Armenian banks’ capital adequacy ratio is on the rise
The banks’ capital adequacy ratio began to drop in late 2014 November due to the dramatic devaluation of the Armenian dram and resulting financial shocks. Thus, in 2014 November the ratio declined by 0.3 percentage points to 16.1%; in December it fell further to 14.5%, and to 14.3% in January 2015. However, in February 2015, the figure began to rise amounting to 14.6%; it rose further to 15.1% in March and April.
The growth was prompted by a decrease in the total assets and a simultaneous capital growth. Thus, in the first half of the year the banks assets decreased by 3.6%, while their capital increased by 5.4%.
Besides, prompted by the Central Bank’s decision that from January 1, 2017, the minimum total capital of commercial banks should not be below 30 billion drams (the current minimum is 5 billion drams) some banks began replenishing their authorized capital. Thus, in the first half of 2015 it increased by 7.7%.
According to an ARKA study, the capital adequacy ratio of Anelikbank, Unibank and Armbusinessbank is now between 12.58% and 12.84%. The ratio of Ardshinbank, Armenian Development Bank, VTB Bank (Armenia) Ameriabank, ACBA-CREDIT AGRICOLE BANK, HSBC Bank Armenia, Areximbank-Gazprombank Group and Conversebank ranges form 13% to 14.94%.
Five other banks’ capital adequacy ratio ranges from 15.84% to 18.89%: They are Inecobank, Artsakhbank, Armeconombank, ProCredit Bank, Armswissbank. The figure is around 20.4% for Araratbank, Byblos Bank Armenia, Prometey Bank, BTA Bank and Bank Mellat.
Capital Adequacy Ratio (CAR), also known as Capital to Risk (Weighted) Assets Ratio (CRAR) is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory capital requirements. This ratio is used to protect depositors and promote the stability and efficiency of financial systems. The minimum ceiling set by Armenia’s Central bank is 12%. ($1 – 478.05 drams). -0-