By the end of July the balance on residents’ deposits at Armenian commercial banks had decreased by 36.3bn AMD or 6.4% as compared with this March. The reason for the decrease is a sharp decrease in foreign currency deposits.

Last July, as compared with last March, residents’ deposits at commercial banks increased by 10.1%. AMD deposits increased by 14.7%, with a 7.9% increase registered in foreign currency deposits. In absolute terms, by the end of last July, AMD deposits had totaled 162.9bn AMD against foreign currency deposits totaling 305.6bn AMD.

Supposedly, the transfer to floating rate played its role: the Armenian dram devaluated against the U.S. dollars and other world currencies. However, depositors’ expectations of an exchange rate jump proved only partly true, which strengthened confidence in the national currency.

The situation has now changed. This March-July, a 12.1% decrease in the balance on residents’ foreign currency deposits was registered against a 9.2% increase in the balance on AMD deposits. The share of residents’ foreign currency deposits in residents’ overall savings increased by 4.4% and reached 31.2%. The higher annual interest rates on AMD deposits – from 8.54% in March up to 9.53% in July, which is a little higher than inflation rate during the period – played its role.

The changes are the result of the CBA’s measures to reduce the Armenian economy’s “dollarization rates.” Specifically, the CBA made a decision this April changing the compulsory reservation standards for foreign currency deposits, 12% of the deposit amount. According to the new standards applied by commercial banks, only 9% of the amount is liable to compulsory reservation in terms of U.S. dollars or Euroe, with the rest 3% to be reserved in terms of AMD.

In the long-term perspective, the structure of residents’ deposits at commercial banks is showing contradictory tendencies. Specifically, the share of foreign currency deposits increased by 3.4% this July as compared with last July. In absolute terms it increased by 60.4bn AMD. On the other hand, the share of residents’ AMD deposits decreased, the absolute increase being only 3.4bn AMD.