Garegin Tosunyan not ready to criticize national banks, but disagrees with surplus amalgamation of

ArmInfo. Head of the Association of Russian Banks Garegin Tosunyan says he is not ready to criticize the financial regulators, but disagrees with the policy of surplus amalgamation of the market players.

Talking to ArmInfo on sidelines of the Armenian-Russian Forum on Interregional Cooperation, Tosunyan said in response to the question as to whether the exit of three Armenian banks with foreign capital from the market through M&A deals will cause unjustified country reputation risks: "I have repeatedly warned against such risks.  Surplus amalgamation affects competition and I think it is necessary to reduce not increase the requirements to diversify the market and boost competition."

He said in some countries where Top-5 largest banks hold 70%-80% of assets there are no such regulatory requirements and restrictions. "The market specifics and development there makes some players to merge to become competitive on the international trans-national markets. At the same time, they do not worry that there are not so large players that operate within their own niches, serving, for instance, the small and mid- sized businesses. They grab that segment and it is normal, as big players usually deform the market, being unable to take all niches of the financial market," he said. In his words, the banking society of Russia managed to prevent the growth of the minimum capital requirement by 300 million rubles. "At present, there are again talks about a billion and even three billions, but these are very delicate talks in the context of devaluation processes. As for Armenia, I am afraid that 30 billion drams and even 100 billion drams are little connected with the aspiration to create a safety cushion. I do not share the 'too big to fail' theory.  There are many risks there; I do not think that the safety cushion is created through amalgamations. It requires diversification of the debit and credit operations and adequate control and supervision, not the vice versa," Tosunyan said. He agreed that the dramatic decline of the return on equity in the crisis period holds shareholders from making additional investments.

Foreign banks - ProCredit Bank (Germany) and BTA (Kazakhstan) exited the Armenian banking market this year through M&A deals, while Areximbank, Russian Gazprombank's 100% subsidiary in Armenia was sold quite lately.