CHANGES IN MANDATORY RESERVATION REQUIREMENTS TO LESSEN BANKS’ APPETITES

ARKA
Apr 6, 2010

YEREVAN, April 6. /ARKA/. Changes in mandatory reservation requirements
will lessen banks’ appetites for foreign currencies, Ararat Ghukasyan,
the head of the Union of Banks of Armenia, said Friday at a news
conference.

The Central Bank of Armenia decided recently to tighten capital and
currency management adequacy standards.

The decision is to take force on April 14.

Before, banks had to reserve 12% of capital on risky loans for covering
possible losses, while now they will reserve 18%.

The central bank thinks that this move will dampen banks’ enthusiasm
in extending loans in foreign currencies, and this will slower the
process of attracting deposits in foreign currencies.

As a result, interests on deposits in foreign currencies are expected
to be lowered.

Ghukasyan also said that the reservation norm is applied also for
pursuing certain policy.

"Few years ago this norm obliged banks to reserve money in national
currency, but when dram revaluation started, we embarked on transition
to reservation in the national currency to curb and smooth the dram
revaluation," he said.

From: Emil Lazarian | Ararat NewsPress