By Shakeh Avoyan
The chairman of the Armenian Central Bank (HKB), Tigran Sarkisian, sought on Friday to downplay financial troubles crippling a large part of the country’s commercial banks, claiming that the sector is as strong as never before.
“Armenia’s banking system has never been so sound over the past ten years,” Sarkisian told RFE/RL in an interview. “Never before have we been so confident about its reliability.”
Only 17 out of 30 banks operating in Armenia eneded last year with profits. Eight banks moved to the verge of bankruptcy and are currently run by caretaker administrations appointed by the HKB. The largest of them, Credit Yerevan, imposed last month severe restrictions on cash withdrawals after defaulting on its liabilities.
Sarkisian assured that most of the banks temporarily run by the HKB will avoid bankruptcy and all of their depositors eventually will be able to get their money back. He also argued that despite the overall decline in profits the banks are now less burdened by outstanding bad loans. This fact puts them in a stronger position in the longer term, he added.
According to the HKB head, the aggregate amount of savings deposits continues to grow despite falling interest rates and the recent problems which have led to a series of street protests by angry clients of the troubled banks.
“We are confident that in 2002-03 our financial system will remain stable and do not see any risks in that regard,” Sarkisian said.
Armenia has enjoyed relative macroeconomic stability in recent years, keeping annual inflation and currency depreciation in single digits. The Armenian dram was one of the strongest currencies in the former Soviet Union last year.
But economists agree that the country’s banking system is still too small to have a serious impact on economic expansion. The banks’ aggregate assets are worth less than $500,000 million and their lending rates are seen as extremely high.