YEREVAN, April 18. /ARKA/. Armenia’s Central Bank decided to leave the countercyclical capital buffer (CCB) unchanged at 1.5%.
The regulator made this decision after analyzing the following facts: a moderate increase in the financial cycle index was recorded compared to the previous quarter, which is mainly due to developments in the credit market. The tax-to-GDP ratio also increased slightly to 65.6% in the fourth quarter of 2023. This ratio remains below the long-term trend (by about 9 p.p.).
The annualized growth rate of total credit is virtually unchanged from the previous quarter. In the first quarter of 2024, mortgage origination volumes were broadly comparable to flows in the same quarter last year, and consumer lending continued the upward trends in activity seen over the past year. Nevertheless, developments in the total loan portfolio remain balanced and do not yet contain obvious signs of excessive (risky) lending.
Compared with previous years, the growth rate of the mortgage loan portfolio (base effect) remains high compared with previous years. Together with the continuing rise in real estate prices, this is a signal of possible risks in this area.
With geopolitical and regional uncertainties remaining high, the likelihood of systemic materialization remains high in the context of both impact and speed. In such an environment, it is important for the banks to maintain additional capital reserves above the capital threshold required by regulation. This will enhance the ability of the banks to absorb credit losses and lend to the economy unhindered.
“Future changes in the ABK rate, both upward and downward, will depend on further developments in macro-financial conditions, uncertainties and systemic risks,” the regulator said in a statement.
There are 18 banks operating in Armenia. -0-