Nerses Yeritsyan: Merger of banks will create supplemental reserve of 2 billion drams for years to come

ArmInfo. Merger of banks will create 2 billion drams supplemental reserve for lending for years to come (at the current exchange rate it is over $4 million). On October 7, Vice Chairman of the Armenian Central Bank Nerses Yeritsyan said in the parliament this is in harmony with the Government's policy of strengthening the role of the financial mediation in economy.

To note, according to the CB's requirement, starting from 1 Jan 2017, the minimum total capital of Armenian banks is to be no less than 30 bln AMD versus the current 5 bln AMD. The relevant decision was taken during the CB Board's meeting on 30 Dec 2014. It was dictated by the need to merge and enlarge the banks, which will enhance the Armenian banking system's efficiency and help the banks to resist various economic shocks. 

According to ArmInfo's Financial Rating of Armenian Banks, only 5 out of 21 operating banks can so far make boast of meeting that requirement. At the end of 2014, these banks were ACBA-Credit Agricole Bank, Ardshinbank, HSBC Bank Armenia, VTB Bank (Armenia) and Ameriabank with total capitals of 42- 50 billion drams. As of June 1 2015, this figures increased to 45-55 billion drams. No mergers or amalgamations have been reported yet. Instead, capitalization is observed every quarter. Nevertheless, some banks will not manage to ensure the minimum capital requirement of 30 billion drams, as only a year is left until the deadline. These banks will face merger or amalgamation. The situation deteriorates with shrinking profits and writing of toxic loans.