In order to support the sector and increase availability of loans, the Central Bank of Armenia started the process of monetary policy easing by systematically lowering the refinancing rate, which decreased by 4.5p.p. down to 6% between 2015-2017. This has pushed banks to revise rates on loans and deposits downwards, evidenced by dropping credit and deposit rates from 14,7% to 10,7% and from 9,7% to 5,3% in 2016-2017 respectively. The Central Bank of Armenia is charged with regulating the money supply, circulating currency, and regulating the commercial banks of the country. Commercial banks in Armenia include HSBC Bank Armenia, America-Cascade, Ardshinbank, Armagrobank, Armeconombank, Armimplexbank, Arminvestbank, ArmSwissBank, Bank Armcommunication, Bank “Capital,” Bank “Haykap,” Central Bank of Armenia, Commercial Bank “Ardana,” Commercial Bank Anelik, “Gladzor” Joint Stock Commercial Bank, Masis Commercial Bank, Unibank and the State Specialized Savings Bank of the Republic of Armenia. Leading foreign banks include: VTB, ProCredit Bank, and Mellat Bank. The International Monetary Fund has been concerned about the direction of policy taken by the Central Bank of Armenia and the slow pace of financial reform. Armenia’s financial sector is overbanked and beset with nonperforming credits, mainly to large state enterprises. Armenia has been a model reforming country among the former Soviet republics, and multilateral creditors are worried that public pressure may now force the government to loosen monetary and fiscal policies. It was revealed in January 1997 that the central bank’s credits to finance the government’s budget gap has surpassed their $100 million limit in the first 10 months of 1996. The bank has been forced to intervene in the domestic markets, selling foreign exchange reserves to maintain the stability of the dram. The IMF reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $141.6 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $310.3 million. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 19.4%.
