Mr. Chzmachyan, the past two years have been marked by major challenges for the Armenian banking system. Still in 2014, the Central Bank gave a strict assignment to increase six times the minimal threshold of the total capital. The deadline was December 31, 2016. Would you thing that not all the banks would be ableto cope with this challenge ... What did the CB initiative give the banking system?
First of all I would like to mention that it is very pleasant to cooperate with the finagent journalist team ... Well, I really said two years ago that as a result of the assignment of the Central Bank, 16-18 banks will remain in the banking system out of 21. Really remained 17. At that time I also predicted that the volume of capital would increase by about $ 300-320 million. That's how it happened. Let me tell you that I was for the decision of the Central Bank. It looks like a small "physical force was used", but the CB managed to increase the power of the banks. Naturally, we had to deal with a bank with a capital of $ 10 million - 5 billion drams, now with $ 62 million.
Of course, it is early to talk about what it has given to banks. I can say that the physical and legal entities dealing with banks are much more confident because they are sure that even in difficult situations banks will be able to find a solution and will not collapse.
In addition to the increase in capital, assets have also increased, which suggests growth in lending. Here, of course, the most important thing is the lending subject - the real economy. Today, it's already possible to see what the government is doing in the direction of economic revival.
Mr. Chzmachian, the Government tries to give a new impetus to SMEs, as well as some tax benefits. In your opinion, what kind of lending policies should be run by commercial banks that will help SME growth, so that lending to large businesses will not diminish.
A few years ago, loans to large businesses were dominant in the bank's credit portfolios. In some cases it was about 70%. Who can and should be the right and true customers today ... Here I have to address the economy. It is worth reminding that in the last 2-3 years the profit of the banks began to decline as the share of problem loans increased in banks. Those loans were to be deducted, which was not desirable for banks. They tried to find a solution to the problem at any cost. But that did not succeed. A reasonable solution was found. The banks added capital and wrote thetroubled loans out of balances. In this case, profit decreases, which is natural and temporary. Which is the most important, banks are cleaned and progress will be recorded. The economy and the banking system are interconnected, and it's even hard to say "chicken appeared from eggs or egg from chicken". The new economic policy of the government can bring new investments to Armenia. At the expense of this, large business lending will increase. But let's not forget that Armenia remains a country of small business, and here the small needs a great support. Banks should also support them. I am deeply convinced that 70% of our country's economy will provide small and developed businesses.
Taking into consideration the fact that the Central Bank continues to reduce the refinancing rate, can we expect that commercial banks will reconsider their interest rates and reduce them?
The Central Bank does not pressure commercial banks and does not force them to lower interest rates. This process is proceeding from the increase of competition. Increasing capital and assets the share of deposits in the total bank money should be slightly lower. The interest rates on deposits are already decreasing, and the interest rates too.
Increase in bank capital also meant diversification of services. What directions do you think banks should choose to provide a competitive environment?
Large capitals of 17 banks provide technical capability. This, in its turn, is a good chance of creating new services.
Mr. Chzmachian, in the recent period, more and more rumors spread that inEEU, as well as in Armenia a single currency will be introduced, and the national currency will come out of circulation. At your estimation, is this realistic today?
I'm sure not. Recently I returned from the symposium organized by the International Banking Council, which was in Belgrade, Serbia. The International Banking Council is a structure that consists of banks' unions from 20 countries, associations, leagues, and Union of Armenian Banks. There we have touched upon this subject and the forjoy of all of us, the bankers of all 20 countries have denied the possibility of a single currency. There will be no such change in the next 10-15 years.
As for the forecasts, one more question ... How willthe capitalized Armenian banks finish the year of 2017?
Predicting is a thankless job, especially in the economy and in the banking system. But I'm convinced that banks will finish 2017 better than 2016. And the figures for the coming year will exceed those of 2017 - the difference will be sharp.
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