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Armenian banks should attract more financial resources from outside sources

YEREVAN, June 29. /ARKA/. Taking into account high interest rates on deposits, Armenian banks should attract more financial resources from outside sources, Samvel Chzmachyan, chairman of the Union of Banks of Armenia, told ARKA News Agency.

“Today interest rates on deposits are very high – 16%, on average, and given that, our banks should apply to those organizations that can allocate resources from the outside,” he said.

In his words, European donor organizations have accumulated considerable amounts of financial resources, which can be used by Armenian banks as funding sources.

Chzmachyan said that today the top-priority objective of the country’s commercial banks is to build up their total capital to meet the central bank’s requirement. “All the banks have taken the road of recapitalization,” he said.

The regulator has increased the minimum requirement for commercial banks’ capital, which must be no less than AMD 30 billion instead of the current AMD 5 billion. The central bank’s decision comes into force on January 1, 2017.

The central bank says this step will consolidate the banks, improve the quality of their services and will contribute to creation of a healthy competition environment.
Today only five of the country’s 21 banks have capital that meets and even exceeds the regulator’s requirement.
Some analysts think that the regulator’s decision may reduce the number of banks in the country to 14 or 15.

Chzmachyan is convinced that the replenishment of the banks’ capital will increase liquidity in the banking sector, which has recently dwindled.

Liquidity at Armenia’s banking sector has shrunk 0.5% since the beginning of this year to 24.6% in April 2015 (against the required 15%), as the central bank says, and banks’ liquidity in Armenia reduced 9 percentage points over the last five years.

Chzmachyan also pointed out that the banks’ biggest trouble is that borrowers fail to fulfill their obligations toward banks. He said small and mid-size companies dominate the risk zone.
The central bank says nonperforming loans in the banking sector grew 0.8 percentage points to 9.1% in April from the 5-6% recorded earlier.

“It is obvious that the country’s economic situation affects borrowers’ solvency and strikes at Armenia’s banking system, as a whole, and therefore it is wrong to blame somebody for decline in banks’ indicators,” Chzmachyan said adding that problems need system solutions.

According to the central bank’s figures, Armenian commercial banks’ assets totaled AMD 3 304.7 billion by early June 2015 showing 3.1% decline and liabilities AMD 2 835 billion – 4% decline.
Their aggregate capital grew 0.1% to AMD 469.6 billion. ($1 – AMD 473.18). —–0—–

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