ArmInfo.The Central Bank of Armenia has decided to increase the countercyclical capital buffer (CCB) from the current 1.75% to 2% of risk-weighted assets, which will take effect on February 1, 2027.
As noted in a statement released by the Central Bank of Armenia today, the Board of the Central Bank made this decision on July 28, 2027, guided by a comprehensive analysis of macro-financial developments and trends in the credit market. The analysis supporting the Central Bank's current decision regarding the budget classification code (BCC) revealed: First, the financial cycle index increased compared to the previous quarter, primarily due to high activity in lending and the real estate market. The estimated loan-to-GDP ratio in Q1 2026 increased to 84% (versus nearly 77.2% a year earlier during the same period).
Second, the loan portfolio continued to grow at a high annual rate. High activity was recorded across almost all lending areas. In particular, the trend of accelerated growth in consumer loans continued, reflected in high annual growth in both reserves and the volume of loans issued in the first half of 2026. Mortgage loan growth stabilized at a level below the rates of previous years. Nevertheless, the volume of mortgage loans issued in the first half of 2026 significantly exceeded the same period a year earlier. As a result, household debt burdens and debt servicing costs continued to grow, reaching levels that match or exceed historical highs.
Third, the real estate market has seen accelerating annual price growth. Given the large volumes of mortgages and construction loans provided in previous years, the Central Bank continues to focus on continuously monitoring potential credit risk accumulation on bank balance sheets and responding promptly to them.
Fourth, according to macro-stress testing estimates, the amount of additional capital required to absorb unexpected losses from a potential shock at the current stage of the financial cycle is estimated at nearly 211 billion drams, or 2.04% of risk-weighted assets.
Fifth, the banking system is currently characterized by high profitability and capital adequacy. Under these conditions, the costs of capital accumulation are clearly low, and the current level of bank capitalization is sufficient to ensure uninterrupted lending to the economy. Sixth, risks emanating from regional economic, trade, and political uncertainty continue to dominate the list of financial stability risks. In particular, given the current conflicts, there is a high probability of sharp, frequently simultaneous shocks affecting the macroenvironment.
It should be noted that the Central Bank initially decided to introduce a supplement to the bank capital ratio—the countercyclical capital buffer (CCB)—on July 31, 2020, setting it at 0% of risk-weighted assets, effective August of that year. Since then, the CCB has been maintained at zero for over two years. Then, on October 24, 2022, the Central Bank Council decided to increase the CCB from zero to 1%, effective May 2023. Further, in May 2023, it was decided to increase the CCB to 1.5% from August of that year, maintaining this level until May 2025. This level was then further increased to 1.75%. This level, judging by the current decision of the Central Bank, will remain in effect until February 2027. The countercyclical buffer is necessary to cover bank losses in the event of systemic risk reaching extreme levels in the banking sector. According to the Procedure for "Calculating and Establishing Thresholds for Capital Adequacy Buffer Supplements for Banks," the regulator reviews the CCB threshold quarterly. This buffer is intended to support the stability of the banking sector. The change in the CCB (upward or downward) depends on macro-financial conditions, the degree of uncertainty, and the systemic risk scenario.
