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BANKS AND CAPITALS: ECONOMISTS ASSESS IMPACT OF CB REQUIREMENT FOR RAISING SHAREHOLDER'S FUNDS
Economy | 16.01.15 | 15:38
By Sara Khojoyan
ArmeniaNow reporter
The Central Bank's (CB) decision to give two years' time to commercial
banks in order to increase their share capital six fold up till
30 billion AMD (about $63 million) is directed toward solving some
problems the banking system faces now, experts said.
The CB made its decision on raising the current minimum of 5 billion
AMD ($10.5 million) share capital to 30 billion on the last working
day of last year giving time to all functioning 21 banks in Armenia
till January 1, 2017 and explaining that this step is directed toward
stabilizing the banks.
According to economist Vilen Khachatryan, the CB has a clear idea of
the problems in the banking system and this initiative is directed
toward their solution.
"The very fact, for instance, that some banks offer much higher
interest rates for deposits than other banks do for loans speaks of
the fact that these banks have a problem of liquidity," Khachatryan
told ArmeniaNow.
The economist, however, thinks that the CB hurried to make the
decision, especially after the panic created in the banking system
during the sharp devaluation of the dram in December.
"We may say that there is crisis of trust in the banking system in
the country, and taking such steps during this tense situation is
not right. They should have waited for the situation to calm down."
During the first working week of 2015 there were numerous evaluations
on which of the 21 banks correspond and will be able to reach the
necessary standard. It is mostly foreseen that seven banks will be
alienated. A Haykakan Zhamanak daily analyst suggested that there
will remain 14 banks out of today's 21.
On Thursday economist Vardan Bostanjyan also told reporters that the
role of the state in the process of banks merger is very important.
According to the economist, representatives of the financial system
must strictly follow that bank resources are rationally distributed;
otherwise there might appear monopolies in banking system as well.
"However positive the unification might be, it will bring to
monopolization. And now, with already existing monopolized state in
Armenia it will be a blow for the society from the back. Leaders of
the domain will then easily dictate the society, loan takers, their
conditions," Bostanjyan said.
Bostanjyan has concerns in other terms as well, according to which,
in order to pile more money, banks will make the access to loans
difficult with higher interest rates.
Vilen Khachatryan, however, does not agree with this evaluation: "If
the number of banks is more than 20, then there is competition. It is
not like one bank possesses 50 percent of all deposits, or another one
provides most part of loans, and I think that 15 banks will compete
as well."
"We may say that this is not only a process of unification, but also
absorption. There are banks in Armenia that have problems, and they
will join stronger banks so that their problems are not seen. Hence,
the problem is secretly passed on to another bank. If a bank goes
bankrupt, the whole banking system is endangered, and this way,
the issue is closed," the economist said.
According to Khachatryan, the CB will try to run the unification
process smoothly, however, because people are negatively predisposed
toward commercial banks, there will be some tension.
Currently only five among the 21 functioning banks in Armenia possess
more than 30 billion AMD share capital.
http://armenianow.com/economy/59882/armenia_banks_merger_dollar_dram_rate
From: Emil Lazarian | Ararat NewsPress
Economy | 16.01.15 | 15:38
By Sara Khojoyan
ArmeniaNow reporter
The Central Bank's (CB) decision to give two years' time to commercial
banks in order to increase their share capital six fold up till
30 billion AMD (about $63 million) is directed toward solving some
problems the banking system faces now, experts said.
The CB made its decision on raising the current minimum of 5 billion
AMD ($10.5 million) share capital to 30 billion on the last working
day of last year giving time to all functioning 21 banks in Armenia
till January 1, 2017 and explaining that this step is directed toward
stabilizing the banks.
According to economist Vilen Khachatryan, the CB has a clear idea of
the problems in the banking system and this initiative is directed
toward their solution.
"The very fact, for instance, that some banks offer much higher
interest rates for deposits than other banks do for loans speaks of
the fact that these banks have a problem of liquidity," Khachatryan
told ArmeniaNow.
The economist, however, thinks that the CB hurried to make the
decision, especially after the panic created in the banking system
during the sharp devaluation of the dram in December.
"We may say that there is crisis of trust in the banking system in
the country, and taking such steps during this tense situation is
not right. They should have waited for the situation to calm down."
During the first working week of 2015 there were numerous evaluations
on which of the 21 banks correspond and will be able to reach the
necessary standard. It is mostly foreseen that seven banks will be
alienated. A Haykakan Zhamanak daily analyst suggested that there
will remain 14 banks out of today's 21.
On Thursday economist Vardan Bostanjyan also told reporters that the
role of the state in the process of banks merger is very important.
According to the economist, representatives of the financial system
must strictly follow that bank resources are rationally distributed;
otherwise there might appear monopolies in banking system as well.
"However positive the unification might be, it will bring to
monopolization. And now, with already existing monopolized state in
Armenia it will be a blow for the society from the back. Leaders of
the domain will then easily dictate the society, loan takers, their
conditions," Bostanjyan said.
Bostanjyan has concerns in other terms as well, according to which,
in order to pile more money, banks will make the access to loans
difficult with higher interest rates.
Vilen Khachatryan, however, does not agree with this evaluation: "If
the number of banks is more than 20, then there is competition. It is
not like one bank possesses 50 percent of all deposits, or another one
provides most part of loans, and I think that 15 banks will compete
as well."
"We may say that this is not only a process of unification, but also
absorption. There are banks in Armenia that have problems, and they
will join stronger banks so that their problems are not seen. Hence,
the problem is secretly passed on to another bank. If a bank goes
bankrupt, the whole banking system is endangered, and this way,
the issue is closed," the economist said.
According to Khachatryan, the CB will try to run the unification
process smoothly, however, because people are negatively predisposed
toward commercial banks, there will be some tension.
Currently only five among the 21 functioning banks in Armenia possess
more than 30 billion AMD share capital.
http://armenianow.com/economy/59882/armenia_banks_merger_dollar_dram_rate
From: Emil Lazarian | Ararat NewsPress