Friday, April 18 2014 17:44
Even steep decline in transfers cannot shatter financial stability of Armenia, Central Bank says
ArmInfo. According to the stress tests of the Central Bank of Armenia (CBA), the decline in transfers (from Russia) cannot shatter the financial stability of Armenia with 20% probability, Andranik Grigoryan, Head of the Financial System Stability and Development Department at the CBA, told journalists when asked what impact the possible deterioration of the economic situation in Russia may have on Armenia's economy. Nevertheless, he added that the steep decline in the transfers may lead to a slight growth in non-performing loans (according to the CBA's stress tests).
In general, Grigoryan stressed that the financial system of Armenia is able to resist both domestic and external shocks. In the meantime, the CBA's report on the country's financial stability says that the geopolitical situation in the world and the global economic situation may slightly influence the general financial stability of the country.
According to the CBA's report, over the past few years the financial system of Armenia has seriously been diversified. "A couple of years ago we identified the financial system with the banks only, whereas now the banks' share in the total financial system has dropped due to the growth in the number of credit organizations and other financial institutions", said Grigoryan. Financial mediation has also grown, he added. Thus, at the yearend of 2013, the share of the financial system's lending in GDP exceeded 40%.
The CBA also states a big competition in the country's financial system. The expert pointed out that in Armenia the Herfindahl-Hirschman Index (a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them) has been below 1,000 points since 2010 (in case of full monopoly the index is equal to 10,000 points).
According to the CBA's report, the Armenian financial system's total capital ratio dropped to 16% in 2013. Grigoryan specified that the minimum total capital ratio is fixed at 12%. "The reduction of this ratio may be due to two factors - growth in lending or decline in the asset quality. In our case, we deal with growth in the financial system's lending portfolio and we should consider the decline of this index as a positive tendency", he said.
To recall, in 2014 the CBA expects the growth rates of individuals' money transfers to slow down to 7-9% in 2014 versus the previously expected 8-10%. In 2013, the inflow of private non-commercial transfers to Armenia amounted to $1.9 bln (up 10.8% versus 2012), and the outflow grew by 10.9% to $324.2 mln.
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