CBA: measures taken to de-dollarize Armenian economy

CBA: measures taken to de-dollarize Armenian economy

PanARMENIAN.Net - Dollarization of the Armenian banking system increased slightly after the financial crisis mostly due to depreciation of the local currency, Board Member of the Central Bank of Armenia (CBA), Mr. Armenak Darbinyan told the 7th Annual Meeting of the European Fund for Southeast Europe (EFSE) held in Sarajevo, Bosnia and Herzegovina.

“Since then, the CBA began adjusting the regulatory framework to tackle the issue. Different approaches were applied to assets and liabilities denominated in national and foreign currency,” he said.

According to Mr. Darbinyan, following the recommendations of the Financial Sector Assessment Program (FSAP), the Central Bank of Armenia of now starting to require detailed information about the financial cash flows of banks’ largest borrowers to lower the currency induced credit risks in the system.

“We hope that the stable macroeconomic environment combined with the measures being taken will help de-dollarize the economy and lower the currency induced credit risks in the market,” he said.

“I would like to noted that all supporting infrastructures for the development of the financial system, such as Deposit Guarantee Fund, National Mortgage Company, Financial System Mediator, Centralized Credit Register, ACRA credit bureau and AML/TF institute have been established in line with the best international practice and are currently in place,” he added.

Although the Armenian financial system is stable and dynamically growing, Mr. Darbinyan said, the level of financial intermediation is still moderate. “Nevertheless, it shows signs of constant growth: thus at the end of 2012 total assets of the banking system constituted 68% of the GDP,” he said.

Mr. Darbinyan mentioned two reasons proving that Armenia’s industry is consolidating. “First, it’s the high level of competition. According to the World Bank, Armenia ranks among the world’s 20 countries with highest competition. Second, there remains some space for scale efficiency in the financial system compared to the other countries in the region,” he said.

According to the CBA Board Member, the main elements of the earning power of commercial banks will still be the traditional banking activities in the near future, with a slightly growing share of innovative financial products.

“However, our vision of a good bank is the institutional bank with traditional in nature but technically innovative activity,” he said.

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