Tuesday, June 28 2011 12:26
Bank risks in Armenia much lower than in European countries
ArmInfo. Blitz-interview with Arthur Javadyan, Armenian Central Bank Chairman
Mr. Javadyan, the bank community, including the Central Bank, declares that the crisis is nearly over in the country. What risks have remained in the banking system of Armenia?
Risks in the banking system of Armenia were under strict control both in the height of the crisis and in the period of crisis management. The current level of bank risks in Armenia allows their adequate assessment. The level of non- standard loans that makes up just 3.4% in the banking system of Armenia testifies to the adequate risk level. This indicator of some banks is even lower. This level is lower in Armenia rather than in developed European countries and much lower than in developing countries. One can say for sure that banking risks in Armenia are at a proper level.
Unlike the markets of developed countries, banks in Armenia display rather a conservative approach to mortgage lending, which made up only 2% of the total loan portfolio of the banking system in 2010. Low liquidity level is mentioned among the key factors hindering the growth of the mortgage portfolio. What do you expect in the mortgage market in the post-crisis period?
The aggregate mortgage portfolio of the banking system exceeds 93 bln drams at present. Inclusive of the portfolio of universal loan companies, this indicator totals nearly 100 billion drams. It is quite good indicator given that certain demand for mortgage loans observed during the crisis is observed also at present due to the full-fledged infrastructure, including the National Mortgage Company and Affordable Housing for Young Families project that boosts circulation of funds through refinancing. I think the mortgage lending segment is developing quite dynamically. I hope these upward trends will continue in the market and new actors will emerge.
Regarding new actors, when will All Armenian Bank start functioning? The CB has already licensed it:
The start-up process of banks is rather complicate, generally. It is necessary to form the bank staff, settle technical problems, etc. Anyway, besides licensing, the CB has already approved the preliminary business-plan of All Armenian Bank and studies its loan programs. I think, after relevant procedures, the bank will launch activity.
Mr. Javadyan, what about the situation in the insurance market where the number of companies fell from 25 to 8 after transfer of regulatory functions to the Central Bank?
The current situation in the insurance market of Armenia is like the situation in the banking system in late 90s when a serious 'purge' started in the banking system in 2001. In fact, out of 80 banks the CB left only those that operate on all the CB standards at present. The insurance companies will face the same situation. Central Bank is purging unfair participants from the market. Western investors have recently started displaying interest in the insurance market of Armenia. Although it is early making any specific forecasts, but I am sure new powerful actors will emerge in the insurance market of Armenia within the nearest future.
Will the new companies provide any new services, including life insurance and compulsory medical insurance?
It is early making any specific forecasts regarding the possible spectrum of services the new investors may offer. Everything depends on the volume of investments they are going to enter the market with. New investors may provide life insurance. However, life insurance alongside with compulsory medical insurance will become available in Armenia after the second part of the pension reform starting 2014.
Thank you.
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