YEREVAN. – The loan forgiveness proposed by the opposition will be an unbearable burden for Armenia’s banks. Nerses Yeritsyan, Vice-Governor of the Central Bank of Armenia (CBA), said this during the hearings being held Thursday in the National Assembly, and on the topic of application of penalties, fines, and interest rates on loans and other overdue liabilities, their forgiveness, and some other loan issues in the banking system.
According to him, it is necessary to find another solution to this problem. In particular, he reminded that the banking system is a balance of bank loans and deposits. "Forgiving loans means forcing banks to give up [their] interest income. However, the interests on deposits are paid from that income. Therefore, it is also necessary to ask the depositors whether they agreed to give up their interests on their deposits,” said the CBA vice-governor.
He also said that in 2019, Armenia’s banks paid 140 billion drams, or 2.5% of GDP, to their depositors.
According to Yeritsyan, loan forgiveness can change the mindset of borrowers—and not for the better, as they will not pay thinking that they will be forgiven again later. "It turns out that righteous payers are not encouraged, whereas they are much more than the unrighteous. At least 93% of them fulfill their loan obligations in good faith. During the [COVID-19] pandemic [in Armenia], the share of the problematic loans increased by only 1 percent," said Nerses Yeritsyan.
"If we demand that the banks constantly forgive the debts, then in the same way we can demand that the shops distribute goods without money," the official said.
The vice-governor added that instead of forgiving the loans, the CBA started developing a responsible lending concept. In particular, the Central Bank of Armenia has proposed a number of law amendments that will tighten lending of loans without the credit history and source of income of those applying for bank loans in the country.