Saturday, March 20 2010 14:03
Armenian Central Bank to tighten normative standards of capital adequacy since 14 April
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.
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