YEREVAN, January 27. /ARKA/. Consolidation of Armenian banks prompted by the central bank’s decision to raise the minimum amount of commercial banks’ total capital to 30 billion drams from the current 5 billion drams will lead to major losses, Zoya Tatevosyan, an economist, is quoted by Chorrord Ishkhanutyun newspaper.
In accordance with this decision, 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.
Those banks unable to comply with this requirement will merge or stop functioning. Large banks have no problems, but of the 21 banks that operate in Armenian now, 16 will be left with no option but to build up their capital.
“Adverse effect of this decision is already visible… Some banks don’t lend money now or extend loans only in foreign currencies, some banks increased their interest and commission rates,” Tatevosyan said.
“For example, Armbusinessbank raised its service fee from 1,500 drams to 5,000 drams, Prometey Bank increased its interest rate for loans secured by gold from 20% to 24% and Inecobank stopped lending money at all.”
Tatevosyan says that there is no objective to secure the country’s economic interest in the regulator’s decision, and in her opinion, it will weaken competition among banks, and that will monopolize the banking sector.
“This decision will strike hard at banks with small capital and will lead to job cuts, and it shouldn’t be considered positive especially amid unemployment in the country,” she said adding that migration rate will go up as well.
Tatevosyan doesn’t share the central bank’s opinion that the new requirement will make the banking sector more stable and secured.
“If banks are not secures and they face risks, they may be closed without the central bank’s decision,” said. –0–
