Arpine Hovhannisyan: Bank executives receive hundreds of millions of drams annually, but banks do not provide information on expenditures for protecting citizens’ financial funds
The remuneration of bank executives in Armenia can reach hundreds of millions of drams annually, while citizens have no information about how much financial institutions spend on protecting their money from fraudsters. This issue was raised by lawyer and former Deputy Speaker of the National Assembly Arpine Hovhannisyan, who presented the responses to her inquiries addressed to Armenia’s 18 banks.
According to her, she had contacted the banks asking them to provide annual figures on the amounts of money spent on implementing and maintaining systems for protecting customers’ financial funds. However, the responses received were disappointing, in Hovhannisyan’s assessment. A number of banks considered the requested information a trade secret, while others stated that the requirements of the Law on Freedom of Information did not apply to them. Some banks did not respond at all.
According to the lawyer, some financial institutions also attempted to place responsibility for fraud exclusively on citizens, claiming that in such cases the customer is often the one at fault.
Hovhannisyan points out that as a result of fraud, citizens often find themselves in a vulnerable position. If a loan is taken out in their name without proper consent, if money is withdrawn from their accounts through numerous transactions within a short period of time, or if fraudsters use telephone manipulation to induce people to transfer large sums of money, the burden of the financial losses, in her assessment, largely remains on the victims. The question of the banks’ responsibility, according to the lawyer, remains open.
At the same time, Hovhannisyan presents data from public and other sources regarding the high remuneration of executives in the banking sector. According to the information she cites, the chairman of Unibank’s Board receives around 380 million drams annually, while the chairman of EconomBank’s Board receives about 299 million drams. She also cites information obtained from non-public sources, according to which the monthly remuneration of executives at some banks may amount to tens of millions of drams.
In particular, according to the data she presents, this figure may reach 50 million drams at Acba Bank, 27 million at EconomBank, 19 million at Converse Bank, and 23 million at Ameriabank. Hovhannisyan emphasizes that these figures are information obtained from different sources, whereas the purpose of her inquiries was to determine the actual expenses incurred by banks for protecting customers’ funds.
“I wanted to see to what extent the amounts they pay themselves, their own remuneration, are comparable with the funds being spent on protecting our money,” the lawyer says.
As an example, she recalls the legislative regulation in the United Kingdom, under which, under certain conditions, banks are required to compensate citizens who have fallen victim to fraud up to £85,000. According to Hovhannisyan, within this system, financial institutions allocate significant funds to preventing fraud and compensating victims.
In Armenia, meanwhile, there is not even a unified picture regarding expenditures allocated to protection. According to Hovhannisyan, the Central Bank stated that it does not have such numerical data, while the Union of Banks was also unable to provide the requested information.
Arpine Hovhannisyan proposes that the Central Bank introduce a legislative initiative that would oblige banks to compensate citizens for financial losses caused to them as a result of fraud. She also proposes making it mandatory for banks to publish data on expenditures made on systems for protecting customers’ funds.
According to the lawyer, citizens should know what measures the financial institutions entrusted with their money are taking to protect it, and who bears responsibility when that protection fails.
Hovhannisyan also stated that she would separately address the mechanisms for examining disputes between banks and customers, claiming that some banks have created convenient “pocket arbitrations” for themselves, where citizens often find themselves in unequal conditions.