The decade of stability of Armenia’s financial system and availability of services
YEREVAN, APRIL 10, ARMENPRESS. The past ten years were period of significant achievements for the Armenian banking system. The system recorded stability, the capital of banks increased and their services were made available. In line with this, the mortgage market also developed, pension reforms were carried out and the mandatory car insurance system was installed. The partnership of the Central Bank intensified with international financial structures, the financial education was introduced in educational programs, and the educational-research center was established in Dilijan, reports Armenpress.
Combining the stories of these and all the remaining achievements we get the picture of the country’s progress which was also predetermined by financial progress as stated by President Serzh Sargsyan in his remarks addressed to the CBA staff: “I think you know more than anyone else our economic figures, and I want to state that you played a great role in achievements of these figures, as well as to highlight the role of the CBA and our commercial banks. It’s really very important that you demonstrate great independence”.
During 2007-2017 the average rate of Armenia’s 12-month inflation comprised nearly 4%. The financial mediation level of the banking system increased by almost 4 times from the beginning of 2007 up to 2018. The ratio of assets and GDP reached from 20% to 77%, and the ratio of loans and GDP from 9% to 45%. On the same period the volume of assets reached 4.4 trillion drams from 525 billion drams, the volume loans – from 230 billion drams to 2.5 trillion drams and the volume of deposits – from 300 billion drams to 2.5 trillion drams. Such growth of the intermediation of the banking system happened at the expense of borrowing funds.
During these years the access to financial services increased thanks to expansion and improvement of the network of branches, installation of services, new technologies and development of culture on using financial services among the people. As a result of the increase of trust towards the banking system the savings steadily flowed to the banking system, ensuring progressive growth of volumes of deposits which enabled the banks not only to increase the availability of loan resources, but also to improve the stability of credit financing sources. As a result of the deepening competition between the banks, the spreads of interest rates of AMD and foreign currency loans decreased respectively by 6% and 8% compared to the beginning of 2007.
In order to make Armenia’s mortgage market stable and available, the National Mortgage company was created in 2009. Apartments for Young People credit organization was established in 2010 aimed at providing youth with favorable loan conditions. The company today provides loans for several programs, among which the most important is the Affordable Apartment to Young Families program. It was one of the pre-election programs of President Serzh Sargsyan. Within the frames of this program, more than 1500 apartments were distributed, 2100 people became beneficiaries.
The company also started to provide student loans. The availability of mortgage loans were significantly contributed by the growth of credit affordability, in particular, by the decline of credit interest rates and maturity growth.
Despite the deterioration trends of figures depicting the financial stability in the region, growth in banks’ capital adequacy and liquidity was recorded in Armenia.
Mher Abrahamyan – head of the Financial system regulation department at the Central Bank, said over the past years a number of reforms have been carried out in the banking system regulation field the main goal of which was to further strengthen the stability of the financial system in the future and create necessary preconditions for long-term development of the banking system. The most important among the changes is the increase of the minimum requirement of the capital by the Central Bank.
According to the financial system assessment program by the World Bank and the International Monetary Fund, Armenia satisfied the fundamental principles of effective control of the banking system by nearly 67% in 2006, but already in 2012 this figure changed to nearly 93%.
The creation of the Financial system mediator institution was in the logic of consumer rights protection strategy of the CBA financial system.
“A number of CIS countries, including Russia, Ukraine, Belarus, want to install Armenia’s experience, as an exemplary experience. We have been invited to these countries for many times as speakers aimed at exchanging our experience and cooperation”, financial system mediator Piruz Sargsyan said.
From 2005 to 2017, Armenia’s gross international reserves increased by more than three times – from 755 million USD to 2.3 billion USD. Head of the Financial department Arman Potikyan stated in this regard: “Armenia’s international reserves continued increasing over the past 10 years and at the moment they are historically at the highest level”.
According to international assessments, Armenia’s financial system has a system of effective preventive measures in the field of money laundering and terrorism funding as a result of which Armenia was included in the list of countries having such effective systems during these years.
This is only a part of the work done. In line with this, the launch of the educational-research center in Dilijan gave new impetus to educational and research activities.
Within the frames of the Central Bank of Armenia, dozens of international and regional conferences and hundreds of lectures were held which were attended by thousands of participants. The cooperation with scientific, educational institutions of leading international financial structures expanded. Education programs are being implemented with the Berkeley, Harvard, Stanford and Shanghai universities.
English –translator/editor: Aneta Harutyunyan