Armenian Central Bank to tighten normative standards of capital
adequacy since 14 April
20.03.2010
ArmInfo. Central Bank of Armenia which continues implementing the
programme of events on dedollarization together with the government of
Armenia, has adopted several decisions on tightening of some normative
standards for the banks, press-service of Central Bank reported. The
decisions on tightening of the normative of adequacy of the capital
and restoration of the normative standard to manage currency were
adopted at today’s sitting Central Bank Council under chairmanship of
Artur Javadyan.
The demands to the foreign currency assets are tightened in the
normative of the capital adequacy, mainly in credits which contain
100% share of risk, the share will be increased up to 150%. In other
words, if earlier 12% of capital were reserved in 100% risk credits to
cover possible losses, since the moment of tightening 18% will be
reserved. In the normative on foreign currency management, from 14
April to 31 July 2010 calculation will be made in the following way:
the long position on each currency should not be more than 7% out of
the capital, and beginning from 1 August the 7% level will function in
all the open positions. The REPO-rate will be fixed at 11,5%.
As the head of Financial Policy and Financial Stability Department of
Armenian Central Bank Vahe Vardanyan said earlier, "we do it, as last
year all the foreign currency credits increased the credit risk much,
and the share of the low quality assets in the first half-year of 2009
was almost 10%. Tightening of the adequacy normative of the capital
will make it possible to restrain the banks from active foreign
currency crediting, which may indirectly lead to slowing down the
process of the foreign currency funds attraction by the banks. It is
very much possible that in this case the rates on foreign currency
deposits may decrease gradually, as a result of which interest margin
will grow (difference in 4-5 points) between the rates of the foreign
currency and dram deposits".
On Mar 16 the Central Bank of Armenia decided to toughen the
compulsory reserve requirement for attracted currency funds: starting
from Apr 14 3% of the 12% minimum size of a bank’s compulsory foreign
exchange reserves at the CB will be in AMD with the remaining 9% to be
in foreign exchange. The minimum amount of AMD compulsory reserves has
been kept unchanged at 8%. In Q3 2009 the CB introduced a special
economic requirement for open long foreign exchange position – 7%,
which stipulates that a bank’s foreign exchange assets should not
exceed its currency liabilities.