RA CB IS READY TO MAKE FIRST SERIOUS STEPS TO TRANSFER TO BASEL II PRINCIPLES STARTING JANUARY, 2008

ArmInfo
2007-06-26 10:37:00

Transfer of RA banking system to the principles of Basel II changes
a number of accents on the banking control, Head of RA Central Bank
Tigran Sargsyan said today. First, he said, the banks will be able to
better manage the risks without permanent control of a supervisory
agency. Second, the market and market discipline will contribute a
more sufficient mite to regulation and supervision of the banks.

He said that starting January, 2008, a new standard of the capital
adequacy will be established that will meet the standards of Basel
II. In view of this, the standards of reservation are tempered for
possible losses on the risks of the weighed assets, in particular,
50% instead of 100% will be set on hypothec credits, 75% instead of
100% – on retail credits, 0% instead of 10% – on state bonds, 50%
instead of 100% – on correspondent accounts. The calculations have
shown that that the actual value of the capital adequacy standard
will reduce to 3,3% on average, that will allow the country’s banking
system to find additional 25 bln drams of financial resources which
may be purposed to credit the economy. In the area of standards,
the most sufficient tampering, that has already come into force, is
removal of a standard per the currency position, as well as reduction
of the requirement per the current liquidity from 80% to 60%. Change
of the standard of the total liquidity is presently discussed, where
the matter concerns its tampering or complete removal. One step more
has been made within the frames of Basel II philosophy, the penalty
provisions to the banks are henceforth applicable only in case of
serious and significant violations.

For Basel II implementation, it is important to form a statistical
database in the banks, that will be possible by means of the private
credit bureau of ACRA.

T. Sargsyan said that serious changes have been observed over the
last years I relation to dramization of the economy and the banking
system. Thus, the level of dramization in 2006 deepened by 10%, the
assets of the commercial banks are expressed in drams by more than
50%. T. Sargsyan hopes that the most part of the attracted means will
also be expressed in drams in 2007.

For growth of the dram circulation, the banks will have to increase
the number of cash machines and POS-terminals.

The pension reformation together with the social reforms will find
600-700 bln drams of savings which may be aimed at development of
the financial market.