LOWERING INTEREST RATES BELOW 16% NOT EXPEDIENT: OPINION

ARKA
Aug 25, 2009

YEREVAN, August 25, /ARKA/. An Armenian banker downplayed today
arguments that lowering interest rates below 16% would give a boost
to economic recovery, saying the ongoing economic crisis makes it
simply impossible.

According to Emil Soghomonyan, chairman of the Union of Armenian

Banks, although Armenian businessmen and corporate entities regard
the current interest rate high, ‘it is the cost of our resources.’

Soghomonyan said Armenian banks attract foreign loans at 10% interest
rates.

The only exception, according to him, is the $500 million Russian
loan that was given at a 7% interest rate.

"Competition in the crediting market may of course prompt some banks
to lower their interest rates, but to expect a bank that attracts
credits at a 10% interest rate, will extend them at the same interest
rate is not possible,’ he said, adding that the fact that the economy
is experiencing a recession does not mean that banks must offer loans
as a gift.

Armenian banks offer a 14% interest rate for individual deposits. Banks
are to allocate part of their resources to the Reserve Fund of the
Central Bank and another part to the Accounts Compensation Fund,
let alone operational expenses.

According to Soghomonyan, for a normal functioning banks should
set a minimum 2% margin so that to be able to return the attracted
deposits. This mea ns that business loans will be given at 18% interest
rate, while loans for risky sectors, including mortgage crediting,
will be higher.