YEREVAN, June 1. /ARKA/. The week in Armenia’s financial market was influenced by the Central Bank’s signals on financial stability, credit risks, and banking sector profitability. Capital market development and client protection issues were also in focus.
1. Monetary Policy: The Central Bank Expects Inflation to Return to Target
Central Bank of Armenia Chairman Martin Galstyan stated on May 25 that the regulator expects inflation to return to target in the medium term. According to statistical data, inflation in the country amounted to 5.3% year-on-year in April, compared to 4.5% in March, and its target was set at 3% with a tolerance of ±1.5 percentage points.
This may be perceived as a signal of continued attention to inflation expectations, household debt burden, and loan portfolio quality.
2. Capital Markets: AMX identifies integration into international markets as a key goal
Armenia Securities Exchange CEO Hayk Yeganyan stated on May 29 that one of AMX’s key goals is the integration of Armenia’s capital market into international markets. This issue was presented as part of the AMX’s agenda for developing stock market infrastructure and increasing its connectivity with external markets.
For the financial market, this could be important in terms of expanding the investor base, increasing liquidity, and diversifying instruments. For banks, investment companies, and pension funds, this could expand their scope for working with debt and equity instruments.
3. Banks: Central Bank Urges Caution Amid Rapid Lending Growth
On May 25, Central Bank Governor Martin Galstyan stated the need for commercial banks to exercise caution when issuing new loans. According to the Central Bank, the banking system’s loan portfolio in the economy will grow by approximately 23% in 2025, while the deposit portfolio will increase by 13%. Over the past three years, loan growth has almost doubled the annual growth of deposits.
Galstyan also emphasized the importance of assessing clients’ debt burdens and their ability to service debt not only in the current macroeconomic environment but also in less favorable scenarios.
This could strengthen the role of risk management, scoring models, and portfolio quality monitoring as banks pay closer attention to borrowers’ solvency and collateral structure.
4. Bank Profits: Central Bank Sets More Moderate Long-Term Return Level
Central Bank Governor Martin Galstyan stated that banking system profits will become more moderate in the long term. According to him, the high profitability of banks in 2025 was primarily due to growth in net interest income amid expanded banking intermediation and increased lending volumes. The net profit of the Armenian banking system in 2025 amounted to 421.3 billion drams, an increase of 16.01% compared to 2024.
Furthermore, the head of the Central Bank noted that the banking system is characterized by high levels of capitalization and liquidity.
The quality of interest income, loan portfolio structure, and the stability of the client base may become increasingly important for banks. For the market as a whole, the balance between profitability, capital, liquidity, and the banking system’s ability to absorb potential shocks may remain key.
5. Foreign Exchange Market: The Dram Ended the Week with Moderate Changes Against Major Currencies
On May 29, the average market exchange rate for the US dollar to the Armenian dram was 368.18 drams, compared to 368.01 drams on May 25. During this period, the euro exchange rate increased from 428.44 to 428.71 drams, while the Russian ruble exchange rate rose from 5.1334 to 5.1754 drams.
Currency stability can reduce short-term exchange rate risks for banks, importers, exporters, and borrowers with a foreign currency component.
6. Financial Stability: Central Bank Governor Identifies Two Key Risks
On May 25, Central Bank of Armenia Chairman Martin Galstyan stated that there are two key risks to the country’s financial stability: one related to external factors, the other to internal processes. Among external risks, he pointed to high global political and economic uncertainty, and among internal risks, the possible accumulation of credit risks amid high rates of lending growth.
This could increase the importance of macroprudential supervision, concentration control, and borrower solvency analysis. For financial institutions, the primary objective remains maintaining portfolio stability amid changing external and internal conditions.
7. Compliance and Client Protection: The Central Bank Warns of a New Wave of Telephone Fraud
On May 26, the Central Bank of Armenia warned citizens about a new wave of telephone fraud and phishing messages coming from international codes +63 and +212 via SMS, iMessage, and RCS. According to the regulator, scammers pose as employees of telecommunications companies and offer to change phone settings, supposedly to improve internet connections or activate 5G.
This could increase the importance of client information, anti-fraud monitoring, and coordination between banks, payment organizations, and the regulator. For clients, adhering to basic digital security rules when using banking and payment services remains key.
8. Capital Market: Government Securities Retain Dominance
On May 29, Martin Galstyan, Chairman of the Central Bank of Armenia, stated that government securities dominate Armenia’s capital market, with a volume of approximately $7.4 billion in circulation. Corporate bonds follow, with a volume of approximately $2.2 billion, while the equity market remains relatively small, with a market capitalization of approximately $500 million.
The dominance of government securities could make them a key benchmark for yield, liquidity, and risk assessment in the domestic financial market, and for issuers and investors, it highlights the importance of transparent pricing, reliable infrastructure, and expanding the range of instruments beyond the government debt segment.
Weekly Summary
The main focus this past week was on financial stability, credit risks, the inflation environment, and long-term profitability of the banking sector. For banks, investment companies, issuers, and institutional investors, the key areas remain the quality of credit growth, capital, liquidity, capital market transparency, and client protection in remote channels.
