Upper limit of guaranteed personal deposits in Armenia should be increased more than twofold

The maximum amount of the guaranteed personal deposits in Armenia should be doubled, Mikayel Melkumyan, MP from the Prosperous Armenia Party Faction, one of the authors of the bill on amendments to the law "On compensations for personal deposits in banks", said in Parliament on April 30 when presenting the document in the first reading.  

He said that the need to elaborate the bill was dictated by the developments in December 2014, when the collapse of the national currency resulted in risks and instability for the banking and financial system of Armenia.

In this light, the bill suggests increasing the upper limit of the guaranteed deposits from the current 4 million AMD to 10 mln AMD for AMD deposits and from the current 2 million AMD to 5 mln AMD for foreign exchange deposits.

Melkumyan said that at the moment the total amount of personal deposits at Armenian banks is about 2 trillion AMD. The bill will resolve the problem of the risks concerning 1.3 trillion AMD. The loan book of the banks is 2.070 trillion AMD. So, dozens of thousands of Armenian citizens will receive from the state stable guarantees for their deposits. The Armenian Deposit Guarantee Fund will provide the funds in case the banks go bankrupt.

To recall, over the last months of 2014, the forex market of Armenia experienced sharp growth in the exchange rate - over 570 AMD/1USD.  To note, from Oct through Dec 17, 2014, AMD dropped against USD by 45%, Dec 18-20 it grew by 25%. On Dec 22 it started dropping again.  On Dec 30, 2014, the rate was 474 AMD against 1 USD, 583 AMD against 1 EUR, 8.5 AMD against 1 RUR. For comparison it should be noted that on Dec 20 the rates were 455 AMD, 555 AMD and 7.8 AMD, respectively, versus 570 AMD, 712 AMD and 8.6 AMD, respectively, on Dec 17. At NASDAQ OMX Armenia, foreign exchange operations amounted to $744.5 million drams in 2014 with the exchange rate growing from 407.14 to 560 AMD/1 USD (on Dec 17), then dropping to 470 AMD/1USD on Dec 27.  The transactions in March 2014 amounted to $104 mln, in November - nearly $117 million, in December - $13.6 mln. In March 2015, the average AMD/USD exchange rate on the retail forex market dropped to 472 AMD/$1, the AMD/EUR exchange rate declined to 509 AMD/1EUR, and the AMD/RUR exchange rate rose to 8.3 AMD/1RUR. By April 30, the exchange rates were 477 AMD/$1, 530 AMD/1EUR, and 9.5 AMD/1RUR.