YEREVAN, June 4. /ARKA/. The stress tests conducted by Armenia’s Central Bank showed that even under scenarios of a deep recession or a financial market crash, even an apocalyptic scenario, Armenia-based banks have enough capital to withstand negative economic shocks, the chairman of the Central Bank Martin Galstyan told reporters on Thursday.
He recalled that in 2020, the county’s financial system had to operate in conditions of unprecedented shocks and high uncertainties, caused by the coronavirus pandemic and the war in the Nagorno-Karabakh conflict zone, unleashed by Azerbaijan with the support of Turkey. Nonetheless, the system has been able to keep on providing the intermediary services and absorbing the risks.
“The system was capitalized and liquid. The assistance shown by the Central Bank was instrumental for the local banks to go through the rather difficult year without serious losses,” Galstyan said.
He noted also that the shocks created serious challenges, including for the financial system, prompting the regulator to take measures to ensure financial stability, such as holding on increased credit risks, which is natural in such conditions and making some liquidity injections to lower the liquidity pressure.
“The capital adequacy ratio decreased in 2020 compared to 2019, but it remains quite high compared to the standard figure of 12%, reaching 16.9%. As for liquidity, it decreased to 25.6% with the standard level being 15%, which is also positive,” Galstyan said.
He noted that in order to counter shocks in 2020, financial institutions revised loans in the amount of 1.3 trillion drams, involving 980 thousand loan agreements. They increased also the number of online services, and also forgave loans to the participants of the war in Artsakh and the families of those killed during the war in the amount of 2.5 billion drams.
“Stress tests have shown that even under the most critical, negative and even apocalyptic scenario (new lockdown and economic recession due to coronavirus), the adequacy of capital is sufficient to get out of a difficult situation,” Galstyan said. –0–
