Luiza Petrosyan. From Issue of Shares to Risk-Based Management

Luiza Petrosyan, Member of the Board, Secretary, spoke about placements of shares, their attractiveness, effective internal control mechanisms, and stronger corporate governance principles.

Armeconombank has been issuing shares regularly over the past years. Are there any pending new issues and what is the principle of issue of shares in general?

You are right about the recent issues. In 2016, the Bank adopted a policy aimed at increasing the capital also by regular placements of shares. Since then, on the account of such placements only, Armeconombank’s capital has increased about 13 times. Legislative changes in the form of capital retention and anti-cyclical buffers as implemented by the Central Bank of Armenia served as an extra stimulus for the latest placements.

During this year alone, the capital has already been supplemented with nearly AMD 7bn by the founding shareholders of the Bank, which creates a solid ground for further dynamic development of the Bank.

By the way, one more placemen of Armeconombank’s common shares will commence on 14 June and should be complete by the end of October. The placement scope is about AMD 2bn at AMD 5,360 per share. These shares can be purchased both resident and nonresident individuals and corporate entities, and there are no restrictions as to the minimum and maximum subscription volume, that is, you can buy even one single share. Moreover, last year the Bank's shareholders' meeting split the common shares, so now they are available to a wider range of potential shareholders.

The placements of shares are carried out by Armeconombank in strict conformity with the current legislation, so none of the shareholders’ rights may be impaired in any way. The transparency of both placement details and information on the Bank is strictly observed.

Meanwhile, the number of the Bank’s shareholders by itself reflects the overall loyalty to the Bank. By this indicator, Armeconombank keeps holding the lead in the banking sector.

In addition to the right to participate in the management of the organization, which shares provide to investors, the shares also represent also a source of income. To what extent is the purchase of Armeconombank's share justified from the purely financial point of view?

In June the annual meeting of shareholders of Armeconombank will be held, and the Board has submitted the payment of 2023 dividends for approval. The Bank regularly paid dividends over the past 9 years and directed the rest of the profit to the further development of the Bank, which contributed to the further growth of shareholder investments.

The picture is clear and simple: year after year, the Bank has been steadily augmenting its capital, which allows the investors to generate extra income on his/her investment in addition to the dividends.

What makes Armeconombank’s shares even more attractive is the fact that the dividends payable on them are non-taxable since the shares are listed with the Armenian Stock Exchange.

While paying dividends we always follow the principle of ensuring the further efficient development of the Bank and considering the interests of the shareholders.

Corporate governance is one of the most essential guarantees of the efficient operation of a large financial institution. What steps have been taken over the recent years in Armeconombank towards strengthening corporate governance values?

The Bank was the first in Armenia to implement corporate governance elements. Today, Armeconombank constantly develops its corporate governance system in accordance with international standards as this system is an important component that supports the Bank’s competitiveness in the market. The system implemented in the Bank provides for effective management of the relationships between the Bank’s shareholders, Board, and executive body.

Pursuant to the best international practices in corporate governance, independent members have been included in the Board, and Audit, Human Resource Policy, and Risk Committees affiliated with the Board have been formed as advisory units.

Efficient internal control mechanisms are among the guarantees of a bank’s success. What steps are being taken in this regard?

The main objectives of the Board include introduction and improvement of an effective internal control system, approval of the risk management strategy, applicable policies, and risk appetite.

The Bank has efficiently operating units in charge of internal audit, risk management, compliance, internal observations (AML/CFT), and loan monitoring, which ensure that internal control over the Bank’s current operations is in place and improves constantly.

I would like to specifically refer to the risk management in the Bank, especially in terms of ML/FT risks and international sanctions.

Given the significance of the risk management function, last year the Bank made appropriate changes in both its structure and risk assessment tools and approaches.

As for ML/AF risk, Armeconombank traditionally stands out for its conservative approach to potential risks in this area by setting a lower level of risk appetite. To meet today's imperatives, the Board has approved the Policy of Compliance with International Sanctions and strictly follows its provisions, and the nearly unchanged number of the Bank’s nonresident customers under the light of the known geopolitical developments is a positive evidence in this regard. By the way, this fact was specifically highlighted by Fitch international rating company in its report. With regards to the international sanctions, the Bank's management has unanimously adopted a maximally cautious approach by knowingly refraining from the potential profit on nonresident transactions. The technical and software solutions implemented by the Bank and improved on a daily basis allow timely detection and prevention of financial crimes and attempts to evade sanctions.

In order to properly respond to any changes in the external and internal environment and prevent any potential risks, the Bank's management monitors the process of improving risk mitigation mechanisms.