Banking Concentration Impact on Market Structure of Post-Soviet Country – Armenia

Abstract

The new wave of mergers and acquisitions after the global financial crisis intensified the interest of policy makers and academics in bank concentration and competition and the role of the state in competition policies and regulations (policies and laws that affect the market structure and degree of competition). It is important to not only make sure that banking sector is competitive, transparent and efficient, but also stable.
The purpose of the study was to investigate and analyze the degree of concentration in Armenian banking market and its impact on competition and market structure of financial markets over the period of 2013-2017. Both the structural and the non-structural measurement approaches of concentration and competition, along with the desk research, a case study and interviews with the financial sector professionals and independent expert was employed to address research purpose.
The findings of the study indicate that, in the developing country such as Armenia high concentration implies low or moderate competition levels and relationship between concentration and stability seems to be negative, meaning that high concentration results low stability of this banking market. The banks in Armenia have ability of extracting monopolistic profits from big interest rate spreads by setting less favorable prices to customers based on collusive and non-competitive behavior in highly concentrated market. Competition level and market structure of this country results in high prices of financial product and low access to finance. Armenian financial markets are bank dominated, characterized with monopolistic banking structure, with leading roles of a few universal profile banking institutions, dominating not only banking sector, but whole financial market.