YEREVAN, January 22. / ARKA /. Consolidation of Armenian banks, which will fail to meet a new minimum capital requirement, set by the regulator, will only strengthen the banking industry, according to economist Vilen Khachatryan.
On January 12 Armenia’s Central Bank decided to raise the minimum amount of commercial banks’ total capital to 30 billion drams from the current 5 billion drams from January 1, 2017. It said 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 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.
“Most likely, in some cases we will see not mergers, but takeovers. Larger banks will take over smaller and risky ones, “Khachatryan said at a press conference on Thursday.
According to him, the smaller the number of banks, the easier it is for the regulator to oversee them. At the same time, he expressed concern that the reduction in the number of banks may affect competition among local commercial banks, cause job losses, create a lot of inconvenience for customers, in particular because they will have to renew their agreements.
The last time the Central Bank increased the minimum size of total capital from 2.4 billion drams to 5 billion drams was in January 2009.
According to 2014 data, the total capital of only five Armenian banks met and even exceeded the new requirement, while four banks’ capital was below 10 billion drams. There are now 21 commercial banks in Armenia and also the Pan-Armenian bank. Some experts say their number may slash to 14-15 by 2017. -0-
