Sufficient level of liquidity of Armenia’s banking system to ease transition to new liquidity standards –central bank

Sufficient level of liquidity of Armenia’s banking system to ease transition to new liquidity standards –central bank

YEREVAN, March 27. / ARKA /. In an exclusive interview with ARKA, Mher Abrahamyan, head of Financial System Regulation Department at the Central Bank of Armenia,  said the principles of detection and regulation of systemically important banks are still in development by the Central Bank of Armenia. 

He said even the Basel Committee itself has not finalized yet the regulation and supervision approaches for these banks. Hence, it is premature to speak about specific steps for the Central Bank to take. He said that according to the new principles, requirements will be set for additional capital and stricter supervision will be carried out over these banks.

Asked what requirements will be introduced by the Central Bank for Armenian banks in this respect, Mr. Abrahamyan said Basel III does not cover the risk management issues directly. Yet, the Committee stresses the importance of efficient corporate management and the risk management tied up with it. 

As part of Basel III provisions, we have introduced minimum requirements to internal procedures for capital liquidity assessments. These requirements will come into force soon, and the aim is to ensure efficient internal risk management procedures in banks. 

He also said the level of adequacy and capital liquidity of Armenian banking system was satisfactory in 2013. Capital adequacy ratio of Armenian banks was 16.7% as of the end of 2013, as compared to minimum norm requirement of 12%.

“As we know, the Central Bank has set stricter capital norms for Armenian banks compared to Basel II requirements, which makes transition to Basel III capital component for the banks smoother.”  

According to him, as of the end of the last year, total and current liquidity ratios of Armenian banks were 29% and 142% respectively, as compared to minimum requirements of 15% and 60% set by the Central Bank. This means the liquidity level of Armenia’s banking system is more than sufficient, which will ease transition to the new liquidity standards. 

The leverage ratio of Armenian banking system (total capital/total assets) is about 16%, considerable higher than similar ratios in banking systems of CIS and a number of Eastern European countries, and four times as high as the minimum requirement of 3% under Basel III.

‘Numerous studies by the Central Bank showed that introduction of the new Basel III standards will have no significant impact on Armenia’s banking system both in terms of capital requirements and crediting volume. Our banking system, compared to those of other countries, is better prepared for transition to Basel III, as we have been guided by more efficient regulation tools from the beginning.’ -0-

15:32 27.03.2014

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