YEREVAN, December 9. / ARKA /. Armenia's banking system is sufficiently capitalized and able to withstand more severe scenarios of possible currency upheavals, Central Bank chairman Artur Javadyan said on Tuesday.

Speaking at a news conference he said the capital adequacy ratio of the banking system is 16.4%, which is almost 1.5 times higher than the minimum ratio set by the Central Bank and is twice of the minimum ratio of 8 percent set by the Basel Committee.

Javadyan said these figures show that Armenian banks have enough resources to absorb more than 16% of losses from their "risk assets".

He said the proportion of bad loans in the loan portfolio is 6.7%, but the banks have formed reserves for covering about 40% of bad loans and even a sharp writing off of bad loans will rule out scenarios that would threaten the stability of the banking system.

Javadyan said the banking system provides a high level of liquidity with more than 25% of banks' assets invested in highly liquid assets, which, if necessary, can be cashed quickly to meet the demands of depositors.

He said also highly liquid assets exceed the amount of liabilities payable on demand standing at  135% up from  the stipulated 60%.

Javadyan said commercial banks independently evaluate their risks in order to minimize potential losses having shifted to conservative policy amid the ongoing tension in the financial market for the assessment of new risks and adjusting their own strategies. He said under the circumstances, banks prefer to deal with their regular customers, but this temporary.

"The banking system is reliable and stable, well-capitalized and able to withstand even harder shocks", said Javadyan.

There are 21 commercial banks in Armenia and the Pan-Armenian Bank. The banks’ aggregate assets in late third quarter stood at 2.956.1 trillion drams, an increase of 0.6% from the beginning of the year. Their liabilities were worth 2.456.8 trillion drams, a decline of 0.5%. Their total capital stood at 499.3 billion (up 6.45%) and their and net profit declined by 20 percent to 28.2 billion drams. ($ 1 - 455.08 drams). -0-