- Doing Business in Armenia
The biggest player of the Armenian financial market is banking sector that accounts for about 90 percent of assets of the financial system. The other players of the Armenian financial market include 32 credit organizations (with 100 branch offices), 9 insurance companies and 3 insurance brokerage firms, 126 pawnshops, 226 exchange offices, 6 money transferring companies and 4 organizations dealing with processing and clearing of payment instruments and payment documents, 9 investment companies, etc.
The banking system involves the Central Bank of the Republic of Armenia, 21 commercial banks (with 479 branches) and 1 development bank. It is mostly regulated by three laws: the Law “On the Central Bank of the Republic of Armenia”, Law “On Banks and Banking Activity” and the Law “On Bankruptcy of Banks, Credit Organizations, Investment Companies, Investments Funds’ Managers and Insurance Companies”.
Since its creation in 1993, the Central Bank strives to improve the banking sector by exercising a policy of strict regulation. Since 2001, the financial audits of the commercial banks and the Central Bank of Armenia have been carried out only by independent auditors. Banks are classified according to CAMELS international standards (Capital, Assets, Management, Earnings, Liquidity and Sensitivity to the market changes). The minimum charter capital required for operation of an existing bank is 50 million AMD and the minimum total capital is 5 billion AMD, which mitigates the risk of bankruptcy. In summer of 2005, a bank deposit guarantee fund was created, which guaranties bank deposits in the amount of 4 million AMD for deposits made in drams and 2 million AMD - for deposits made in foreign currency.
Banking system capacities
The banking system is the biggest player of the Armenian financial market. The assets of the Armenian banking system increased by about 19.9% (2,478 billion AMD as of 31 December 2012) and capitalization by about 12.7% (401 billion AMD as of 31 December 2012) during 2012. The net profit of Armenian banks reached 42.4 billion AMD.
The volume of loans by the Armenian banking system, extended up to 1,536 billion AMD by the end of December 2012.
The borrowing interest rates remain relatively high and the conditions of bank credits provision are not very inspiring. Though this situation tends to evolve in a positive way, however nowadays, the majority of large-scale projects are financed by international organizations (European Bank for Reconstruction and Development, the World Bank, IMF, USAID, European Commission) or by foreign governments (Japan, Germany, the United States, France).
All banking transactions are possible in Armenia (opening a bank account, banking transfers, currency exchange, collection of liquid assets, letters of credit, savings, credit card services, check books), even if some of them are less frequent than others. The majority of the banks, for instance, offer checks issuance services, but this method of payment is hardly ever used in the country.
Operations with credit cards are more frequent, even though this system of payment is not yet widely spread. All banks offer their own credit cards and ATMs. More and more shops are accepting payments by credit cards.