Beruflich Dokumente
Kultur Dokumente
FINANCIAL
STABILITY
REPORT
2014
first half
2014
1
TABLE OF CONTENTS
Preface ........................................................................................................................................... 5
1. Developments in the Global Economy ................................................................................. 8
1.1. Macroeconomic Environment .................................................................................... 8
1.2. International Financial Markets ................................................................................ 11
2. Macroeconomic Environment Developments in Armenia ................................................... 16
2.1. Macroeconomic Developments ................................................................................ 16
2.2. Foreign Trade ............................................................................................................... 18
2.3. Net Factor Incomes and Transfers ............................................................................ 20
2.4. Household Income and Debt Burden ....................................................................... 21
2.5. Real Estate Prices ........................................................................................................ 23
3. Financial Market Stability of Armenia ..................................................................................... 26
3.1. Money and Capital Market .......................................................................................... 26
3.2. Foreign Exchange Market ........................................................................................... 28
4. Stability of Financial Institutions of Armenia ........................................................................ 30
4.1. Commercial Banks ...................................................................................................... 30
PREFACE
ABSTRACT
1 . D E V E L O P M E N T S IN T H E G L O B A L
ECONOMY 1
1 . 1. M A CR O E C O N O MI C EN VI R ON M E N T
2014*
2013
2012
2011
2010
2009
2008
2007
2006
2005
14
11
8
5
2
-1
-4
-7
-10
USA
Euro area
Russia
China
World economy
Developed countries
Emerging countries
*
2013 forecasts as
of 30.01.13
2013 forecasts as
of 30.04.13
2013 forecasts as
of 30.07.13
2013 assessment
as of 30.01.14
2014 forecasts as
of 30.01.14
2014 forecasts as
of 30.04.14
2014 forecasts as
of 30.07.14
World economy
3.5
3.3
3.1
3.0
3.7
3.7
3.4
Developed countries
1.4
1.3
1.2
1.3
2.2
2.2
1.8
USA
2.0
1.9
1.7
1.9
2.8
2.8
1.7
Euro area
-0.2
-0.4
-0.6
-0.4
1.0
1.1
1.1
Emerging countries
5.5
5.3
5.0
4.7
5.1
4.8
4.6
CIS
3.8
3.4
2.8
2.1
2.6
1.9
0.9
Russia
3.7
3.4
2.5
1.5
2.0
1.3
0.2
China
8.2
8.1
7.8
7.7
7.5
7.6
7.4
Indicator
(economic growth)
All forecasts and estimations by the IMF are based on the World Economic
Outlook Update, July 2014 report.
3
http://www.bls.gov/bls/newsrels.htm
A n n u a l g ro w t h ra t e o f w o rl d t ra d e
%
2014*
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
18
14
10
6
2
-2
-6
-10
-14
Source: IMF.
60
40
J S N J MM J SN J MMJ S N J MM J SN J MMJ S N J MM J SN J MM
08 09
10
11
12
13
14
10000
9000
8000
7000
6000
5000
4000
3000
J SN J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MM
08 09
10
11
12
13
14
In the second quarter of 2014, the energy prices went down attributable to
the shale gas mining by the USA and the unchanged volumes of gas mining
in the light of economic growth slowdown.
10
Mo l y b d en u m p ri c es
20
0
J MMJ SNJ MMJ SN J MMJ SNJ MMJ SN J MMJ SN J MMJ SN JMM
08
09
10
11
12
13
14
Wh ea t p ri c es
G o l d p ri c es
1 . 2. I N T E RN ATI O NA L FI NA N CI A L MA RK E T S
I n f l a t i o n i n s el ec t ed c o u n t ri es
%, annual average
USA
Russia
China
Developed countries
2014
2013
2012
2011
2010
2009
2008
2007
2006
18
15
12
9
6
3
0
-3
2005
The trend observed last year persisted over the first half of
2014: amid fears of unsteady financial situation in European
countries and slowing economic growth in developing
countries, investors further preferred mostly German bonds
2004
Developing countries
Source: IMF.
11
1 0 -y ea r g o v ern men t b o n d y i el d
%
6
5
4
3
2
1
0
J MMJ S N J MMJ SN J MM J S N J MMJ S N J MMJ SN J MM J
09
10
11
12
13
14
USA
Euro area
Great Britain
I n t eres t ra t e p o l i c i es o f c en t ra l b a n ks
%
6
5
4
3
2
1
0
J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MMJ SNJ MMJ SN J MMJ
08
09
10
11
12
13
14
Fed funds
UK Refi rate
12
http://www.bankofengland.co.uk/publications/Pages/fsr/2014/fsr35.aspx
US D ex c h a n g e ra t e v ers u s E UR a n d G B P
1.8
2.1
1.7
1.6
1.6
1.5
1.1
1.4
0.6
1.3
0.1
1.2
1.1
-0.4
J SN JMF AF AJMMJ SN J MMJ SN J MMJ SN J MMJ SNJ MM
08 09
10
11
12
13
14
USD/EUR
Source: ECB.
I n t erb a n k i n t eres t ra t es
%
6
5
4
3
2
1
0
J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MMJ SN J MM
08
09
10
11
12
13
14
Libor 3 month
Euribor 3 month
Box
Economic developments in main trade partner country
In the first half of 2014, the Russian economy continued to
grow at a slow pace, which reflects the negative effects of
geopolitical tensions associated with Ukraine, on the one hand,
and previous structural problems, on the other. The Russian
economy is still highly reliant on the energy sector, so economic
growth in this country greatly depends on how international oil
prices will develop. A non-competitive business environment and
low level of infrastructure development remain major
impediments to Russia's economic growth.
According to the Federal State Statistics Service of Russia,
despite negative growth in the first quarter of 2014, the Russian
economy bounced back to a positive growth territory in the
second quarter, thus avoiding a technical recession. Overall,
based on the first half 2014 results, the GDP growth was 0.8%.
However, such indicators as construction growth, investment
growth, as well as electricity, gas and water production and
distribution sector growth are still negative.
By semiannual results, capital investment plunge by 2.8% and
construction fell by 2.6%1. Both the trade and service sectors
kept on declining during the first quarter and could only track a
little positive growth in the second quarter, lagging behind the
data of the same reference period last year.
6
http://openmarkets.cmegroup.com/7847/qes-lingering-effect-on-emergingmarkets
13
14
SUMMARY
In the first half of 2014, the global economy continued
recovering, but it was slower than expected. With unstable
world economic growth, Armenia posted an increased trade
balance deficit due to a low growth rate in exports of goods.
In developed countries, issues like economic growth
slowdown, low inflationary environment remain on the
agenda. Under such conditions, developed countries kept on
implementing a low interest rate policy. Developing countries
encountered capital flight, which led to domestic currency
depreciation pressures. Apart economic risks hampering
growth in developing countries, risks associated with the
crisis in Ukraine got a particular emphasis. Russia's economic
growth slowdown somewhat decelerated the inflow of noncommercial remittances from this country; this may later on
affect the domestic household income and Armenia's overall
financial stability.
15
2 . M A C R O E C O N O M IC E N V IR O N M E N T
D E V E L O P M E N T S IN A R M E N IA
2 . 1. M A CR O E C O N O MI C D EV E L O P M E N T S
Th e a n u u a l g ro w t h o f ma i n s ec t o rs o f
ec o n o my
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Services
Construction
Agriculture
Industry
-50%
2007
2008
2009
2010
2011
2012
2013
30.06.2014
G DP ex p en d i t u re c o mp o n en t s ( s h a re i n G DP )
140%
120%
100%
80%
60%
40%
20%
0%
-20%
Public consumption
Gross savings
Net export
2013
30.06.2014
Private consumption
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
-40%
16
G ro w t h o f l en d i n g t o ma i n s ec t o rs o f
ec o n o my
100%
80%
60%
40%
20%
Construction
Services*
0%
Agriculture
Industry
2007
2008
2009
2010
2011
2012
2013
2014 1 H1
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
H1
9.9% (less
indebted)
2.3% (less
indebted)
2.4% (less
indebted)
4.2% (less
indebted)
2.1% (less
indebted)
14.49%
(less
indebted)
11.1%
(less
indebted)
5.0% (less
indebted)
2.4% (less
indebted)
1.8% (less
indebted)
6% (less
indebted)
2.0% (less
indebted)
221.7%
(moderatel
y indebted)
170.31%
(moderatel
y indebted)
148.0%
(less
indebted)
150.0%
(less
indebted)
139.4%
(less
indebted)
128.7%
(less
indebted)
3.1% (less
indebted)
0.7% (less
indebted)
89.8% (less
indebted)
2.9% (less
indebted)
0.6% (less
indebted)
81.6% (less
indebted)
4.2% (less
indebted)
0.7% (less
indebted)
79.8% (less
indebted)
4.6% (less
indebted)
0.9% (less
indebted)
77.6% (less
indebted)
Debt
service/
Export
Interest/
Export
Debt/
Export
Debt/GDP
(limit 50%) 22.3% 18.2% 14.0% 13.6% 35.7% 34.2% 36.4% 37.6% 37.5% 36.2%
17
(mln AMD)
50000
0
-50000
-100000
-150000
-200000
30.06.2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
-250000
2 . 2. F O R EI G N T RA D E
5000
4000
3000
2000
1000
0
2009
2010
2011
2012
2013
2014
H1
18
2100
1800
1500
200
1200
900
100
600
300
0
2009
2010
2011
2012
2013
2014
H1
Other
Exports (right-hand scale)
Other
23%
CIS
countries
23%
China
10%
Iran
6%
EEC
countries
32%
USA
6%
I mp o rt
CIS
countries
28.0%
Other
23.0%
Turqey
5.3%
Iran
4.4%
USA
3.3%
China
9.3%
EEC
countries
26.7%
19
2 . 3. N E T FA C T OR I NC O M E S A ND T RA N S FE R S
The remittances were of great importance in terms of
financial stability.
35%
30%
25%
1600
1200
20%
15%
800
400
10%
5%
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
90000
60000
30000
0
Q 1
2008
2009
Q 2
2010
Q 3
2011
2012
Q 4
2013
2014
20
(AMD)
2013*
2014* I .
2012
2011
2010
30%
25%
20%
15%
10%
5%
0%
2009
180000
150000
120000
90000
60000
30000
0
2008
2007
2006
2 . 4. H O U S EH O L D I NC O M E A ND D EB T B U RD E N
F u t u re c o n d i t i o n s i n d ex a n d i t s c o mp o n en t s
65
60
55
50
45
40
35
I III I III I III I III I III I III I III I III I
06
07
08
09
10
11
12
13
14
Future conditions index
Expectation of major purchases compared to the current quarter
Expectations of financial conditions change in the upcoming quarter
Expectations of household employment change in the upcoming quarter
17
18
Ho u s eh o l d s ' d eb t a n d i n c o me i n d i c a t o rs , %
200
40
35
30
25
20
15
10
5
0
160
120
80
2013
2012
2011
2010
2009
2008
2007
2006
40
2014 H1
Current conditions sub-index and future conditions subindex as two components of Consumer Confidence Index 18
are used to denote households economic conditions and
income. In the second quarter of 2014, the future conditions
2005
21
Th e s t ru c t u re o f h o u s eh o l d l i a b i l i t i es t o
fi n an ci al i n s ti tu ti o n s
(mln AMD)
1000000
800000
600000
400000
200000
Banks
Credit organizations
2014 H1
2013
2012
2011
2010
2009
2008
2007
2006
Pawn shops
Co n s u mer a n d mo rt g a g e l o a n p o rt f o l i o o f
b a n ks a n d c red i t o rg a n i z a t i o n s
(mln AMD)
700000
600000
500000
400000
300000
200000
100000
0
JMMJ SNJMMJ SNJ MMJ SNJ MMJ SNJ MMJ SN JMMJ SN JMM
08
09
10
11
12
13
14
Mortgage loan portfolio of banks and credit organizations
Consumer loan portfolio of banks and credit organizations
2
25%
As o f 30.06.2014
5
28%
1
33%
4
9%
3
5%
2
25%
22
2 . 5. R E A L E ST AT E P RI C E S
0
I III I III I III I III I III I III I III I III I III I III I III I III I
02 03 04 05 06 07 08 09 10 11 12 13 14
A p a rtmen ts p ri c es b y c o mmu n i ti es i n
Yerev a n (s q m)
AMD
500000
7%
6%
400000
5%
300000
4%
3%
200000
2%
100000
Ajapnyak
MalatiaSebastia
Nubarashen
Average in
Yerevan
Shengavit
Avan
Erebuni
1%
Davtashen
100
Arabkir
QanaqerZeytun
Nor-Norq
200
Center
0%
20
23
R ea l es t a t e s a l e a n d p u rc h a s e t ra n s a c t i o n s
i n d ex
150
130
110
90
70
50
30
J MMJ SN JMMJ SN JMMJ SN J MMJ SN J MMJ SN J MMJ SN J MM
08
09
10
11
12
13
14
V o l u me o f l o a n s t o rea l es t a t e ma rket
Percentage change in
H1 2014, y/y
Sources of financing
59782
100%
-10.7%
6802
11.4%
-53.5%
52980
88.6%
1.3%
2014 H1 completed
residential buildings
(sq. m)
Share in total
mln AMD
280000
Total, of which:
245000
State budget
210000
175000
Corporations funds
140000
105000
Household funds
70000
35000
0
J S N J M M J S N J M M J S N J M M
11
12
13
14
Real estate transactions
Residential and non-residential buildings construction
Real estate renovation mortgage loans
Real estate purchase mortgage loans
24
SUMMARY
There was economic growth reported in the first half of
2014, with the growth rate slowed down due to sluggish
economic activity in trade partners' countries as well as weak
investment climate and bad weather domestically. Economic
growth was fuelled mainly by the services sector while growth
rate in other sectors has been relatively low. The first half of
2014 saw a low inflationary environment as prices of some
food products plunged considerably and the effect of energy
price increase in July 2013 phased out. The growth of noncommercial transfers which further had a significant impact
on living standards of households, was however modest in
comparison with previous years. Overall, there are risks to
economic growth slowdown in 2014 amidst external and
domestic developments, which may have a negative impact
on financial stability.
25
3 . F IN A N C IA L M A R K E T S T A B I L IT Y O F
ARMENIA
3 . 1. M O N E Y A ND CA PI TA L M AR K ET
Interest rates in the financial market further trended
down.
Mo n t h l y v o l u me o f rep o t ra n s a c t i o n s a n d
rep o i n t eres t ra t es
(bln AMD)
450
13
360
11
270
180
90
3
J M M J SN J M M J S N J MM J SN J M M
11
12
13
14
Volume of repo agreements with Central Bank
Volume of interbank repo agreements
Interbank repo interest rate (right-hand scale)
V o l u me o f t ra n s a c t i o n s o n c red i t res o u rc e
p l a t f o rm a n d w ei g h t ed a v era g e i n t eres t ra t e
(bln AMD)
800
700
600
500
400
300
200
100
0
12
The yield curve23 shows that at the end of the first half of
the year, relative to the yearend, yields of short-term treasury
bills narrowed but yields of long-term treasury notes grew in
the secondary market.
10
8
6
4
2
0
J M M J S N J M M J S N J M M J S N
11
12
13
Volume of transactions on credit resource platform (left-hand scale)
Weighted average interest rate (right-hand scale)
120%
115%
110%
105%
100%
95%
23
01/05/2014
01/02/2014
01/11/2013
01/08/2013
01/05/2013
01/02/2013
01/11/2012
01/08/2012
01/05/2012
01/02/2012
01/11/2011
01/08/2011
01/05/2011
01/02/2011
01/11/2010
01/08/2010
01/05/2010
90%
26
The yield curve involves dependence between the yields and maturities of
government bonds. Starting from July 2013, the Central Bank is using a new
approach to building the yield curve by applying the Nelson and Siegel
Model; this is a parametric statistical model and it approximates the yield
curve of all periods as a function.
24
Short-term treasury bills are considered to be 6-month bills and long-term
treasury notes, 10-year notes.
25
There are 5 indices calculated for government bonds_4 for coupon bonds
and 1 for discount bonds. The coupon bond indices are G03, G05, G5I,
which cover bonds with maturities, respectively, from 0 to 3 years, 0 to 5
years and 5 years and more; and GMI, which is a coupon bond index.
Indices include the bonds issued in AMD by the Ministry of Finance, with
semi-annual fixed coupons and AMD 1 billion and higher turnover. Discount
government bonds TBI include bonds with maturity of one week and more,
with AMD 400 million and higher turnover. For more details, please see the
CBA website.
8.86
9.29
11.45
10.64
0.39
1.52
2.04
12.54
5.39
11.23
11.08
11.97
11.36
10200
138791
182237
87400
269637
37
1842
3113
5192
8305
9
8
01/12/2013
G03
G05
G5I
GMI
5819
63631
89471
30280
119791
6
5
4.9
53.1
74.7
25.3
100
1.58
2.00
5.53
2.89
19.2
1004.5
1788.5
1675.4
3463.8
01/06/2014
S p rea d o f 6 -mo n t h a n d 1 0 -y ea r b o n d s
TBI
0.33
20 year
2038
15 year
1657
7 year
774
10 year
301
5 year
4 year
MD
11
10
12
3 year
7.7
Yi el d c u rv e c h a n g e
2 year
GMI
3.08
1 year
G5I
5.94
9 month
G05
1.71
6 month
G03
1.32
3 month
TBI
0.37
1 month
Modified duration
1 day
Index
4
3
4.2
186.6
481.8
505.9
788.9
7/9/13
7/23/13
8/6/13
8/20/13
9/3/13
9/17/13
10/1/13
10/15/13
10/29/13
11/12/13
11/26/13
12/10/13
12/24/13
1/7/14
1/21/14
2/4/14
2/18/14
3/4/14
3/18/14
4/1/14
4/15/14
4/29/14
5/13/14
5/27/14
6/10/14
6/24/14
9
8
7
6
5
4
3
2
1
0
12
10
8
6
4
2
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
Treasury bills allocation volumes
Weighted average yield (right-hand scale)
S ec u ri t y t ra d es b y i n v es t men t s erv i c e
p ro v i d ers
(bln AMD)
100
80
60
40
20
0
J MM J S N J MM J S N J M M J S N J MM J SN J M M
10
11
12
13
14
Government bonds
Shares
Corporate bonds
27
V o l u me o f t ra n s a c t i o n s w i t h g o v ern men t
s ec u ri t i es a n d v o l u me o f t ra n s a c t i o n s w i t h
g o v ern men t s ec u ri t i es / o u t s t a n d i n g
g o v ern men t s ec u ri t i es ra t i o
40
35
30
25
20
15
10
5
0
(bln AMD)
50
40
30
20
10
0
J MM J S N J MM J SN J M M J SN J MM J S N J MM
10
11
12
13
14
Government short-term bonds
350
4000
3000
2000
1000
0
150
300
250
200
100
50
3 . 2. F O R EI G N E XC HAN G E M A RK E T
0
J M M J S N J M M J S N J M M J S N J M M J S N J MM
10
11
12
13
14
Equity shares
Corporate bonds
Government bonds
Number of transactions (right-handed scale)
28
V o l u me o f o p era t i o n s i n ex c h a n g e ma rket
o f A rmen i a a n d t h e ex c h a n g e ra t es
(mln USD)
600
440
500
420
400
400
300
380
200
360
100
340
320
J M M J S N J M M J S N J M M J SN J M M
11
12
13
14
Volume of stock exchange operations
Interbank purchases
SUMMARY
Interbank sales
Stock exchange rate (right-hand scale)
400000
300000
200000
100000
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
Purchase, USD
Sale, USD
Purchase, RUB
Sale, RUB
Purchase, EUR
Sale, EUR
14
550
12
10
500
450
400
350
300
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
AMD/USD
AMD/EUR
AMD/RUB (right-hand scale)
29
29
4 . S T A B IL IT Y O F F I N A N C I A L IN S T IT U T IO N S
OF ARMENIA
4
0.9%
5
1.5%
2
7.4%
1
88.9%
3 1 . 12.2013
3
1.5%
4
0.8%
5
1.8%
2
6.4%
4 . 1. C O M M E R CI A L BA NK S
1. Banks,
2. Credit organizations,
3. Insurance companies,
4. Investment companies,
5. Other financial institutions
1
89.5%
B a n ki n g s y s t em s t a b i l i t y ma p
Capital adequacy
Foreign exchange
risk
Assets quality
Yield
Liquidity
30
30.06.2013
30
30.06.2014
2013
2012
Deposits/GDP
30.06.2014
Loans/GDP
2011
2010
2009
2008
2007
2006
2005
2004
43%
39%
35%
31%
27%
23%
19%
15%
11%
7%
3%
2003
Broad money/GDP
S h a re o f 4 l a rg es t b a n ks ` a s s et s , l i a b i l i t i es
a n d c a p i t a l i n t o t a l b a n ki n g s y s t em
50%
40%
30%
20%
10%
0%
Assets
30.06.14
31.12.13
31.12.12
Indicators
31.12.11
Total assets
0.0775
0.0787
0.0699
0.0710
Total liabilities
0.0792
0.0705
0.0727
0.0734
Total capital
0.0644
0.0637
0.0613
0.0628
Liabilities
Capital
2008
2009
2010
2012
2013
30.06.2014
2011
F o rei g n i n v es t o rs ' p a rt i c i p a t i o n i n b a n ki n g
s y s t em c a p i t a l o f A rmen i a
100%
40%
20%
Non-residents
Residents
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0%
30.06.2014
60%
2003
31
31
2
0.4%
4
0.1%
5
3.3%
1
91.2%
2013
30.06.14
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
80%
64%
48%
32%
16%
0%
2002
2100
1800
1500
1200
900
600
300
0
12%
Constraction
11%
10%
+ 2 .1
Public
catering
9%
Consumer
8%
+ 0.1
7%
6%
Transport
5%
+ 0 .9
Mortgage
+ 1 .7
Industry
Trade
+ 2.2
+ 2 .2
4%
+ 0 .6
3%
2%
Agriculture
1%
0%
0%
3%
6%
Belarus
Ukraine
Russia
Armenia
Georgia
Kazakhstan
30.06.2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
21%
18%
15%
12%
9%
6%
3%
0%
Source: IMF.
32
S t ru c t u re o f b a n k l o a n s t o res i d en t s , b y
ec o n o my s ec t o rs
(bln AMD)
100%
2000
80%
1500
60%
1000
40%
500
20%
2013
30.06.14
2012
2011
2010
2009
2008
2007
2006
2005
2004
0%
2003
Other
Financial sector
Consumer (including mortgage)
Trade
35
Construction
Agriculture
30.06.2014
25 % of watched,
substandard and
doubtful loans
classified into
losses
AMD 22.0 billion or
5.0% of regulatory
capital of the
banking system
Total capital
adequacy of the
banking system in
case of stress
scenario
15.5%
Stress scenarios
75 % of
doubtful loans
classified into
losses
Industry
30 % of standard
loans classified
into watching
loans
16.0%
15.0%
2013
2012
2011
2010
Loans to individuals
45%
450000
30%
300000
15%
150000
30.06.14
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0%
2003
Stress scenarios
30.06.2014
30.06.2014
Loans to businesses
2009
2008
2007
2006
2005
2004
0%
2003
34
22
20
18
16
14
12
10
8
6
4
2
0
Number of banks
100
Th e n u mb er o f b a n ks v i o l a t i n g c a p i t a l
a d eq u a c y reg u l a t o ry ra t i o u n d er d y n a mi c
g ro w t h o f l o a n l o s s es
85%
90%
95%
16.0%
40%
45%
50%
55%
60%
65%
70%
75%
80%
16.2%
1%
6%
10%
15%
20%
25%
30%
35%
33
2013
2012
2011
30.06.2014
2010
2009
2008
2007
2006
2005
2004
2003
0%
31-90 days
30.06.14
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
25%
0%
Up to one year
2013
Major liabilities
30.06.2014
2012
2011
2010
2009
2008
2007
2006
2005
2004
35%
30%
25%
20%
15%
10%
5%
0%
2003
700000
600000
500000
400000
300000
200000
100000
0
150%
1500
Loans
125%
1000
100%
500
0
75%
50%
-1000
25%
J 14
J 13
J 12
J 11
J 10
J 09
J 08
J 07
J 06
J 05
-2000
J 04
-1500
J 03
Deposits
-500
34
0%
Th e n u mb er o f c o mmerc i a l b a n ks v i o l a t i n g
l i q u i d i t y reg u l a t o ry ra t i o s i n c a s e o f
i n d i v i d u a l s ' c a l l a n d t i me d ep o s i t s ru n o f f
Stress scenarios
Withdrawal of
25% of
individuals time
deposits
Withdrawal of
25% of demand
liabilities
Withdrawal of 25% of
demand liabilities and
of 25% of individuals
time deposits
21.9%
23.6%
17.4%
100.0%
146.6%
100.0%
Number of banks
21
18
15
12
9
6
3
99%
92%
85%
78%
71%
64%
50%
43%
36%
29%
22%
8%
15%
0
1%
57%
30.06.2014
Deposit runoff
Number of banks violating N21 and N22
Number of banks violating N22
Number of banks violating N21
35
Net i n c o me o f t h e b a n ki n g s y s t em f ro m
f o rei g n c u rren c y t ra d es a n d rev a l u a t i o n
(mln AMD)
17000
13000
9000
5000
1000
-3000
2013
30.06.2014
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
-7000
Stress scenarios
30.06.2014
Profit (loss) in
case of 5%
appreciation
(depreciation)
of AMD/USD
Profit (loss) in
case of 5%
appreciation
(depreciation)
of AMD/EUR
AMD -60.2
million or
0.014% of
regulatory
capital
(AMD 60.2
million)
AMD -23.8
million or
0.005% of
regulatory
capital
(AMD 23.8
million)
Banking systems
profit (loss) from
foreign currency
revaluation
Possible
maximum
10-days loss
estimated
through VaR
Model
AMD 27.2
million or
0.01% of
regulatory
capital
39
36
30.06.2014
Banking
systems
profit (loss)
Price risk
In the first six months under review, the price risk of the
banking system remains very low. The share of financial
assets available-for-sale and held at fair value through profit
or loss has contracted by 0.3 percentage point to 6.5% of
total assets.
Th e s h a re o f f i n a n c i a l a s s et s a t f a i r v a l u e
t h ro u g h p ro f i t o r l o s s a n d a v a i l a b l e f o r s a l e
f i n a n c i a l a s s et s i n t o t a l a s s et s
(bln AMD)
200
12%
175
10%
150
8%
125
100
6%
75
4%
50
2%
25
0
0%
I III I III I III I III I III I III I
08
09
10
11
12
13
14
Financial assets at fair value through profit or loss and
available for sale
The share of financial assets at fair value through profit or
loss and available for sale in total assets (right-hand scale)
30.06.2014
AMD 14.7 billion
(or 3.3% of banking
system capital)
41
37
Th e s t ru c t u re o f t o t a l reg u l a t o ry c a p i t a l
(mln AMD)
2013
30.06.2014
2012
2011
2010
2009
2008
2007
2006
2005
2004
40%
35%
30%
25%
20%
15%
10%
5%
0%
2003
510000
450000
390000
330000
270000
210000
150000
90000
30000
-30000
-90000
P ro f i t a b i l i t y ra t i o s o f t h e b a n ki n g s y s t em
(mln AMD)
30.06.2014
Net profit
2013
2012
2011
2010
2009
0%
2008
4%
2007
8%
10000
2006
12%
20000
2005
16%
30000
2004
20%
40000
2003
50000
42
This differs from IFRS mainly on the part of loan loss provisioning for
standard assets.
43
Net interest margin is calculated as ratio of net interest income to assets.
38
I n c o mes a n d ex p en s e o f b a n ki n g
s y s t em
mln AMD
2013
4 . 2. C R EDI T O RG ANI Z A TI ON S
30.06.2014
2012
2011
2010
2009
2008
2007
2006
2005
2004
600000
500000
400000
300000
200000
100000
0
-100000
-200000
-300000
-400000
-500000
-600000
2003
Non-interest expense
Interest expense
Recovery
Non-interest income
Interest income
31.12.2013
31.12.2014
Growth (%)
Assets
209841599
242183153
15.4
Liabilities
132243167
145819185
10.3
77598432
96364328
24.2
5852591
3872024
Capital
Net profit
B a n ki n g s y s t em R OA i n s el ec t ed E a s t
E u ro p ea n a n d CI S c o u n t ri es
6%
4%
2012
30.06.2014
Kazakhstan
30.06.2014
Armenia
Georgia
2013
Russia
Ukraine
2013
Bulgaria
Czech Republic
2011
2010
2009
2008
2007
2006
2005
2003
2004
Belarus
B a n ki n g s y s t em R OE i n s el ec t ed E a s t
E u ro p ea n a n d CI S c o u n t ri es
Belarus
Bulgaria
Czech Republic
Russia
Ukraine
Armenia
Georgia
Kazakhstan
2012
2011
2010
2009
2008
2007
2006
31%
26%
21%
16%
11%
6%
1%
-4%
-9%
2005
0%
-2%
-4%
2004
2%
2003
Source: IMF.
39
B a l a n c e o f l o a n s t o res i d en t s b y c red i t
o rg a n i z a t i o n s , b y s ec t o rs
(bln AMD)
100%
225
200
80%
175
150
60%
125
100
40%
Other
2013
30.06.14
2012
2011
2010
2009
2008
2007
2006
2005
0%
25
0
2004
75
50
2003
20%
Financial sector
Trade
Construction
Stress scenarios
Agriculture
Industry
30.06.2014
Total loss of
credit
organizations
25 % of loans in
watched, substandard
and doubtful
categories classified
into loss loans
75 % of loans
in doubtful
category
classified into
loss loans
30 % of loans
in standard
category
classified into
watched loans
AMD 549.9
billion or 0.6%
of regulatory
capital
4 . 3. S E C U RI TI E S MAR K E T PA R TI CI P AN T S
Th e s t ru c t u re o f a s s et s i n t h e c a p i t a l a d eq u a c y
ra t i o o f i n v es t men t c o mp a n i es a s o f
30.06.2014.
28%
2%
70%
Credit Risk
Market Risk
Operational Risk
40
4 . 4. I N S U RA N C E C OM P A NI E S
As of June 30, 2014, there were 9 insurance companies 45
licensed to perform insurance business in the Republic of
Armenia.
In the period under review, the amount of assets of
insurance companies has reduced by 7.6% to AMD 46.2
billion and the amount of liabilities decreased by 14.1% to
AMD 29.2 billion. However, total capital has grown by 6.3%
to AMD 17.0 billion. During the semester, the share of
insurance companies in the domestic financial sector
contracted by 0.1 percentage point to 1.4% of the financial
sector assets. In the period under review, relative to the
same reference period last year, the amount of accrued
premiums, the main indicator of insurance activity, has
plunged by 30.8% to AMD 15.7 billion (the drop of this
indicator in the previous reference period was 4.7%).
The annualized premiums to GDP ratio, another key
indicator of insurance companies, was 0.65%, which had
fallen by 0.18percentage point in relation to 2013 46. In June
2014, the premium per capita ratio was AMD 9,546 versus
AMD 11,850 reported as of December 2013.
I n s u ra n c e s ec t o r a s s et s , a s o f 3 0 . 0 6 . 2 0 1 4
5
5%
6
5%
7
4%
8
3%
9
2%
10
1%
11
12%
4
6%
1
32%
3
11%
2
19%
45
41
Ma i n ra t i o s o f i n s u ra n c e s ec t o r o f A rmen i a
(AMD)
0.9%
14000
12000
10000
0.6%
8000
6000
0.3%
4000
2000
30.06.2014
2013
2012
2011
2010
2009
2008
0
2007
0.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1
Solvency risk
L o s s a n d ex p en s e ra t i o s o f I n s u ra n c e
s ec t o r
140%
120%
100%
80%
Stress scenarios
60%
30.06.2014
Growth of reimbursement rates, 10%, and
insurance payments increase, 5 %
40%
20%
Loss ratio
30.06.2014
2013
2012
2011
2010
2009
2008
2007
0%
Expense ratio
Credit risk
Allocating funds of the insurance sector in low-risk assets
allows keeping investment risk at a low level. Assets
equivalent to technical reserves are invested primarily in
time and demand deposits with commercial banks as well as
government and non-government bonds.
47
The loss ratio was calculated using the following formula: (net accrued
indemnity + net provisions to technical reserves (except for unearned
insurance premium reserves, UIPR) + other transaction costs on insurance) /
(earned insurance premiums sums refunded on the contracts terminated).
48
The expense ratio was calculated using the following formula: non-interest
expense / (earned insurance premiums sums refunded on the contracts
terminated).
42
Th e s h a re o f ri s k w ei g h t ed a s s et s a n d req u i red
s o l v en c y i n i n s u ra n c e s ec t o r c a p i t a l a d eq u a c y
ra t i o , a s o f 3 0 . 0 6 . 2 0 1 4
Stress scenarios
30.06.2014
Classifying 30% of
standard assets
into watched
category
Classifying 5% of
standard assets
into loss
category
Sharp increase of
outstanding claims
reserves, 25%
159.0%
153.8%
160.0%
2.9%
34.7%
2.4%
60.0%
Credit risk
Operational risk
Insurance sectors
gain (loss) in case
of foreign
exchange
revaluation
Maximum potential
10-day loss valued
through a VaR
method
Liquidity risk
The level of liquidity risk in the insurance sector is low,
which can be seen through the results of the stress-scenario.
The level of liquidity amounted to 333.2%, while the
minimum threshold is defined 100%.
Liquidity risk assessment stress scenario
Stress scenario
30.06.2014
Required growth of outstanding claims
reserves when the stress scenario occurs
Liquidity of insurance companies when the
stress scenario occurs
43
SUMMARY
In the period under review, the financial risks were further
manageable in the banking sector which is the largest part of
the financial system. The growth rate of loans has decreased
which is positive for credit risk mitigation in the upcoming
time horizon in terms of financial stability. Some quality
deterioration in credit portfolio was recorded due primarily to
accelerated growth of the loan portfolio in the past 3 years.
However, with a possible loss arising from credit risk, capital
adequacy of the banking system remains above the
established minimum threshold. The probability of
emergence of liquidity and market risks to threaten financial
stability is estimated to be low. Non-bank financial
institutions also saw their business operations, and the
regulatory indicators were further maintained within the
required limits.
44
5 . S T A B IL IT Y O F F I N A N C I A L M A R K E T
INFRASTRUCTURES
5 . 1. I N T E RBA NK P AYM E N T S VI A E L E C TR ON I C
P A Y M E NT S Y ST E M O F C EN T RA L BA NK
In the first half of 2014, there were about 1.6 million of
payments, with a total value of AMD 5351.4 billion, executed
via the Electronic Payment System (EPS) of the Central Bank
of Armenia.
In the period under review, the value of payments kept on
growing while the number of payment messages has plunged
sharply compared to the level reported in previous years.
P a y men t s b y E l ec t ro n i c P a y men t S y s t em
( w i t h o u t ex c h a n g e ma rket t ra n s a c t i o n s )
bln AMD
thousand pieces
3000
2000
2500
1600
2000
1200
1500
800
1000
400
500
0
0
I II III IV I II III IV I II III IV I II
11
12
13
14
Payments valum
Payments quantity (right-hand scale)
Th e d y n a mi c s o f p a y men t s n u mb er b y MT
400000
350000
Payments via the Central Bank systems involve the payments made
through Electronic Payments System, EPS (excluding stock exchange trades),
payments related to transactions with indirect monetary instruments of the
Central Bank, payments executed within the Central Bank as well as final
settlements of ArCa cards system and the Government Securities Accounting
and Settlement System, GSASS (cash leg of transactions). For details, see
the paper Payments and Securities Clearance and Settlement Systems in
the Republic of Armenia, 2010.
300000
250000
200000
150000
100000
50000
0
F M AM J J O S ON D J F M AM J J O S ON D J F M AM J
12
13
14
MT-100
MT-108
MT-120
MT-122
MT-123
MT-131
MT-132
MT-133
MT-202
MT-203
45
Credit risk
There is no credit risk identified in the EPS.
Liquidity risk
The likelihood of emergence of liquidity risk and
systemic problems in the EPS is very low.
Th e d y n a mi c s o f a v era g e d a i l y p a y men t s
o n o w n ex p en s e
2.8
2.4
2.0
1.6
1.2
0.8
0.4
J MMJ S N J MM J S N J MM J S N J MM J S N J MM J S N J MM
09
10
11
12
13
14
(bln AMD)
210
180
150
120
90
60
30
0
J FMAMJ JOSONDJ FMAMJ JOSOND J FMAMJ J OSONDJ FMAMJ
11
12
13
14
46
51
For details, please see the publications Financial Stability Report, and
the Payments and Securities Clearance and Settlement Systems in the
Republic of Armenia, 2007.
52
The daily average indicator of own liquidity was calculated on the basis of
a ratio of opening liquidity on dram correspondent accounts of commercial
banks to debits (payments) through the account. Incoming payments are not
included in the indicator so that a stress-scenario can assess the likelihood
of bank rejections if additional liquidity is not available within a day, namely
to which extent would banks generate their payments using only opening
balances of their own funds. The calculation does not include cash
enhancements through their own accounts of commercial banks. The
indicator is calculated for a system level (aggregate for all banks), so
indicators may vary across commercial banks.
53
The debits side of the account, including the EPS payments on other debit
flows on the account.
1 half 2013
2 half 2013
18:0119:00
16:0117:00
14:0115:00
12:0113:00
10:0111:00
08:0009:00
1 half 2014
25
20
15
10
5
0
08:0009:00
10:0111:00
1 half 2013
12:0113:00
14:0115:00
2 half 2013
16:0117:00
18:0119:00
1 half 2014
47
System capacity
Ma x i mu m n u mb er o f p a y men t s p er h o u r, b y
mo n t h
number
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
J FMAMJ J ASONDJ FMAMJ J ASONDJ FMAMJ J ASONDJ FMAMJ
11
12
13
14
Dy n a mi c s o f t h e i n d i c a t o r ex c eed i n g 2 5 0 0
p a y men t s p er h o u r a n d i t s s h a re i n t h e
t o t a l o p era t i o n a l h o u rs o f c u rren t mo n t h
%
100
80
60
40
20
0
J F M A M J J A SO N D J F M A M J J A SO N D J F M A M J
12
13
14
Share in operational hour
Th e d y n a mi c s o f p a y men t s ex c eed i n g t h e
t h res h o l d o f 2 5 0 0 , 3 5 0 0 a n d 4 3 0 0
p a number
y men t s p er h o u r
80
70
60
50
40
30
20
10
0
J FM AMJ J AS OND J FM AMJ J AS OND J FM AMJ
12
13
14
2500-3500
3500-4300
54
The study was made to determine the nature of utmost payments per hour
(on a monthly basis) and to identify the payer behavior.
55
The 2008 Financial Stability Report of the National Bank of Denmark
states that operational availability for systemically important RTGS system,
which is compliant to ESCB system requirements, should be very high, e.g.
operational availability of TARGET was 99.65 percent, which is considered a
good indicator.
48
5 . 2. G U AR AN TY O F DE P O S I T S
In 2005, the Central Bank of Armenia established the
Deposit Guaranty Fund. The Fund acts in accordance with the
Republic of Armenia Law on Guaranteeing Reimbursement of
Bank Deposits of Individuals. An important pillar for financial
stability, the Fund contributes to strengthening the
soundness of the banking system, enhancing public
confidence in the banking system and protecting depositor
interests in the country.
In the first half of 2014, the banking sector of Armenia saw
a sustainable growth of bank deposits of individuals and the
number of depositors.
As of the end of the first half of 2014, relative to the last
year, the amount of deposits of individuals has grown by
around 6.70%, with the amount of guaranteed deposits
grown by 3.14%, to AMD 268,045,018 thousand. Relative to
the end-year 2013, the number of individuals holding
guaranteed deposit has increased by 1.72% to 1,609,636
persons (excluding former USSR Savings Bank depositors
who have been registered with VTB Armenia Bank CJSC).
In the banking system of Armenia, the biggest community
of depositors only holds deposits in local currency. As of the
end of the period under review, the share of depositors who
only hold deposits in dram was 84.56% in total. The share of
depositors who only hold foreign currency deposits was
6.50% in total. The above figures did not change much in
comparison with the previous reporting period.
At the end of the first half of 2014, the share of local
currency deposits in the banking sector of Armenia has
grown by 0.14% to 30.74% in relation to the end-year 2013.
5 . 3. C R EDI T R EGI S T RY AN D A C RA CR E DI T B U R EA U
49
Individuals
Legal persons
Total
Th e n u mb er o f req u es t s rec ei v ed d u ri n g f i rs t
h a l f o f 2 0 1 3 -2 0 1 4
25000
20000
15000
10000
5000
Outstanding
Repaid
Total
433682
1356993
1790675
19688
112555
132243
453370
1469548
1922918
0
J
2013
2014
Th e n u mb er o f l o a n s reg i s tered i n A CR A
d a ta b a s e (i n th o u s a n d s )
8000
7000
6000
5000
4000
3000
2000
1000
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
Number of loans outstanding
1200
1000
800
600
400
200
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
Individuals
Legal persons
50
Th e n u mb er o f rep o rt s p ro v i d ed b y A CR A
c red i t reg i s t ry
400000
350000
300000
250000
200000
150000
100000
50000
0
J M M J S N J M M J S N J M M J S N J M M
11
12
13
14
SUMMARY
The results of monitoring indicate that credit and liquidity
risks to the Electronic Payment System are minimized, the
level of system capacity is satisfactory, and the intraday
payments are executed uninterruptedly. No operational risks
were identified in the system, so the systems availability has
been at an internationally accepted level.
In general, the EPS operation is satisfactory. The
developments in the payment and settlement system
remained manageable, without such risks that could
undermine the financial stability.
51
C HA R T S
Regional economic growth rates .....................................................................................................................................
10
10
10
11
11
11
11
12
12
13
13
16
16
17
18
18
19
19
20
20
21
21
21
22
Consumer and mortgage loan portfolio of banks and credit organizations ..............................................................
22
Consumer loan portfolio structure of banks and credit organizations of Armenia ..................................
22
23
23
24
24
26
Volume of transactions on credit resource platform and weighted average interest rate ......................................
26
Excess funds in AMD (reserve funds in AMD/ actual reserve funds) ..........................................................................
26
27
27
27
27
Volume of transactions with government securities and volume of transactions with government
securities/outstanding government securities ratio ....................................................................................................
28
28
28
Volume of operations in exchange market of Armenia and the exchange rates .....................................................
29
29
52
29
30
30
31
Share of 4 largest banks assets, liabilities and capital in total banking system ......................................................
31
31
The structure of risk weighted assets calculated in banking system capital adequacy
index,as of 30.06.2014 ...................................................................................................................................................
32
32
The change of the share of NPLs in the loans to different sectors of economy .......................................................
32
32
33
Share of loans to the businesses and individuals in total loan portfolio ..................................................................
33
33
The number of banks violating capital adequacy regulatory ratio under dynamic growth of loan losses ............
33
The dynamics of actual and regulatory liquidity ratios of the banking system .........................................................
34
34
34
34
The number of commercial banks violating liquidity regulatory ratios in case of individuals' call and time
deposits runoff ..................................................................................................................................................................
35
Net income of the banking system from foreign currency trades and revaluation ..................................................
36
36
The share of financial assets at fair value through profit or loss and available for sale financial assets
in total assets ....................................................................................................................................................................
37
38
38
39
Banking system ROA in selected East European and CIS countries ..........................................................................
39
Banking system ROE in selected East European and CIS countries ..........................................................................
39
40
The structure of assets in the capital adequacy ratio of investment companies as of 30.06.2014 ......................
40
41
42
42
42
The share of risk weighted assets and required solvency in insurance sector capital adequacy ratio,
as of 30.06.2014 ..............................................................................................................................................................
43
45
45
46
Average daily payments, average daily opening balances, average daily opening available liquidity
comparative analyses .......................................................................................................................................................
46
47
47
53
48
Dynamics of the indicator exceeding 2500 payments per hour and its share in the total operational hours of
current month ...................................................................................................................................................................
48
The dynamics of payments exceeding the threshold of 2500, 3500 and 4300 payments ....................................
48
50
50
50
51
T AB L E S
IMF Overview of the World Economic growth Projections ..........................................................................................
17
24
27
27
31
33
Stress scenario of credit risk derived from off-balance sheet contingent liabilities ...............................................
33
35
Stress scenario of liquidity risk derived from off-balance sheet contingent liabilities ...........................................
35
36
37
37
39
40
42
43
43
43
50
54
G L O S S A RY O F T E R M S
Economic growth
Inflation
Consumer price index
Balance of payments
Foreign trade
Credit risk
Credit risk refers to the risk that a borrower will default on any type of
debt by failing to make payments which it is obligated to do. The risk is
primarily that of the lender and includes the lost principal and interest,
disruption to cash flows and increased collection costs.
Liquidity risk
Liquidity risk is the risk that a given security or asset cannot be traded
by the financial institution quickly enough in the market to prevent a
loss (or make the required profit).
Foreign currency risk is the risk that a change in exchange rate in the
market will adversely affect profits and/or capital of the financial
institution.
Interest rate risk is the risk that interest rate volatilities in the market will
adversely affect profits and/or capital of the financial institution.
Price risk
Price risk is the risk that a change in price of securities in the market or
price of similar financial instruments on balance sheets will adversely
affect profits and/or capital of the financial institution.
Standard asset
Watched asset
Substandard asset
Doubtful asset
Loss asset
Nonperforming asset
Major borrower
A party the risk on which exceeds 5 percent of total capital of the bank.
Major liability
55
Total liquidity
Current liquidity
Capital adequacy
Leverage
Off-balance sheet contingent Off-balance sheet contingent assets include outstanding credit lines,
asset
credit cards and overdrafts as well as letters of credit, guarantees and
warranties provided.
Net provisioning
Net foreign currency position The difference between assets and liabilities in FX assets and local
currency assets containing FX risk.
The Herfindahl-Hirschman
index
This index is defined as the sum of the squares of the market shares. It
varies between 0 and 1, characterizing the level of concentration (values
near to 0 denote lower concentration.
The difference of the present value of total assets and present value of
total liabilities.
Spread
ABBREVIATIONS
CBA
GDP
GNDI
NSS
IMF
UNO
CIS
ECB
USA
FRS
NMC
FDI
RF
Russian Federation
IFRS
MTPL
CDA
TB
Treasury Bills
EPS
GSASS
The Central Bank of the Republic of Armenia, 6, Vazgen Sargsyan str., 0010, Yerevan, http:// www.cba.am
56