Enhanced activity of Armenian banks on inter-bank crediting market
indicates growing need for effective liquidity control
2008-11-22 14:24:00
ArmInfo. The enhanced activity of Armenian commercial banks on the
inter-bank crediting market shows that they realize the need to control
liquidity now that economy crediting is declining in the face of the
global financial crisis, says the vice chairman of the Central Bank of
Armenia Vache Gabriyelyan.
Since recently most of the local banks have shown enhanced prudence in
their credit policies. They have begun to place their free funds in
REPO deals on the inter-bank crediting market so as to help their
partner-banks to keep their current liquidity high. Today, the banks
are showing maximum activity on the inter-bank market with a view to
ensure effective and equal placement of their funds. There has always
een certain liquidity polarization and uneven distribution of resources
in Armenia’s banking sector. That’s why the Central Bank is not going
to interfere in this process, says Gabriyelyan.
The CB can interfere only in case of shortage of liquidity. On
Thursdays the CB provides bonds for REPO deals and their amount has
already exceeded 30bln AMD. This means that Armenian banks have
sufficient liquidity: those who had big securities portfolios are
pledging them in exchange of short-term inter-bank loans. If banks were
actually short of liquidity they would stopped crediting the economy
but they have not. Simply, some processes are slowing down due to
enhanced risk control. Short-term inter-bank loans are not a rival to
real credit crediting but just an optimal solution for the moment.
The raise in deposit rates has led to a raise in loan interests. As a
result, the banks are working at profit and have no problems with
obligations. Our banking system is sufficiently capitalized for meeting
its obligations to its customers. Today, our minimum capital
sufficiency ratio is 12% but banks keep it within 19%-20% with the
lowest level being no less than 14%. The same is for liquidity, says
Gabriyelyan. Presently, the cash liquidity-call deposit ratio in
Armenia exceeds 100% with the minimum level being 60%.
Presently, investors from different foreign countries, particularly,
Cyprus, are showing high interest in Armenia’s banking system. The CB
has given preliminary consent to the entry of Cedrus bank from
Lebanon. We may also expect big merger and acquisition deals. Shortly,
big investment resources will enter Armenia’s economy through the
banking sector, says Gabriyelyan.