RA Government approved of legislative changes package for new financial instrument's creation
RA Government approved a package of amendments to laws on "Banks and banking activities", "Bankruptcy", "Bankruptcy of banks, credit and investment organizations", "Bonds market", "Insurance and insurance activities".
Packet of changes aims to create a new financial instrument subordinated loans to increase capital of financial and trade organizations. The mechanism allows of a more effective attraction of additional capital, than authorized capital increase.
Subordinated loan is a loan, which ranks after other debts should a company fall into receivership or be closed. Subordinated loans typically have a higher rate of return than senior debt due to the increased inherent risk. Accordingly, major shareholders and parent companies are most likely to provide subordinated loans, as an outside party providing such a loan would normally want compensation for the extra risk.
Packet of changes aims to create a new financial instrument subordinated loans to increase capital of financial and trade organizations. The mechanism allows of a more effective attraction of additional capital, than authorized capital increase.
Subordinated loan is a loan, which ranks after other debts should a company fall into receivership or be closed. Subordinated loans typically have a higher rate of return than senior debt due to the increased inherent risk. Accordingly, major shareholders and parent companies are most likely to provide subordinated loans, as an outside party providing such a loan would normally want compensation for the extra risk.
