YEREVAN, January 26. / ARKA /. The decision of the Central Bank to raise the total capital requirement from the current 5 billion drams to 30 billion drams from 2017 will not result in a significant cut in the banks’ number, according to head of the Union of Armenian Banks Samvel Chzmachyan.

In an interview with the local newspaper ‘Golos Armenii’ (Voice of Armenia) he said the bigger the number of banks the stronger the competition among them.

Chzmachyan said the regulator’s requirement to increase the total capital of commercial banks is justified, however, he added that the deadline could be longer. Another disputable question, according to him is the proposed six-fold increase in 24 months.

According to Chzmachyan, the moods in the banking sector are different, however, the owners of all commercial banks in Armenia are able to meet the new requirement and most of the banks will do so.

"Perhaps, some of the owners will agree to merging with other banks, though this runs counter to the Armenian mentality, and some may sell their banks. The least unlikely scenario is a gradual withdrawal of a bank from the market,» he said.

According to Chzmachyan, the most important task lies with the government that should enforce radical measures for the development of the real economy to make it capable of absorbing additional financial resources.

"After all, the banks even now have excess liquidity, often experiencing difficulties with the placement of free funds, and soon there will be much more of them,” he said.

The Central Bank said earlier that all banks established before January 1, 2017 will have to meet the new requirement- that is to have 30 billion drams worth total capital. It 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. The last time the Central Bank increased the minimum size of total capital from 2.4 billion drams to 5 billion drams was in January 2009.

According to 2014 data, the total capital of only five Armenian banks met and even exceeded the new requirement, while four banks’ capital was below 10 billion drams. There are now 21 commercial banks in Armenia and also the Pan-Armenian bank.-0-