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Official Calls For Curbs On Bank Collaterals


Armenia - Mihran Poghosian, head of the Service for the Mandatory Execution of Judicial Acts, at a news conference, 18Jan2012.

Armenia - Mihran Poghosian, head of the Service for the Mandatory Execution of Judicial Acts, at a news conference, 18Jan2012.

Armenians failing to repay loans extended by commercial banks and other lending firms must be legally protected against losing their sole homes, the head of a government agency enforcing court rulings said on Tuesday.

Mihran Poghosian announced that his Service for the Mandatory Execution of Judicial Acts (SMEJA) will draft a law banning financial institutions from using such apartments and houses as loan collaterals.

Poghosian spoke of an increased number of people defaulting on credit payments and facing eviction from their properties. The SMEJA had to deal with more than 1,000 loan defaults in the first half of this year alone, he said.

“Many people are left without homes,” Poghosian told a news conference. “You force people out of their homes and they don’t know where to live, especially if they have no relatives. For many times, we ourselves had to resettle people in hostels.”

“True, our job is to carry out evictions, but there is also a human factor involved and it too should be taken into account,” added the 35-year-old official.

In Poghosian’s words, the SMEJA, which is subordinate to the Ministry of Justice, will submit a relevant bill to the government later this year. It was not clear if senior government officials are aware of the initiative and approve of it.

The measure is likely to be opposed by the Armenian banking sector, which has greatly benefited from recent years’ surge in mortgage and consumer borrowing in the country.

Bagrat Asatrian, a former Central Bank governor managing the Garni Invest credit firm, criticized Poghosian’s initiative as populist and dangerous, saying that it would only stifle economic activity.

“It’s no secret that the place of residence is the sole property of the vast majority of our citizens,” Asatrian told RFE/RL’s Armenian service (Azatutyun.am). “With this measure those citizens would probably be driven out of economic activity because no financial company would lend without collateral.”

Poghosian insisted, however, that commercial lenders should find other ways of ensuring the repayment of their loans. “Maybe banks will start taking into account a person’s occupation, rather than the value of their property, which is what they do in many normal countries,” he said.
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