/By AzerNews/

By Mushvig Mehdiyev

There are only two options left for banks in Armenia amid the financial crisis: either merge or turn into a credit organization.

The central bank adopted an unparalleled decision last year to urge the banks to increase their overall capital from $10 million to $60 million. The new decision is expected to come into force in 2017.

Now, several commercial banks are in trouble given lack of enough capital to increase their capital to the mandatory amount. The specialists even forecast that as a result of the central bank's decision, the number of banks declaring their bankruptcy after 2017 will increase.

There are 21 commercial banks functioning in Armenia today and only 5 of them have the charter capital of $60 million. Ameriabank, VTB-Armenia, Akba-Credit-Agrikol bank, Ardshininvestbank and HSBC bank are the banks in Armenia, which have the required amount in the cash boxes, according to the central bank's data for September, 2014. In other words, these five banks will not face any problem in regard to the CB's surprise decision.

The total capitals of the two commercial banks - Armbusinessbank and Inecobank - are slightly below the considered $60 million average norm. They are among the banks which are expected to have no problem to meet the central bank's demand in 2017.

But the new decision will inflict a heavy blow on eight commercial banks in the post-Soviet country, since their overall money reserve is even under the current $10 million threshold.

The experts believe that these banks will either merge to achieve the obligatory capital together or will just turn into credit organizations to remain in Armenia's financial market. The new decision could finally bring some of them to closure, claim the specialists.

The central bank justifies its unexpected decision with a move to ensure the credibility and protection of the commercial banks.

Smbat Nasibyan, Co-Founder of the Converse Bank, believes there is already a financial crisis in Armenia and the banks don’t have enough accumulated reserves to welcome the new decision.

In Azerbaijan and Georgia, Armenia's regional neighbors, the upper limit for the bank capital is around $5-6 million. This threshold paves the way to expand competitiveness in the banking sector, which is among the key determinants of financial progress.

Some in Armenia claim that the central bank's mentioned move serves to the monopolistic interests of oligarchs in the state power, who are the most influential bankers in the country.

Zoghovurd, a local newspaper in Yerevan, said the year of 2014 was unlucky for the banks in Armenia, as they finished the year with considerable financial losses.

Areximbank, Akba-Credit-Agrikol Bank, Biblos Bank and Bank BTA wrapped up the year with pure financial loses amounting to $25 million altogether.