YEREVAN, January 15. /ARKA/. The expected consolidation of banks in Armenia will have no positive impacts on the country's economy, Vardan Bostanjyan, an economist, said Thursday at a news conference.

Armenia’s Central Bank decided last week to raise the minimum amount of commercial banks’ total capital to 30 billion drams from the current 5 billion drams from January 1, 2017. According to a Central Bank’s press release, the banks established before January 1, 2017 will have to meet the new requirement- that is to have 30 billion drams worth total capital. The regulator said the measure is aimed at encouraging mergers and consolidation of banks, which is expected to create a sound competitive environment and make banking services more available. The regulator said also it expects this measure to increase the flexibility and the ability of the banking system to withstand shocks in different economic situations, and help advance financial intermediation.

«Capitalization is the major matter to banks, as also to any other economic entity, and it is natural that a high capitalization enhances stability the banking sector's stability,» Bostanjyan said.

However, in his opinion, the expected processes in this segment will not produce any effect favorable for the national economy, since capitalization and consolidation processes should be carried out proportionally and simultaneously in all its segments and to the same extent.

Calling the central bank's decision to increase requirement to banks' total capital six times radical, Bostanjyan said that as a rule such steps have adverse impacts on economies.

He pointed out the necessity to pay attention not only to the banks, but also to financial sector's other segments, such as insurance and capital markets, as well as to financial mediation institutions, which almost don't exist in the country.

In his opinion, banks' consolidation will not produce adverse results only if the country manages to distribute rationally the banks' financial resources among the economy's segments for their development.
The economist said that of the country's 22 banks some 14 banks may remain by 2017.

«It is clear that the 22 banks functioning in Armenia should merge in such a way so that each of them has AMD 30 billion as minimal capital, and I think seven banks will consolidate,» he said answering ARKA News Agency's question.

Now 21 commercial banks and All-Armenian Bank operate in Armenia. According to the 2014 data, total capital of only five of them meets and even exceeds the regulator's new requirement, and four banks have capital less than 10 billion. ($1-AMD 478.24). --0--