ArmInfo.The results of macroprudential stress testing of the banking sector in Armenia show that even under a negative scenario, the system is able to absorb possible losses while maintaining the continuity of financial intermediation. Chairman of the Central Bank of Armenia Martin Galstyan stated during a press conference on May 2.
In this vein, he emphasized that the banking system is characterized by fairly high capital and liquidity buffers. "Nevertheless, according to the Central Bank, in the context of ongoing geopolitical uncertainty, the likelihood of materialization of systemic (cyclical) risks continues to remain high. In such a situation, the Regulator attaches importance to the use of a balanced approach by banks to ensure the balance of assets and liabilities, capital adequacy, risk management , and the payment of dividends," said Galstyan, noting that the Central Bank is trying to pursue such a prudential policy, which is countercyclical in nature. In other words, it is aimed at preserving part of the profits earned by banks at a good time, so that in the event of a possible negative development of processes, they should respond properly and protect the financial system from additional risks, the head of the Central Bank explained.
He recalled that from May 2023, the Countercyclical Capital Buffer (CCyB) - was increased for banks to 1% of risk-weighted assets, and three months later, from August, an increase to 1.5% will follow. In dram terms, this means an increase by 60 billion drams from May and by another 30 billion drams from August, i.e. in total, an increase of 1.5% implies an additional 90 billion drams.
It should be noted that at the meeting of July 31, 2020 the Central Bank decided to set banks' countercyclical capital buffer at 0% of risk-weighted assets. The decision entered into force from August of the same year. Since then, the CCyB bar has been kept at zero for more than 2 years, but in October 2022, a decision was made to increase CCyB. CCyB is necessary to cover the bank's losses in the event of systemic risk thresholds in the banking sector.
