2017 Turns a New Leaf in Banking Sector of Armenia

As required by the Central Bank of Armenia, all of the Armenian banks must have a AMD 30bn regulatory capital. This resulted in a consolidation of a number of banks. “Zhoghovurd” had a conversation on this and other banking topics with Saribek Sukiasyan, Chairman of the Board of ARMECONOMBANK OJSC.

Mr. Sukiasyan, the decision of the Central Bank of RA requiring a AMD 30bn minimum regulatory capital from the Armenian banks becomes effective on 1 January 2017. Will ARMECONOMBANK meet this requirement?

It surely will. On 25 October, another placement of ARMECONOMBANK shares was completed, the results of which will be submitted to the general meeting of the Bank's shareholders for approval in about a month, and the registration with the Central Bank of Armenia will follow. 145,000 shares of ARMECONOMBANK were placed at AMD 14,600 each. After the Central Bank registers the placement results, the regulatory capital of ARMECONOMBANK will amount to approximately AMD 31bn, so today we can already say that ARMECONOMBANK has adjusted its regulatory capital to the aforementioned requirement.

Lately, we have been hearing complaints regarding high interest rates of the loans. Do you see any possibility for these rates to decrease?

Such complaints were voiced earlier, too. People tend to compare the average interest rates existing in Armenia with the rates existing, for example, in the Western countries where these rates are lower. This is an understandable dissatisfaction, as the most attractive conditions for the customers are lower interest rates for loans and higher interest rates for deposits. However, these two types of interest rates are directly proportional to each other: if the banks lower the loan interest rates, the deposit interest rates will also decline.

I think that 2017 turns a new leaf in the history of the Armenian banking sector: the competition among the banks will actually start in the coming year. All the banks remaining in the market will have a surplus of free resources and will try to attract as much customers as possible. In the conditions of surplus of free resources, it is normal to expect a decrease in the interest rates for deposits. Another thing to be considered is that the Armenian banking sector pays approximately AMD 150bn interest on deposits each year. This is a quite significant amount, which means that thousands of people are indirectly involved in business, that is they take part in business as they earn on invested deposits and pay income tax.

Mr. Sukiasyan, there have been publications recently in the press that the Central Bank of Armenia forces commercial banks to transfer the funds from their employees’ cumulative accounts to pension foundations. Are these rumors true, and has ARMECONOMBANK faced such an issue?

I find such publications groundless. The Central Bank of Armenia is a supervisory authority, and I can confidently state that there has never been any coercion against ARMECONOMBANK in this or any other matter. The truth is that while the Bank pays salaries to the employees, the employees are free to make their own choices for managing their own savings, and the Bank simply acts as their agent in terms of taxes.

Although 2016 is not over yet, many mention that 2016 was rather hard for the banking sector of Armenia. How was this year for ARMECONOMBANK?

In attempt to summarize the year, I can say that we put significant efforts and energy into this year. ARMECONOMBANK has grown a lot by now: we have 47 branches now, and we had 40 at the beginning of the year. We have increased all indicators, and the partnership circle has expanded significantly. In 2016, the capital of the Bank increased due to placements of shares, consolidation, and investments made by our family, which enabled us to meet the AMD 30bn regulatory capital requirement set by the Central Bank of Armenia.

And the last question. how is the cooperation between ARMECONOMBANK and international institutions progressing?

As always, the Bank continues to closely collaborate with its long-time partner and shareholder, the European Bank for Reconstruction and Development. In 2016, the Bank borrowed USD 34m from foreign institutions such as Symbiotics S.A., BlueOrchard Finance S.A, Incofin Investment Management, of which USD 24m was utilized for the development of small and medium-sized enterprises. Over AMD 1.7bn was borrowed under the Central Bank’s project with the German-Armenian Fund from the facilities managed by KfW and other sources, the bulk of which was directed to the development of micro, small and medium-sized enterprises.

Currently, we are negotiating to attract other facilities as well, so I hope that by the end of the year the size of the borrowed funds will further increase. ARMECONOMBANK has always been a steadily developing bank which keeps coming up with new attractive offers for its customers, and our interests always meet.

Arpine Tovmasyan