CENTRAL BANK OF ARMENIA RESPONDS TO CRITICISM OF THOSE AGAINST TOUGHENING OF THE CBA’S NEW REQUIREMENT TO COMMERCIAL BANKS’ MINIMUM TOTAL CAPITAL

by Vahagn Mamyan

Saturday, February 28, 00:17

The opponents having no sufficient information about the Armenian
Central Bank’s decision to increase the commercial banks’ minimum total
capital standard from the current 5 bln AMD to 30 bln AMD by 2017 have
recently been voicing generalized statements and comments on it. The
CB press service has told ArmInfo that in some cases the comments of
the opponents, who intentionally manipulate the situation, ungroundedly
whip up the citizens’ concerns. The CB thinks that manipulation on the
banks’ names allegedly for their own safety is especially inadmissible.

The CB believes that the tangible growth in the specified standard
is aimed at maintaining the Armenian banking system’s reliability,
ensuring stability in the banking sector and deepening financial
mediation. The source points out that the given measure does not at
all aim to close some banks or reduce the number of the banks.

Before taking the relevant decision, the Central Bank had repeatedly
discussed that issue with the shareholders and heads of the commercial
banks, which expressed readiness to meet the new requirement. Several
banks have already replenished their capitals, increasing them to
the standard level of 2017.

Not a single bank in Armenia causes the Central Bank’s concerns about
possible failure to meet the new requirement. “The banking system
of Armenia is stable and meets all international standards. So, the
customers of the banks have nothing to worry about. Only enhancement
of the service quality should be in the focus of their expectations”,
says the source.

To note, starting January 1 2017, a new standard of minimal total
capital – 30 billion drams versus current 5 billion drams – will be
introduced in the banking system of Armenia. The Central Bank Council
made the given amendment to the provision 2 of the Law “On Regulation
of the activity of banks and basic economic standards of the banking
activity” on 30 December 2014. The amendment will apply to all the
participants in the banking system of Armenia. The banks have enough
time to meet the new requirements. This tightening will lead to merger
of banks and bigger actors will emerge in the banking sector, which,
in turn, will ensure a higher quality and more accessible banking
services and health- competition. In addition, the banking sector
will become more efficient and stable. Favorable environment will be
created for introduction of new technologies and products, which will
help involving Armenian banks into the international equity market
and creating a basis for further enhancement of cooperation. The banks
will become more flexible and resistant to economic shocks. This will
promote also financial mediation.