Rating-Agentur Expert RA GmbH and AmRating issued an industry report on Armenia`s banking system

ArmInfo. In 2017 the Armenian  banking sector dynamics were characterized by a high level of excess  liquidity due to finalization of the consolidation process, connected  with the need to comply with the new normative standard of total  capital. The sector was also characterized by the slowing loan and  deposit portfolios' growth rates, insignificant reduction in the  level of capital adequacy, improvement in the asset quality and  profitability figures.

Macroeconomic factors associated with the favorable export conditions  and restoration of the traditional transfer economy of Armenia  contributed significantly to domestic demand and increased overall  market liquidity. This circumstance significantly influenced the  activity of retail bank lending, but so far could not support the  declined levels of corporate lending. At the same time, the rather  high level of competition in the banking sector, unprecedentedly low  level of interest rates and, as a result, a significant decrease in  interest margin created a long-term trend of banking sector  consolidation.

However, the main indicators are unevenly distributed throughout the  whole sector, the five leaders of which are characterized by a more  healthy and diversified portfolio.

Against the backdrop of the favorable macroeconomic conditions and  banking sector consolidation, in order to support the sector and  increase availability of loans, the Central Bank of Armenia (CBA)  started the process of monetary policy easing by systematically  lowering the refinancing rate, which decreased by 4.5p.p. down to 6%  between 2015-2017. This has pushed banks to revise rates on loans and  deposits downwards, evidenced by dropping credit and deposit rates  from 14,7% to 10,7% and from 9,7% to 5,3% in 2016-2017 respectively.  Since 2015, as part of the program to support the debt securities  market, the regulator has effectively nullified the obligatory  reserve ratio for banks when raising funds by issuing bonds in  national and foreign currencies. This has significantly helped to  increase the issuance activity of banks. Simultaneously, the CBA  expanded the list of international financial organizations, funds  attracted from which are subject to mandatory reservation under a  reduced normative standard.

http://www.raexpert.eu/reports/Research_report_USA_11.12.2015.pdf