BANKING SYSTEM STILL FRAGILE

YEREVAN, JANUARY 11, ARMENPRESS:Developments in the Armenian banking sector in the last two years can serve as a ground to suppose that official announcements about its being one of the few established branches of economy are not realistic, the Armenian daily Hayots Ashkhar says in its January 11 edition. "The fact that along with smaller banks comparatively big ones have either gone bankrupt or appeared on the verge of being liquidated comes to prove this supposition," it says, citing the example of once prospering Kredit-Yerevan bank. Nine out of 31 operating banks in 2001 have closed down or are on the verge of being closed down. Last year the Central Bank recognized as invalid the licenses granted to Shirakinvest, Econominvest and RIA banks. The Central bank°s efforts to revitalize Shirakinvets produced no results. Econominvest and RIA banks, whose licenses were recognized as invalid because of their underreporting and breaches of the banking legislation, made an attempt to defend their rights in court, but failed. The news about Kredit-Yerevan°s insolvency came unexpected. After the controlling stake passed to another owner, the Central bank appointed a temporary administration, which is expected to revitalize the bank. Will the new administration succeed we shall know in several months. But it is known that similar processes in Armenia usually do not yield positive outcome. But along with the reduction of the number of commercial banks, a new bank, Unibank, with around $5 million charter capital was established. The Armenian Savings Bank was also privatized. Thus, at the beginning of the new year there were only 23 fully operating banks in Armenia instead of 31 in 2001. However, the majority of these banks are very small. The volumes of banks° losses rose in 2001. In the first quarter of 2001 they reported 14 billion Drams in losses, in the last quarter they already reported 20 billion losses and virtually half of the banks closed the year with losses. This proves that the banking system is Armenia is still very fragile.