Consolidation of Banks Will Help Stabilize and Improve Banking System

Media Room

Consolidation of banks in Armenia will not lead to monopolization of the market, since the latter is quite competitive and diversified. The share of top 5 banks is 46%, while the rest each occupy their own niche, said Ameriabank Development Director Tigran Jrbashyan while commenting on CBA’s latest decision on raising the total capital threshold to 30 billion AMD starting 2017.

“Monopolization is not an issue for the Armenian banking system, but there will be mergers and acquisitions by all accounts. Even if CBA had not passed its decision to raise the capital threshold, the consolidation process was already on. It’s just there was no motivation. Whereas now bank owners have to make up their minds whether to merge and take action or wait till the bank starts to bear losses. CBA’s decision sort of stimulated this process”, said Jrbashyan.

According to him, there will be mergers and acquisitions during the coming 2 years; new market players will emerge, banks with new status and possibilities, and the stability and efficiency of the banking system will only benefit from this. “This process will greatly help improve our banking system, and I believe that in 2017 we will have a qualitatively new banking system with new possibilities and quite different profitability ratios, which will be ready to attract new capital and provide financing”.

Ameriabank CEO Artak Hanesyan said that in difficult times it is banks’ capital that speaks of their stability. “Increase of capital will firstly boost stability; secondly, capital is the tool which will enable further growth of the system. Currently banks’ capital adequacy ratios are reaching their limit, which means that in order to develop and be able to lend we have to invest more capital”. He also said that many banks are open and ready to consolidate, which eventually will help raise the overall efficiency of the system. “I think the optimal number of operating banks for Armenia is 10-12”, said Hanesyan.

On December 30, 2014 CBA had passed a decision according to which starting from January 01, 2017 the minimum threshold for total capital of banks will be 30 billion AMD instead of the current 5 billion. CBA explains its decision by the necessity to stimulate consolidation processes in the banking system.

Yerevan, February 17, Armenpress

Updated 19.03.2015, 16:27
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