Monday, May 19 2014 14:36
Head of Central Bank of Armenia: Banks will extend spectrum of instruments and reduce rates in case business environment lacks double standards and oligopolistic agreements
ArmInfo. The banks will extend the spectrum of instruments and reduce the rates in case the business environment in Armenia is transparent, lacks double standards and oligopolistic agreements, Artur Javadyan, Chairman of the Central Bank of Armenia (CBA), said in Parliament on Monday.
"In that case, I assure you, the banks will start applying more instruments and the rates will decrease more intensively than now", he said. Javadyan added that the current competition in the banking sector has allowed reducing the rates of business loans by almost 6-7 pct points over the past 6 years. "This decline in the total loan book makes up 3-4% and I think that it is also insufficient though the spread has dropped even more due to the growth in deposit rates. This demonstrates the demand for Armenian drams as a result of dollarization of the economy. The banks have become more conservative, the banking sector has high liquidity, and transparent enterprises are needed", he stressed.
In the meantime, one of the parliamentarians pointed out that the current interest rates of the loans fail to stimulate business development. Large businesses operating at a high profit handled numerous loans and in order to borrow a new loan they either had to change their loan agreement or were denied the loan. As a result, the large business faces an unliquid situation, which may lead to serious consequences.
According to the CBA, in March 2014 the deposit rates in the financial market of Armenia averaged 8.5%, having dropped by 0.2 pct points versus Dec 2013 and grown by 0.5 pct points year-over-year. In the meantime, the loan rates dropped by 0.1 pct points versus Dec 2013 to 14.3%. The decline in deposit and loan rates led to the decline of the margin by 0.2 pct points versus Dec 2013 to 5.8% (0.8 pct points y-o-y growth). The drop in loan and deposit rates was due to the decline in the rates of AMD instruments. Thus, the rates of AMD deposits dropped by 0.7 pct points to 10.5%. The AMD loan rates fell by 0.5 pct points versus Dec 2013 (0.3 pct points y-o-y decline) to 15.7%. Meanwhile, USD deposit rates grew by 0.3 pct points versus Dec 2013 to 6.5% in March 2014. USD loan rates rose by 0.1 pct points versus Dec 2013 (0.2 pct points o-y-o decline). The rates of long-term loans, including mortgages, made up 14% in March 2014 (down 0.3 pct points versus Dec 2013). The rates of corporate loans made up 12% in March 2014 (down 0.1 pct points versus Dec 2013).
