Annual Report 2019

20 CENTRAL BANK OF ARMENIA MAIN OBJECTIVES OF THE CENTRAL BANK Maintaining price stability: The monetary policy carried out by the Central Bank in 2019 under the inflation targeting strategy was steered to helping inflation recover gradually and bringing it to the confidence band as low inflationary environment persisted. Main factors that determined low inflation during the year included more-than-predicted contractionary fiscal policy implementation, deflationary pressures transmitted from the external sector, and some structural factors, such as increased competition in the commodity market and the shift in demand from the market of non-durable goods to that of durable goods. In such a situation, the Central Bank continued carrying out expansionary monetary policy in 2019 and, as part of that policy, it eased monetary conditions twice in fulfilment of its main objective in the medium run. Maintaining financial stability: In 2019 the Central Bank continued its efforts to strengthen financial stability in line with the financial stability strategy by taking measures to improve the regulatory framework and increase the effectiveness of supervisory activities. In the reporting year, capital conservation buffer, countercyclical capital buffers and surcharge for systemically important banks were introduced, work was done to implement the Basel 3 liquidity standards, internationally practiced macroprudential tools, such as the loan to value ratio, the debt to income ratio, and the Solvency 2. The stable macroeconomic situation and high economic growth in Armenia have created a favorable environment for sustainable development of the financial system. The capital adequacy and liquidity standards of the banking system run above the required thresholds. The banking system operated with profit while ensuring growth in key indicators. Other participants of the financial system also worked with profit and ensured growth of key indicators. In the reporting year, financial intermediation in the economy continued to grow: the financial system's assets-to-GDP ratio and lending-to-GDP ratio have grown by 8.9 pp and 4.8 pp to 106.5% and 58.7%, respectively. ANNUAL REPORT 2019

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