YEREVAN, May 27. /ARKA/. The reduction in loan and deposit interest rate spread will slow down, said Andranik Grigoryan, the head of financial system stability and development at the Central Bank of Armenia (CBA).

Over the last year the interest rate spread has continued dropping slowly, which indicates competition in the market and efficiency of the financial system, according to Grigoryan.

Deposit interest rates continue rising and loan interest rates still drop, which has a positive impact on the population, the expert said.

“Yet, I believe decline in spread will slow down substantially, as it is already quite low,” Grigoryan said.

The central bank still sees a trend for dropping weighted average bank loan rate and increasing weighted average deposit rate that are influenced also by quite concessional loans, according to Grigoryan.

The 2014 forex rate fluctuations led to increase in percentage of dollar deposits, he said.

In particular, loan in foreign currency accounted for 72% as of the end of 2014, a level that has been quite stable over the last  years, according to the expert.

Certain outflow of funds from the banking sector was recorded at the end of December 2014 – beginning of January 2015, Grigoryan said. But the most recent data suggest the situation has recovered, he added.

According to the central bank, total deposits of residents in Armenia’s banks amounted to 1,319.7 billion drams in December 2014, of it 64.1% or 846.7 billion drams in dollars and 472.9 billion drams in local currency.

Loans extended by commercial banks to residents amounted to 2,091.3 billion drams in the reporting period, of it 65.8% or 1,376.5 billion drams in foreign currency and 714.8 billion drams in local currency.

Interest rates for dram loans extended for up to one year rose by 2.85 percentage points from the beginning of the year to 19.11% in March 2015; deposit rates hiked by 4.26 percentage points to 15.21%. ($1 – 479.9 drams). –0--