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Armenian banking system able to absorb possible risks

YEREVAN, 27 May. /ARKA/. The outcome of stress tests carried out by the Central Bank of Armenia indicates that the national banking system is able to absorb potential risks, Andranik Grigoryan, the head of stability and financial development department of the Central Bank, said today.

“In 2015, the liquidity and capitalization indicators of the banking system improved. Besides, Armenia’s financial system maintains stability and is sufficiently flexible to address potential risks,” he said when presenting the regulator’s Financial Stability Report for 2015.

He said in a bid to meet the minimum capital amount requirement local commercial banks have replenished their statutory capital by 74 billion drams, which suggests they are going to increase lending. This also implies that banks have additional security measures to overcome possible risks in the long-term perspective, he added.

On main external challenges faced by Armenia’s financial system, Grigoryan said they are the economic slowdown in Armenia’s major partner countries, in particular, in Russia and the European Union, as well as the ongoing downward trend in world prices for non-ferrous metals and falling remittances.

He said the negative impact of these factors on the cash flows of economic entities has affected the demand for loans, as well as reduced the level of loan repayment. According to Grigoryan, the share of non-performing loans of Armenian banks has exceeded 7%.

The total assets of 21 commercial banks in Armenia last year grew by 4.67%  to 3.548.1 trillion drams. In 2015 the banks’ overall lending grew by only 0.69% to 2.182.2 trillion drams, down from 21.2% growth in 2014.

The banks’  liabilities grew by 2.52% to 2.986.1 trillion drams; credit investments grew by 0.69% to 2. 182. 2 trillion drams. Of 21 banks operating last year five closed the year with a profit of 29.5 billion drams, while the other five sustained losses of 11.3 billion drams. ($ 1 – 477.82 drams).

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