On Saturday the Banks Union of Armenia held its annual general meeting in Dilijan city. PM Tigran Sargsyan took part in the general meeting as well. Tigran Sargsyan presented five theses, which are interesting not due to their executive effectiveness but also the manner of presentation and structure.
The bankers, who know Tigran Sargsyan better than anyone else, are petitioned to transform from global way of thinking to particular and specific actions. In order to understand this thesis, we need to understand the second one, according to which in the ongoing globalization process the world is getting smaller and narrow, where we should have our world, which is the Armenian world. “The Armenian world, which is the second thesis, already exists and we need to see it. When working on its policies the CB doesn’t base on the economic processes in the country, but the financial flows in the Armenian world, which directly influence on inflation and the demand for money. The CB cannot implement effective policy without considering this fact. The activities of the Armenians in different parts of the world influence on the financial market, investments and services in our country. We should create such financial structures where these facts are considered,” said Tigran Sargsyan.
The third thesis suggested by Tigran Sargsyan concerns creation of a financial center. Certainly this financial center has not been formed yet, but they say that it has some specific characteristics. “Certainly our financial center has specific characteristics and we should form it basing on the platform of the Armenian world,” said Tigran Sargsyan.
As we haven’t formed a financial center yet, let’s refer to the fourth thesis, which concerns the pan-Armenian bank. The PM says that this is the idea of Serzh Sargsyan and he suggested this one year ago when he was prime-minister and said that “we still cannot offer the necessary financial tools to the Armenian world.”
Pan-Armenian bank
As the government says that this institution is very important, we will briefly describe its characteristics. According to the CB president Artur Javadyan, it will be the first result of the cooperation between our state and the private sector. It will be involved in financing pan-Armenian projects and projects with innovative and long-term nature. The PB will mainly operate based on trade principles, but Javadyan assures that it will not be a competitor for the banks operating in Armenia. Specifically, it will not be involved in activities such as opening bank accounts, it will not accept credits less than $100 million and will not provide financial support for small projects. The legal form of the entity is open joint stock company, which will have $100 million charter capital. The state will owe 20% in the charter capital, and the other shares will be owned by domestic and international financial organizations and private investors. The board of the bank will consist of about 15 members, 5 out of which will be representatives of the government. The CB will prepare the draft law on the PB during one month. It will be submitted to the parliament in September. Thus, Javadyan says that this bank will be established either at the end of this year or in the beginning of next year.
Fifth thesis: “Guys, let’s live in peace”
With the fifth thesis Tigran Sargsyan petitions to strengthen the cooperation between the RA government, CB, the Banks Union of Armenia and non-governmental organizations, including the unions in charge of protecting the rights of consumers, “despite the fact whether they like those these or no.” “There must be an environment of peace in the Armenian world, which means that there should also be a new culture of dialog, which excludes any enmity and intolerance. Furthermore, there should be opportunities for different interests in the environment of cooperation, also there should be a new Armenian harmony,” said Tigran Sargsyan.
Return to reality
Certainly, these are good ideas but until we have the Armenian world I said with its harmony and peaceful environment, we have to live in the existing reality.
The existing reality is that the banking system does not carry out its main function, which is the role of financial intermediate, which gives the free resources of people to the business field. The interest rates of the money banks give to the private sector is too high for a country which wants to become a financial center, this interest rate is about 13-14%. Furthermore, there are many problems with bureaucratic instances and bribery when applying for credit. Besides that, there is a strange thing, which is that the price of dram is growing, but still the banks are offering higher interest rates for dram than for the other currencies.
The most important thing supporting the development of the banking system is credibility of the society toward banks. As for this credibility, it is directly connected with credibility toward the state. If a citizen does not trust the state, he/she will not trust the central bank of that country and the banking and other financial institutions under the control of that central bank. In other words, Dilijan cannot become a financial center while people are attending rallies in Yerevan by horses.