ARMENIA COULD RESTRICT BANKING BONUSES TOO
NAIRA HAYRUMYAN
rahos||economy&pid=15072
17:48:39 – 03/09/2009
The question on the profits of banks during the crisis period is
relevant not only for Armenia. Actually, compared with Europe and
America, the Armenian banks are just baby talk.
But the problem is that the banks are allocated means from the state
budget in the framework of anti-crisis programs. Thus, instead of
reducing interests on loans and raising rates on deposits, banks gain
enormous profits which are paid as bonuses to their employees, or
rather leadership. For instance, nine banks that last year received
financial assistance from the U.S. government, in the end paid its
staff bonuses of 32.6 billion, according to a report of the Attorney
General of New York.
Things reached the point that France put forward a proposal to limit
banking bonuses. Yesterday, the EU finance ministers announced that
they reached agreement on this issue. Apparently, soon a law will be
adopted which will forbid banks to enrich at the expense of public
funds.
The anti-crisis struggle in Armenia became bank support. The Prime
Minister repeatedly declared that a stable banking system is the key
to victory over the crisis. The government directs the budget means
as well as the loans from international financial institutions to
the banks. It does this for the banks to be able to lend for business
development and mortgage under the relatively low interest rates. But
interest rates of loans remain almost unchanged. Besides the fact that
the refinancing rate in Armenia is much higher than in other countries,
banks do not want to lose excess profits and do not lower interest
rates. Recently, the central bank again lowered the refinancing rate,
but judging by everything it did not cause excitement in the credit
market.
According to the representative of the International Monetary Fund in
Armenia Nienke Oomes, "unfortunately the link between the Central Bank
refinancing rate and the interest rates of banks is not strong enough".
It turns out that public funds (and borrowed funds from abroad will
also be included in the "gold fund" of public debt), instead of
developing the economy, settle in the pockets of bankers. And here
the banking system becomes not the guarantee of economic stability
but an obstacle to its development. Armenia does not necessarily have
to wait for the enactment of legislation in the EU, the government
can now think about the law which enables banks keep only a fee for
services and a small commission.
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