How does today's banking system in Armenia?

Armenia's banking system is in transition, moving from the stage ended a painful financial recovery to a stage of intensive development based on the latest international trends and focus on achieving the standards of Basel II. Indicators such as the relatively high degree of liquidity and capital adequacy, low level of doubtful loans classified in the portfolios of commercial banks - is a consequence of the restrictive measures and tight prudential policy of the Central Bank. In this case, the banking business in the country is quite profitable and attractive to investors.

Today the Central Bank of Armenia does not want to in a relationship with commercial banks to act as a cruel overseer, and inclines to the need for sound policies gentle therapy by introducing a system of consolidated supervision and corporate governance principles. The functions "executioner" temporarily transferred to the One supervisor will be in the system and urged the regulator to restore order and help the formation of financial markets, in particular, the insurance market and capital.

Despite the common problems of banks in Armenia and other post-Soviet countries, the process of formation of the banking system has its own characteristics. It was accompanied by such adverse factors as serious geopolitical risks, the economic blockade and severe energy crisis. These factors lower the degree of integration into the world economy and international financial markets.

Came to power in 1998, the new leadership of the country has set a target get the economy out of stagnation and create a strong financial resource base to participate in the revival of the economy. To address this problem connected and financial donors in the face of international funds, funds that have significantly expanded the resource base of commercial banks started to provide these funds preferential loans.

The main feature of the political stability in Armenia is the availability of a strong power vertical, closed on the figure of the hard charismatic leader - President Robert Kocharian, does not forgive "deliberate mistakes", but at the same time, knowing how to get along with the leaders represented in the power of the major forces that shaped the political coalition . A positive factor of the Armenian banking market include its weak political nature, that is, low levels of penetration of political interests in the country's banking system. Practice shows that even the existence of close links with senior political or economic interests, does not guarantee a successful result the bank's management "in all endeavors." This minimizes the potential political risks and shocks in the event of future changes in the government, which is important when evaluating a system / country risk. However, the country has a high level of corruption risk, which affects the banking system.

Strong economic growth in Armenia, political stability and measures to improve the health of the banking system over the past five years have allowed commercial banks to reach a cost-effective mode of operation. At the same time there was a development of technological, human and technical capacity, which was the engine of the Central Bank of the Republic of Armenia, who initiated and co-founder of a banking infrastructure necessary - local National Payment System «Armenian Card», credit registry, the system guarantees deposits and fund mortgage lending.

Otregulirovannosti level of the banking system is far ahead of the general economic, and therefore the banking market is more attractive to foreign investors, the bulk of which consists of the old (pre-Soviet) and new (post-Soviet) Diaspora, not directly involved in the political life of the country. Insufficient, the presence in the banking sector from foreign institutional investors may be due to several factors: the presence of a regional conflict, small size of the market, the virtual absence of a liquid stock market, and other objective reasons peculiar to underdeveloped countries in transition.

The growing competition in the field of high-banking services, the need to raise the level of capitalization and a serious shortage of long-term resources are forcing many banks are constantly searching for additional funding and strategic foreign investors.

Many problems of commercial banks can be resolved in the process of further reform of the financial market - a financial infrastructure, the development of the insurance market, alternative pension system, the stock market and the derivatives market by determining role deliberate policy of the Central Bank of Armenia.