ArmInfo. The Central Bank of Armenia introduces additional requirements for capital adequacy of banks - three buffers to the standard. As noted in the report of the Central Bank "Financial Stability 2018", from January 2020, in accordance with the requirements of "Basel III", capital conservation buffer, a counter-cyclical buffer, and a buffer for systemically important banks will come into force. Moreover, the first two will apply to all banks, and the third - to systemically important banks.
Capital conservation buffer is necessary to cover bank losses during periods of financial instability. Starting from 2020, this indicator will be set at 0.5%, with a phased increase to 2.5%.
Countercyclical buffer is necessary to cover bank losses in the event of a systemic risk limit in the banking sector. The purpose of this buffer is to limit the volume of loans in the period of a sharp rise in the economy. This buffer will range from 0% to 2.5%.
From January 2020, systemically important banks will be required to additionally calculate a systemic value buffer in the amount of 0.5% of risk-weighted assets with an increase annually to reach 1.5% from January 1, 2023. The purpose of this buffer is to increase the possibilities of countering systemically important banks to shocks in crisis situations.
The report notes that the Central Bank has already developed the "Procedure for applying and calculation of buffers to the capital adequacy ratio", which entered into force in April 2019. This order is aimed at improving the efficiency of macro-prudential policies and strengthening the ability of banks to withstand shocks in various economic situations.
According to the Financial Ratings of Banks of Armenia, prepared by ArmInfo IC, as of April 1, 2019, on average in the banking market the capital adequacy ratio was 30.64%, which is lower than a year ago (32.79%). Of the 17 banks operating in Armenia, a y-o-y decrease in the level of capital adequacy was recorded in 11. It should be noted that the capital adequacy ratio (N1) for Armenian banks is set by the regulator at a level of at least 12%.