Armenia’s banking system has recorded unprecedented growth rates in recent years, but this dynamic may also carry serious risks. This was stated by Bagrat Asatryan, emphasizing that the average annual capital growth in the banking system from 2022 to 2025 was around 20%.
He describes this as a “fantastically high” indicator, driven not only by asset expansion but also by a sharp increase in profitability. However, it is precisely here, according to the former official, that concerning trends are forming.
From External Inflows to Internal Price Increases
Asatryan recalls that a significant portion of income growth was driven by external financial flows. Against this backdrop, banks raised tariffs, strengthening their revenue base. The problem, however, is that the same policy extends to the domestic market.
“It is regrettable, but we must note that the policy of tariff increases persists domestically as well,” he points out.
The former Central Bank chairman stresses that macroeconomic stability has generally been ensured in recent years. While 8.8% inflation was recorded in 2022, the average inflation in subsequent periods was about 3%. The refinancing rate has decreased, but the average interest rate on loans, in his assessment, has not fallen and has even risen in some segments.
Refinancing at 6.5%, Consumer Loans up to 20%
Asatryan considers problematic the situation where the refinancing rate is around 6.5%, while consumer loans are provided at 17–20% and mortgage loans at 12–13%.
“It is abnormal when the regulator’s rate decreases, yet banking rates do not fall or even increase,” he emphasizes.
In his view, this indicates an incomplete competitive environment. The small market size inherently carries risks, but according to Asatryan, the issue also lies in possible internal agreements and insufficient functioning of market mechanisms.
Regulatory Levers — Are They Being Used?
Asatryan is convinced that the Central Bank of Armenia has sufficient regulatory tools and legislative powers to intervene and address gaps. Although direct setting of interest rates is a crude measure and was previously used as an extreme step, he insists there are other mechanisms to restore a healthy competitive field.
In addition to regulatory measures, Asatryan does not rule out the use of tax instruments — through the introduction of additional tax mechanisms in conditions of superprofits.
“If profits are growing, it is necessary to assess whether tariff increases were necessary or aimed at generating superprofits,” he notes.
A Systemic Issue Requiring Discussion
According to Asatryan’s assessment, the banking system is currently in an overheating phase. High profitability and active growth are positive in themselves, but if accompanied by restricted competition and disproportionate tariff hikes, they can create long-term risks for the economy.
He is convinced that the issue should become the subject of broad professional and political discussion, and regulatory bodies must take a more active stance to balance profitability with public interest.