Union of Banks of Armenia: Biggest risk in country’s banking sector is uncertainty amid COVID-19

27.05.2020 15:29
Union of Banks of Armenia: Biggest risk in country’s banking sector is uncertainty amid COVID-19

YEREVAN, May 27. /ARKA/. The biggest risk in the banking system of Armenia and beyond it today is the uncertainty due to the new coronavirus, Seyran Sargsyan, the executive director of the Union of Banks of Armenia (UBA) told reporters at an online press conference on Tuesday.

In his words, the biggest risk today is uncertainty, because the duration of the economic slowdown is not known as well as impacts of these processes. It is also not known what the consequences will be for customers, he said.

Sargsyan said that even in the most difficult scenarios, the UBA believes that the risks are manageable, despite the very high uncertainty indicator.
According to him, the banking system of Armenia is stable and able to withstand stressful situations, as evidenced by the high rates of its capitalization and liquidity.

So, in his words, the main indicator of capitalization - the ratio of total capital to assets - in the Armenian banking system is 14.6%, on average, with the requirement of a standard of only 12%.
"More than that - the norm of 12% is even higher than that in many countries, and at the banking system of Armenia, this indicator that shows a high level of capitalization of the banking system is much higher," Sargsyan said.
He also pointed out several indicators that shows the inclusion of the Armenian banking system in the economy, in particular, the ratio of total assets to GDP at the end of the year was 88.6%, loans to GDP - 57.1% and contributions to GDP - 53.4%. “This indicator is growing regularly, which suggests that the banking system is making an increasing contribution to the development of the economy,” Sargsyan said.

At the same time, speaking about how much capital buffers will allow to get out of the situation if the crisis lasts longer than expected, he said that even in the most pessimistic scenario, liquidity indicators are high and risks are managed by banks. "I hope that the banking system of Armenia will successfully overcome all difficulties," Sargsyan said.

According to the SBA, Armenian banks’ profits increased by 7.2 billion drams in the first quarter of 2020, compared to the same period a year before, and amounted to 23.3 billion drams. The total capital for the first three months of this year increased by 2.1% and amounted to 862 billion drams. Armenian banks’ assets for the reporting period totaled 5 trillion 907 billion drams by the end of 2019 showing an increase of 102 billion drams or 1.8%. Total liabilities for the first quarter of 2020 amounted to 5 trillion 45 billion drams, which is 85 billion drams or 1.7% more than at the end of 2019. Liabilities to customers during the reporting period decreased by 1.4% and amounted to 3 trillion 427 billion drams.

Today, 17 commercial banks operate in Armenia. ($ 1 – AMD 483.82). -0-


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