Tuesday, January 13 2015 13:42
Tightening of total capital standard of banks starting Jan 1 2017 to ensure positive effect on capital in Armenia
ArmInfo. Starting January 1 2017, a new standard of minimal total capital - 30 billion drams versus current 5 billion drams - will be introduced in the banking system of Armenia. The Central Bank's press-service told ArmInfo, the Central Bank Council made the given amendment to the provision 2 of the Law "On Regulation of the activity of banks and basic economic standards of the banking activity" on 30 December 2014. The amendment will apply to all the participants in the banking system of Armenia. The banks have enough time to meet the new requirements.
This tightening will lead to merger of banks and bigger actors will emerge in the banking sector, which, in turn, will ensure a higher quality and more accessible banking services and health competition. In addition, the banking sector will become more efficient and stable. Favorable environment will be created for introduction of new technologies and products, which will help involving Armenian banks into the international equity market and creating a basis for further enhancement of cooperation. The banks will become more flexible and resistant to economic shocks. This will promote also financial mediation.
During the last years, the Central Bank has repeatedly discussed the issue of the minimum capital size with shareholders of banks. Most of them supported the idea and expressed readiness to invest additional capital to polish their image in the region and remain competitive.
Some of the shareholders have already submitted applications and achieveў relevant agreements on capital replenishment and consolidation. The Central Bank discussed the given issue also with representatives of some international organizations that display an interest in investing in Armenian banks.
Earlier, on 17 December, the Central Bank toughened the compulsory reservation standards for the raised funds in foreign exchange from 12% to 24%. Banks place their "reserve funds" with the CB in terms of the AMD only. Earlier on December 3, the CB increased the Lombard repo rate from 10.25% to 21%. Finally on 23 December, the CB increased the refinancing rate from 6.75% to 8.5%. Since early December, the CB launched long-term foreign exchange swaps in the market (for a period of 3-6 months) to satisfy demand for US dollars.
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