companies establishing business in Armenia.