Thursday, August 8 2019 18:03

ArmInfo.The expected increase in the threshold of guaranteed bank deposits of individuals in 2020, in particular for dram deposits - up to 15 million drams and for foreign currency deposits - up to 10 million drams, concerns non-residents.  And for resident depositors, the previous guarantee threshold is  maintained: 10 million drams for dram deposits and 5 million drams  for foreign currency deposits.

At a meeting on August 8, the Armenian  government issued a positive opinion on the bill amending the RA law  "On Guaranteeing Compensation of Bank Deposits of Individuals"  proposed by the Prosperous Armenia parliamentary faction.

The statement substantiating the government decision states: "It is  no secret that some compatriots from the Diaspora, if they wish to  invest in Armenia, choose the simplest model - opening a deposit in  the bank. The insufficient development of other financial instruments  and a higher degree of risk make it impossible to choose another  investment method. In this context, it is advisable to increase the  threshold of guaranteed deposits for non-resident individuals, since  they while not living in Armenia have poor idea about the banking  system and possible risks, and therefore regarding the investment of  deposits, they almost completely trust the deposit guarantee system,  which can become an incentive for the Diaspora to participate in the  development of the Armenian economy, as well as increase the  involvement of banks in attracting funds from foreign investors,  given that the savings of non-residents are much greater than those  of residents, and the deposit guarantee threshold is much higher. The  deposit guarantee system is a very important tool in terms of the  reliability of the banking sector, while at the same time being the  main factor in attracting deposits. Particularly due to this, in  recent years there has been an increase in deposits in Armenian  banks. "

It is worth noting that article 19 of the relevant law states that at  least every five years the issue of revising the threshold of the  guaranteed deposit should be considered , and each time with  calculations and analysis to assess the appropriateness of such  changes. Until the next review, the threshold of the guaranteed  deposit will be the same. According to the law, the analysis is based  on a number of criteria: the ratio of the maximum guaranteed deposit  to per capita GDP; the proportion of depositors with deposits above  the guaranteed threshold in the total number of depositors with  guaranteed deposits; the share of guaranteed deposits in the total  bank deposits of individuals; as well as internationally accepted  other criteria used to calculate the threshold of guaranteed deposits  .

The need for such calculations and analysis is due to the fact that  increasing the threshold for a guaranteed deposit, in other equal  conditions, also implies an increase in guarantee contributions made  by banks to the Deposit Guarantee Fund, as a result of which it is  possible to increase interest rates on bank loans to reduce costs.

To recall, the threshold of guaranteed deposits was revised in 2015  with a significant increase. On October 26, 2015, the parliament  approved amendments to the law "On guaranteeing compensation of bank  deposits of individuals", according to which the guaranteed threshold  for dram deposits was increased from the previous 4 million drams to  10 million drams, and for foreign currency deposits - from the  previous 2 million drams (in equivalent) up to 5 million drams. The  need for this revision was dictated by the events of December 2014,  when, as a result of the collapse of the national currency, the  financial and banking system of Armenia was faced with risks and  instability.

According to the data of the Central Bank of Armenia summarized for  2018, the volume of deposits attracted by the banks of Armenia  (fixed-term and extra-demand, residents and non-residents) amounted  to a total of 2.957 trillion drams ($ 6.1 billion, with a y-o-y  increase of 12.7%). In their structure, residents' deposits accounted  for 76% or 2.248 trillion drams ($ 4.7 billion, with a y-o-y growth  of 6.7%). The share of the dram component in the deposits of  residents increased in 2018 to 47.3% from 44.3% in 2017, while the  currency component, on the contrary, decreased to 52.7% from 55.7% in  2017. According to the results of 2018, household deposits amounted  to 1.464 trillion drams ($ 3 billion), with a slowdown in y-o-y  growth to 2.9% from 8.3% in 2017. In the structure of the  population's deposits, the share of the dram component increased to  41% from 37.5% in 2017, and the currency component, on the contrary,  decreased to 59% from 62.5% in 2017. The total volume of bank lending  increased in 2018 by 15%, amounting to 3.1 trillion drams ($ 6.4  billion), and excluding prolonged and overdue loans, the volume of  credit investments of banks increased by 16.3% per annum to 2.959  trillion drams ($ 6.1 billion). In their structure, the share of the  dram component increased to 43.8% from 37.7% in 2017, and the  currency component, on the contrary, decreased to 56.2% from 62.3% in  2017. The volume of dram loans in 2018 increased by 35.5%, and  foreign currency loans - only 4.8%. This was accompanied by a  decrease in interest rates for 2015- 2018: on deposits - from 9.51%  to 5.33% on average, AMD ones - from 13.62 to 7.83%, and on loans -  from 14.31% to 10.53% on average, AMD ones- from 17.68 to 12.46%.