Armenian banks’ problems stem from their isolation- former central bank governor

10.09.2015 16:17
Armenian banks’ problems stem from their isolation- former central bank governor

YEREVAN, September 10. / ARKA /. Armenia’s banking sector has accumulated a great deal of problems which can be explained to a certain degree by their isolation, a former governor of Armenia’s Central Bank, Bagrat Asatryan, said in an interview with ARKA.

"Participation of banks in the real economy is limited. This is manifested both in terms of lending, and in general, in terms of their place and role in the society, "Asatryan said.

Asatryan said these problems began especially apparent late last year, when growth rate of Armenian banks began dropping under the influence of negative economic developments in Russia. As a result Armenian banks’ profitability rate slashed noticeably, he said.

"Our economy is still too monopolized. Large oligarchs do not need banks, the bulk of capital is in their hands, and the volume of cash turnover exceeds the amount of any Armenian bank, ‘Asatryan said.

He, however, believes that the level of monopolization in Armenia has not reached yet a critical point. Basically, the banks are affected by external factors such as reduction of financial flows, in particular of direct investment and private transfers, which led to the deterioration in asset quality, he said.

According to official data, private remittances sent to Armenia mostly by labor migrants in the first seven months of 2015 for non-commercial purposes were 30.3% down from the year earlier totaling about $674.3 million.

The bulk of the money - about 75.9% - came from Russia. Compared to the first seven months of 2014 they plummeted by 35.7% to about $511.9 million, while remittances from Armenia to Russia grew by 2.6% to $114.7 million.

In the first half of 2015 Armenian commercial banks appeared to have cut their credit investments by 4.5%, which stood at 2.069 trillion drams in late June, according to ARKA news agency’s financial and economic bulletin "Banks of Armenia" which shows the performance of Armenian banks for the second quarter of 2015.

The drop is blamed primarily on the banks’ move to increase their reserves for potential losses from lending. -0-

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