A.Arzoyan: National rating scale needed to activate Armenia`s Bond Market

ArmInfo. To activate the bond  market of Armenia, a national scale of ratings is needed. Arshinbank  Risk Management Director Artak Arzoyan expressed this opinion in an  interview with ArmInfo, explaining that local investors and borrowers  dominate the national financial market, and an internal credit rating  is required for the issuance of debt securities of certain  categories.

He noted that Ardshinbank is the only Armenian bank with the credit  ratings of two international agencies Fitch Ratings and Moody's  Investors Service, preferred to withdraw its bonds to the foreign  market. But in the future, when the national scale of ratings will  work, for which Ardshinbank, which holds the leading positions in the  financial market, has all chances to get a high investment rating,  there will be a bond issue in the local market. Meanwhile, the eyes  of Ardshinbank with each tranche are directed to the foreign capital  market.

He explained that the national scale provides more opportunities for  differentiating the creditworthiness of issuers, since it excludes  some sovereign risks, in particular the risk of transfer of funds  outside the state and other systematic risks, which are equally  characteristic for all issuers in this market. "Domestic credit  ratings on the national scale are important because the country risk  does not allow making clear distinctions between groups of credit  risk of various national borrowers or their debt obligations.In this  situation, the national credit rating is an alternative assessment of  the issuer's creditworthiness with the lowest credit risk in the  country," stressed Arzoyan.

"The advantages of rating estimates on the securities market are that  this is a source of information and an objective assessment for the  investor about reliability of the issuer, or security, and providing  access to capital. In addition, the rating encourages the  diversification of sources financing, since it allows the issuer to  apply to borrowings not only in the securities market, but also in  other financial markets. Along with this, the rating is an instrument  for reducing the cost of borrowed capital, since it allows the issuer  to minimize the costs of placement and servicing of bonded loans,  contributes to the improvement of the conditions for granting loans.  And at the same time, the rating is used as a regulatory tool, "A.  Arzoyan summarized.

To note, on July 4, during a heated debate in Yerevan, organized by  Fitch and the Central Bank, the issue of the need to establish a  national scale of credit ratings was also touched upon. But judging  from the situation in Russia, where Fitch Ratings (in December 2016)  and Moody's (in March 20016) decided to revoke the ratings assigned  to Russian issuers on the national scale, it is likely that the  national scale of credit ratings is unlikely to appear in Armenia,  unless, of course, the Central Bank Will not take a constructive  approach to resolving this issue.

To recall, in Armenia, only four banks have ratings of Fitch or  Moody's: Ameriabank, Ardshinbank, ACBA-Credit Agricole Bank and  Anelik Bank. Moreover, only from Fitch - Ameriabank and ACBA- Credit  Agricole Bank, only from Moody's - Anelik Bank, and Ardshinbank has  ratings and Moody's and Fitch. Of these, only ACBA-Credit Agricole  Bank is not an issuer of bonds, while Ameriabank is on the stock  market with the 4th issue, Anelik Bank is from the 3rd, and  Ardshinbank is placing its securities on the foreign market. In  total, there are 32 issuer bonds on the stock market of Armenia, of  which 7 are banks - Araratbank, Ameriabank, Unibank, Armbusinessbank,  Armswissbank, Anelik Bank and Converse Bank.  Along with them,  prometey Bank issues bonds, but in his case, as well as with  Ardshinbank, preference is given to the foreign market.