Central Bank of Armenia raises countercyclical capital buffer for banks to 2.25%
The Central Bank of Armenia (CBA) has raised the countercyclical capital buffer for banks by 0.25 percentage point to 2.25% of risk-weighted assets. The CBA Board took the decision at its October 20 meeting, and the new rate becomes mandatory from May 1, 2027 (decision No. 282-N).
Until then, the Board’s decision of July 28, 2026 (050.0202 N) applies, requiring banks to meet a 2% countercyclical buffer as of February 1, 2027.
Why the buffer was raised
According to the CBA’s rationale, the decision followed a comprehensive analysis of the macro-financial situation and developments in the credit market.
At the end of the second quarter of 2026, loans from the financial sector to the economy reached about 87% of GDP. The credit-to-GDP gap widened to about 6.6 percentage points. The financial cycle index also rose, which the CBA attributes mainly to activity in the real estate market and high lending growth.
Annual growth of the loan portfolio remains high, comparable with previous years. Consumer lending is growing strongly, although it has slowed somewhat since the start of the year. Mortgage growth has accelerated since January after a decline last year.
Average property prices have risen significantly since the start of the year. The CBA links this to stronger external demand and growing interest in real estate as an investment asset. Together with the pick-up in mortgage lending and strong growth in construction loans, these trends may signal a new phase of acceleration in the property market and a possible build-up of risks.
The CBA stresses that further changes to the buffer rate, whether up or down, will depend on macro-financial conditions, uncertainty and the development of systemic risks.
The banking system in numbers
According to the CBA presentation, as of August 2026 (annual change in brackets):
- assets: AMD 13.77 trillion (about $37.7 billion, +18.94%)
- loans: AMD 8.44 trillion (+23.39%)
- non-performing loan ratio: 1.5% (+0.25 pp)
- liabilities: AMD 11.69 trillion (+19.95%)
- deposits: AMD 7.35 trillion (+20.83%)
- balance sheet capital: AMD 2.08 trillion (+13.58%)
- total capital adequacy: 20.4% (+0.17 pp)
- liquidity coverage ratio: 200.8%
- return on equity (ROE): 18.29% (−2.5 pp)
- return on assets (ROA): 2.9% (−0.45 pp)
Loans to the construction sector exceeded AMD 1 trillion as of August.
Yerevan apartment prices up 23.5% on average
According to the Cadastre Committee of Armenia, cited in the CBA presentation, the average price per square metre of apartments in Yerevan’s multi-apartment buildings rose 23.5% year on year and 20.32% from the end of last year.
Among the capital’s districts, prices rose most in Shengavit (29.2%), Erebuni (29%), Nor Nork (28.8%) and Nork-Marash (28.7%), and least in Kentron (12.7%) and Arabkir (18.6%).
The CBA cites demand linked to the net inflow of people into Armenia as one of the likely drivers of price growth. At the same time, 5.09 million square metres of housing were commissioned in 2020–2025, more than double the figure for the 2006–2011 construction boom (2.39 million square metres).
What the countercyclical buffer is
The countercyclical capital buffer is additional capital that banks must hold during periods of rapid credit growth and build-up of systemic risks. It is meant to absorb potential losses in a downturn and support the stability of the financial system. The CBA reviews the buffer rate every quarter.
