Armenia`s Central Bank  to maintain countercyclical capital buffer at  1.75%

ArmInfo.  The Central Bank of Armenia has decided to leave the rate of the countercyclical capital buffer (CCB) unchanged, at 1.75% of risk-weighted assets, and this decision enters into force on May 1, 2025. As noted in the message of the Central Bank of Armenia, the Board of the Central Bank made such  a decision on April 22 this year, guided by the comprehensive  analysis of the macro-financial and credit market developments.

The analysis substantiating the current decision of the Central Bank regarding the CCB showed: 1.  Compared to the previous quarter, the Financial Cycle Index increased, primarily driven by heightened lending activity across all sectors. The credit-to-GDP ratio rose by 3.3 percentage points, reaching 75.3% by year-end. As a result, it is now nearly aligned with its long-term trend, with the credit-to-GDP gap narrowing to approximately -0.1 percentage points.  2. The annual growth rate of total loans remained largely unchanged from the previous quarter. In the first two months of 2025, the volume of newly issued mortgage loans was nearly equivalent to that of the same period in 2024. During this time, both average real estate prices and rental payments declined relative to the end of the previous year,  accompanied by relatively low annual growth in construction sector loans. Given the gradual phase-out of the income tax refund program and the saturation of demand in the mortgage market, a further slowdown in market activity appears likely. Activity in consumer credit market has remained elevated. The sustained growth in consumer lending over the past two years may be attributed to several factors: income rise of borrowers, lengthening loan maturities, a catch-up effect following a period of subdued growth (convergence), and increased demand for furnishing newly purchased homes an indirect consequence of recent high mortgage market activity. 

3. At present, the primary risks to financial stability arise from  the geopolitical environment and the real estate market. These risk factors, among others, have been Countercyclical Capital Buffer (CCyB).

Based on the comprehensive analysis of the above-mentioned facts, the CentralBank considers it appropriate to leave the CCyB rate unchanged at 1.75%. Future changes in the CCyB rate (both upward and downward) will depend on the further development of macro-financial conditions, uncertainties, and systemic risks.