CBA: CHANGE IN INTEREST RATES IN ARMENIA TO DEPEND ON BANKS’ FINANCING SOURCES

ARKA
Sep 29, 2008

YEREVAN, September 29. /ARKA/. Change in interest rates in Armenia will
depend on banks’ financing sources, Vache Gabrielyan, deputy chairman
of the Central Bank of Armenia, said at a press conference on Monday.

He found it difficult to predict how high interests will rise. He said
it will depend on the world economy, amounts of attracted money and
the scale of inflation pressure as well as Central Bank’s approaches
to this issue.

"Everything will depend on the market development. Banks have certain
margin and can raise interest rates by one to three percentage
points, but mainly up to two points, though many things depend on
their financing sources", Gabrielyan said.

He said more detailed information will be available in the Central
Bank’s report on interest rates.

"However, it is impossible to predict interest rates, since there
are many factors", Gabrielyan said.

He also said that it is not clear yet whether interest rates will go
up or not.

"We are gauging risks now and many things will depend on our
expectations on gradual decrease of inflation pressure in Armenia",
the banker said.

He said that Central Bank of Armenia doesn’t interfere in the market –
banks run their resources independently.

"By increasing or decreasing value of money, the Central Bank can
influence broad economic processes, however the Central Bank never
sets profitability margin, since this contradicts market principles",
Gabrielyan said.

Central Bank of Armenia is increasingly driving interest rates up.

Current annual refinancing rate is 7.75%, while earlier this year it
was at 5.75%.

The Central Bank is also raising interests on deposits being attracted
from banks, collateral credits, which are now at 4.75% and 10.75%
accordingly against 2.75% and 8.75% earlier this year.

The Central Bank is also increasing interests in REPO.