Armenian Central Bank expects no tangible cuts in interest rates on lending in foreign encage

24.02.2014 20:10
Armenian Central Bank expects no tangible cuts in interest rates on lending in foreign encage

YEREVAN, February 24. / ARKA /. Arthur Stepanyan, a member of Armenian Central Bank Board, said today the regulator’s latest decision to cut its key refinancing rate earlier this month by 0.25 percentage point to 7.5 percent is unlikely to have any substantial impact on interest rates at local forex market.

According to him, the regulator’s decisions to lower its refinancing rate usually prompt local banks to cut interest rates on lending in the national currency.

According to the National Statistical Service, the average interest rates on loans in dram in December 2013 stood at 14.99%, while interest rate on deposits in the national currency stood at 10.55%.

"We have already seen a 3-4% cut on interest rate in loans in drams and do not expect further reductions," said Stepanian. He declined to speak about a possible cut in interest rates on loans in foreign currency ‘because of a string of factors influencing it.”

According to him, the spread between interest rates on loans and deposits has been decreasing quite rapidly, and the regulator's policy was aimed at its reduction. Stepanyan said a significant reduction in rates is a bit risky.

According to the National Statistical Service, the interest rate spread in December 2013 was 4.62 %, a decrease of 1.31 percentage point compared to December 2012. Compared with November, this figure rose by 0.18 percentage points.

Interest spread (the difference between interest rates on loans and deposits) is an important indicator for assessing the banking system of a country. High interest rate spread indicates systemic risks, when banks are not able to adequately assess credit risks. -0-


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