Armenia

A SUPPLEMENT TO EUROMONEY - April 1997

Introduction

Both in Armenia and the former Soviet Republics the financial and, in particular, the banking systems were the last area where reforms were introduced. When the Soviet Union collapsed, the newly independent republics were developing and pursuing their own economic policies, though they were all still in the rouble zone. This had an adverse effect on the financial and banking system development.

In the early 1990s the banking system's capital was increased considerably. It was mainly influenced by strict statutory and total capital minimum requirements of the Central Bank of Armenia. In addition to this, a clarification of the regulatory framework and closer approaches to international standards in 1995 resulted in a significant inflow of foreign capital.

In April 1993 banking legislation was ratified by parliament, enabling the implementation of an independent monetary policy. Later, faced with the breakdown of the old rouble zone, Armenia assumed monetary independence and introduced its own national currency, the dram, in November 1993. The following spring the Central Bank of Armenia was established. A difficult period followed which lead to inflation of 500% and a sharp decline in the exchange rate.