Thursday, April 18 2013 20:47
Expert: Reduction of AMD compulsory reserve requirement to give an impulse to economy lending in Armenia
ArmInfo. The reduction of the AMD compulsory reserve requirement will give a fresh impetus to economy lending, Tigran Jrbashyan, Development Director of Ameria Group, told ArmInfo on April 18.
He said that though the banking system demonstrates good results in economy lending, now the growth rates of this indicator have slowed down to some extent. In addition, the issue of capitalization of the banks is being tackled.
"In any case Armenia's economy is dollarized and we'll be able to see the real results in Q2, as the Central Bank's decision on reduction of the AMD compulsory reserve requirement from 8% to 4%, which comes into force in mid 2013, is forming certain expectations in the banking system even now", the expert says.
He also agrees with the opinion that the megaregulator should have reduced the reserve requirement even earlier. "The banks raised the issue of reduction of the AMD reserve requirement", he said. However, one should also take into account the CB's legislatively approved policy on inflation regulation.
"As a rule, over the period of certain instability of global economy, as well as domestic political processes forming specific inflationary pressure, not a single Central Bank and not a single Government in the world makes such serious changes", stressed Jrbashyan.
When asked to what level the interest rates of AMD loans may drop after the decision taken by the Central Bank, the expert pointed out that this also depends on the funding rates. "The behavior of funding rates and deposit rates plays a decisive role now", the expert stressed.
To note, at the April 16 session, the CBA took a decision on reduction of the AMD compulsory reserve requirement from 8% to 4%, which will come into force on 12 June 2013.
To recall, there are 21 banks in Armenia today. According to the Central Bank of Armenia, as of 1 March 2013 the total provision of crediting amounted to 1.632 trillion AMD ($4 bln, 24.3% y-o-y growth). In the loan book of the banks (excluding extended and overdue loans), the share of AMD loans made up 35% or 548.9 bln AMD, and the share of foreign exchange loans - 65%, or 1.015 trillion AMD. The AMD lending grew by 13.8% and foreign exchange lending - by 26.7%. In February the interest rates of AMD loans in Armenia dropped by 0.57 points, by 2.59 points versus Feb 2012 and were fixed at 15.52%.
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