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March 28
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YEREVAN. – Consolidation of the Armenian banks is a necessity, as a result it will be possible to avoid undesirable shocks in the economy and to provide slow but sustainable economic growth. Arman Barseghyan, Retail Banking Director at Ameriabank, said during an online conference on bank’s Facebook page.

Consolidation of banks will ensure a large turnover and profitability which will lead to getting necessary profits and will open up an opportunity to work even at current low interest rates. And, the interest rates are obviously low, he said.

According to Barseghyan, the interest rate of LIBOR since 2015 has increased from 0.5 to 0.61, while the US Federal Reserve's interest rate has increased from 0.5 to 1.25 since last year. During this period, Armenia’s Central Bank reduced interest rates.

Another reason for the reduction of interest rates was the demand of the Central Bank to increase the minimum capital requrement, which generally had a positive effect on the banking system, but also had negative aspects.

“The increase of the CB's minimum capital requirement was positive and the experience showed that it also provided a certain inflow of capital to the country. However, as a result, interest rates have also dropped,” he said.

According to Barseghyan, the average profitability of bank capital today is around  6-7%, and the rate of dram deposits is on the average 8-9%. This reduces the attractiveness of business activity.

“The profitability of the banks has obviously decreased. Credit interest rates have fallen more rapidly than the deposit interest rates. Either bank consolidation or upward trend in interest rates is needed so that the banking system could provide minimum profitability,” he added.

Ameriabank Retail Banking Director has pointed out four key factors that will have a significant impact on changes in interest rates. First of all it is economic growth and business activity. Banks also expect activity, as it will promote the intensification of credit demand. The other factor is the continuation of the CB's gentle monetary policy.

Another important factor is the consolidation of banks, and the last is the need to follow international financial market trends.

According to Barseghyan, the banks expect long-term, but stable growth, given these factors, which will allow avoiding drastic changes in the future economic policy that could lead to economic shocks.

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