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Crisis expected in Armenian banking system

Armenia Materials 15 January 2013 13:09 (UTC +04:00)
Recent alarming reports have been received about the state of Armenia’s banking system, the Haykakan Zhamanak newspaper reported with reference to Armenia Today.
Crisis expected in Armenian banking system

Recent alarming reports have been received about the state of Armenia's banking system, the Haykakan Zhamanak newspaper reported with reference to Armenia Today.

According to the newspaper, problems arose in the Armenian banking system which can cause a serious crisis.

In particular, there were problems with the return of loans. Debtors cannot fulfil commitments before the banks and relending began to increase. That is, debtors take a loan from a bank to reimburse the loan in another bank.

According to current legislation in Armenia, such relending to put it mildly is not encouraged. However, the corresponding structures turn a blind eye because otherwise the system will collapse. However it is a short term solution and at some point such a financial cycle must stop.

Banks hope the Central Bank will find major financial sources to introduce funds into the banking system, but hope does not seem justified. According to some reports, four banks operating in Armenia faced serious difficulties.

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