YEREVAN, January 15, /ARKA/. The planned consolidation of Armenian banks is aimed at improving the standing of the Armenian banking system in the international market, an economist Vardan Bostanjyan told ARKA.
Armenia’s Central Bank decided last week to raise the minimum amount of commercial banks’ total capital to 30 billion drams from the current 5 billion drams from January 1, 2017.
According to a Central Bank’s press release, the banks established before January 1, 2017 will have to meet the new requirement- that is to have 30 billion drams worth total capital. The regulator said the measure is aimed at encouraging mergers and consolidation of banks, which is expected to create a sound competitive environment and make banking services more available.
The regulator said also it expects this measure to increase the flexibility and the ability of the banking system to withstand shocks in different economic situations, and help advance financial intermediation.
“Raising the standing of the Armenian banking system is the desire of international financial institutions,” said Bostanjyan.
“Consolidation of Armenian banks, which will lead to the strengthening of the banking system, is aimed at attracting investment from international financial institutions. From the point of view of the world market, this means improving the sustainability of the banking system,” he said.
There are now 21 commercial banks in Armenia and also the Pan-Armenian bank. The total assets of all commercial banks in the first 9 months of 2014 stood at about 3 trillion drams, a 0.6 percent rise form the beginning of the year. Their liabilities were worth 2.456. 8 trillion drams (a decline of 0.5%), their total capital was 499.3 billion drams (up 6.45%) and their net profitability dropped by 20 percent to 28.2 billion drams.
According to 2014 data, the total capital of only five Armenian banks meets the new requirement, while four banks’ capital is below 10 billion drams.-0-
