{ "title": "IMF Executive Board Concludes Armenia's 2018 Financial System Stability Assessment", "publication": "IMF News, December 3, 2018", "sourceUrl": "https://www.imf.org/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment", "canonical": "https://www.imf.org/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment", "overlayPath": "/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/index.md", "summary": "Press Release No. 18/447; December 3, 2018.", "publishDate": "2018-12-03", "sections": [ { "heading": "Background and context", "content": "- Press Release No. 18/447; December 3, 2018.\n- On November 30, 2018, the Executive Board of the International Monetary Fund (IMF) discussed the Financial System Stability Assessment (FSSA) of Armenia.\n- The Financial Sector Assessment Program (FSAP) was established in 1999 and is mandatory for the 29 jurisdictions with systemically important financial sectors; its key findings are summarized in an FSSA." }, { "heading": "Macroeconomic and financial-sector overview", "content": "- Armenia is a small open highly dollarized economy subject to external shocks.\n- The financial system is relatively shallow and dominated by banks.\n- The banking sector’s assets equal about 78 percent of GDP.\n- Subsidiaries of foreign banks make up a sizable proportion of banking assets.\n- Capital markets are thin; external financing is important for long-term financing given a small domestic investor base." }, { "heading": "Recent performance and indicators", "content": "- Armenia’s financial system has expanded further since the 2012 Financial Sector Assessment Program (FSAP).\n- The country’s macroeconomic performance has been satisfactory, and the financial system has been stable.\n- The banking sector weathered the 2014 economic slowdown, aided by additional capital injected by shareholders, several mergers, and improved regulation and supervision.\n- At present, financial soundness indicators show signs of improvement.\n- All banks meet the 12 percent minimum capital requirement.\n- Bank profitability has gradually recovered, although it is still below pre-crisis levels.\n- Nonperforming loans (NPLs) have fallen; a substantial proportion is covered by provisions, although NPL ratios are still high in a few banks." }, { "heading": "Progress since the 2012 FSAP (Central Bank of Armenia actions)", "content": "- Measures adopted to mitigate risks from dollarization:\n - Higher risk-weights and provisioning were imposed on dollar assets to absorb credit risk due to unhedged borrowing.\n - Liquidity requirements were introduced in 2012 to mitigate the higher liquidity risk of foreign exchange funding.\n- Strengthened financial oversight:\n - Adoption of a risk-based supervision framework.\n - Addressing gaps in the regulatory framework identified in the previous FSAP." }, { "heading": "Executive Board assessment — main findings", "content": "- Directors agreed with the main findings and recommendations of the FSSA.\n- Progress welcomed:\n - Strengthening financial sector oversight.\n - Promoting financial deepening to enhance resilience.\n - CBA reforms since the 2012 FSAP, notably prudential measures to mitigate risks from dollarization and upgrading the risk‑based supervision framework.\n- Remaining vulnerabilities highlighted:\n - High levels of dollarization.\n - Insufficient liquidity cushions in foreign currency.\n - Need for further refinement of supervision and crisis management arrangements." }, { "heading": "Executive Board recommendations and priorities", "content": "- Capital and buffers:\n - Adopt the capital conservation buffer and the surcharge for domestic systemically‑important banks as planned.\n - Be prepared to implement the countercyclical capital buffer if the current trend in credit growth persists.\n- Credit-risk and dollarization measures:\n - Adopt measures to address credit risk from unhedged foreign exchange exposures, such as introducing a stressed debt service to income ratio limit.\n - Gradually introduce the requirement for banks to maintain reserves in foreign currency for liabilities denominated in foreign currency.\n- Liquidity standards:\n - Introduce the liquidity coverage ratio and net stable funding ratio in Armenian dram and in U.S. dollars.\n- Supervision and regulatory practices:\n - Refine the risk‑based supervision framework for a more granular assessment of banks’ capital needs.\n - Enforce large exposure limits.\n - Amend the definition of nonperforming and restructured loans in line with international best practices.\n - Implement measures to improve transparency in reporting and accounting by corporations and sub‑national and state‑owned entities.\n- Financial safety net and crisis management:\n - Fully develop all components of the financial safety net and crisis management arrangements in line with international standards and best practices.\n - Expand supervisory memoranda of understanding to include resolution planning of foreign subsidiaries in Armenia.\n- AML/CFT:\n - Continue efforts to address remaining gaps to align the AML/CFT framework with the Financial Action Task Force standard.\n\nSource: IMF Press Release No. 18/447 (December 3, 2018).\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Republic of Armenia and the IMF\n- Financial Sector Assessment Program (FSAP)\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment" } ], "bullets": [ "[Markdown version](/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/index.md)", "[Structured JSON version](/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/index.json)", "[Bundle manifest](/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/bundle-manifest.json)", "Published: December 3, 2018", "Press Release No. 18/447; December 3, 2018.", "On November 30, 2018, the Executive Board of the International Monetary Fund (IMF) discussed the Financial System Stability Assessment (FSSA) of Armenia.", "The Financial Sector Assessment Program (FSAP) was established in 1999 and is mandatory for the 29 jurisdictions with systemically important financial sectors; its key findings are summarized in an FSSA.", "Armenia is a small open highly dollarized economy subject to external shocks.", "The financial system is relatively shallow and dominated by banks.", "The banking sector’s assets equal about 78 percent of GDP.", "Subsidiaries of foreign banks make up a sizable proportion of banking assets.", "Capital markets are thin; external financing is important for long-term financing given a small domestic investor base.", "Armenia’s financial system has expanded further since the 2012 Financial Sector Assessment Program (FSAP).", "The country’s macroeconomic performance has been satisfactory, and the financial system has been stable.", "The banking sector weathered the 2014 economic slowdown, aided by additional capital injected by shareholders, several mergers, and improved regulation and supervision.", "At present, financial soundness indicators show signs of improvement.", "All banks meet the 12 percent minimum capital requirement.", "Bank profitability has gradually recovered, although it is still below pre-crisis levels.", "Nonperforming loans (NPLs) have fallen; a substantial proportion is covered by provisions, although NPL ratios are still high in a few banks.", "Measures adopted to mitigate risks from dollarization:", "Strengthened financial oversight:", "Directors agreed with the main findings and recommendations of the FSSA.", "Progress welcomed:", "Remaining vulnerabilities highlighted:", "Capital and buffers:", "Credit-risk and dollarization measures:", "Liquidity standards:", "Supervision and regulatory practices:", "Financial safety net and crisis management:", "AML/CFT:", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)", "[Republic of Armenia and the IMF](http://www.imf.org/external/country/ARM/index.htm)", "[Financial Sector Assessment Program (FSAP)](https://www.imf.org/external/np/fsap/fsap.asp)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/index.md", "json": "/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/index.json", "bundleManifest": "/en/news/articles/2018/12/03/pr18447-imf-executive-board-concludes-armenias-2018-financial-system-stability-assessment/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T22:22:54.046Z" }