Banks http://www.banks.am/ Բիզնես լուրեր Հայաստանից, ֆինանսական լուրեր, բանկեր, աշխատատեղեր, դոլար, եվրո, փոխարժեքներ en-us Fri, 18 Sep 2026 08:32:03 +0400 <![CDATA[ The Golden Bridge to Monetary Multipolarity ]]> https://banks.am/en/news//31247 https://banks.am/en/news//31247 Hippolyte Fofack is a former chief economist at the African Export-Import Bank.

One clear sign of de-dollarization and the shift toward a multipolar monetary order is gold’s renewed prominence in global financial markets. Investors increasingly view the metal as a strategic asset; central banks are buying record amounts of it to bolster resilience against financial and geopolitical risks, with last year marking the fourth-largest expansion of gold reserves on record. The Dutch central bank’s decision to move much of its gold reserves out of the United States, citing “geopolitical unrest,” is but the latest example of this trend.

Market reactions to US Treasury Secretary Scott Bessent’s intervention in bond markets after the sharp selloff in longer-dated US debt and the resulting higher yields in the usually quiet month of August further support the perception of gold as the ultimate safe-haven asset. Bessent’s intervention sparked a sharp drop in the dollar and a massive rally in gold prices.

This follows the European Central Bank’s confirmation in June that gold had overtaken US Treasuries as the world’s top reserve asset. That status seems likely to harden and spread. According to a recent survey by the Official Monetary and Financial Institutions Forum, more central banks plan to decrease their dollar holdings than to increase them over the next decade. The World Gold Council’s 2026 Central Bank Gold Reserves survey reports similar findings, with 74% of respondents anticipating moderate or significantly lower dollar reserves over the next five years.

[[gallery1]]
It is, of course, unlikely that a new global monetary hegemon will replace the dollar any time soon, especially in a digital age marked by rapid technological diffusion and increasing dispersion of economic power. Instead, the slow retreat from the greenback signals the emergence of a more diversified international monetary system in which several currencies—the dollar, the euro, and the renminbi—play important roles, particularly in central-bank reserve holdings. In such a system, gold serves as the politically neutral reserve asset linking competing monetary blocs.

Central banks, sovereign wealth funds, and institutional investors have begun to prioritize capital preservation over high returns, mainly because high-yield investments lose their appeal if the underlying assets are at risk of becoming inaccessible during periods of conflict or instability. Gold, whose relationship with the dollar’s trade-weighted exchange rate is typically negative, carries no sovereign counterparty risk, making it a superior hedge against the challenges of a rogue America and geopolitical turbulence.

Geopolitical risks have transformed the international monetary system from a neutral infrastructure that facilitates global commerce and cross-border investment into an arena of strategic competition, fundamentally altering the risk-return balance and elevating national security from a peripheral concern to a threshold condition for investment decisions. Strong demand for gold reflects a broader transformation in global finance, marked by a shift from financial claims to tangible ownership, from efficiency to resilience, and from dependence on a single reserve currency to a more diversified and strategically balanced monetary order.

This reassessment of sovereign risk has certainly influenced the People’s Bank of China’s reserve strategy. In July, the PBOC increased its gold reserves for the 21st consecutive month to 76.08 million troy ounces. Meanwhile, China is building up its physical gold inventories in Hong Kong, which recently launched a gold clearing and settlement system on a trial basis, and has limited retail investors’ access to precious-metals trading.

China’s shift toward holding physical gold underscores the evolution of the metal’s function, from a financial asset to a strategic monetary asset. In addition to reducing dollar exposure, gold’s larger role in the management of the country’s currency reserves also promises to strengthen trust in the renminbi and reinforce confidence in the PBOC’s balance sheet. It also seems aimed at boosting efforts to facilitate the renminbi’s broader use, including through bilateral currency-swap agreements, trade-settlement mechanisms, and debt issuances, with the market for renminbi-denominated debt instruments (offshore “dim sum” and onshore “panda” bonds) rapidly expanding.

[[gallery2]]
But China’s push to promote the renminbi does not mean that the currency is capable of unseating the dollar. The renminbi remains subject to capital controls and lacks the financial depth to compete with the greenback globally.

Similarly, recent initiatives to internationalize the euro, most notably the expansion of the enhanced Eurosystem repo facility for central banks and the growing issuance of euro-denominated debt, have been relatively successful, with it becoming the leading currency in the green and sustainable international bond market in 2025. But still, the euro cannot hope to fill the dollar’s global shoes, owing to structural and institutional barriers, notably the lack of a unified fiscal policy and deep, seamless capital markets.

Even so, gold complements the rise of rival currencies and supports diversification by providing a common store of value that is accepted without regard to geopolitical alignment or other monetary arrangements. Thus, its ascent reflects efforts—including local-currency settlement between BRICS members and cross-border payment systems in Asia and elsewhere—to deepen regional integration and reduce dependence on the dollar for trade and investment.

Digital technologies that enable the circumvention of traditional correspondent banking networks add another dimension to gold’s renewed relevance. Central bank digital currencies and real-time payment infrastructure enable the creation of a decentralized monetary system in which multiple currencies coexist, forming the backbone of a new global financial system for the digital age. Yet technology cannot replace the need for trust: gold continues to provide the universal credibility that underpins confidence during periods of structural change.

[[gallery3]]
While conventional wisdom that “there is no alternative” to the dollar still holds, the process of de-dollarization was never expected to be abrupt. Global redistribution of monetary influence will almost surely be gradual and cumulative, mirroring the realignment of economic power.

The case for gold—the ultimate neutral reserve asset, trusted by all countries and controlled by none—as a shield against geopolitical and financial shocks remains undeniable. But it is hardly the only reason for embracing the metal. In the face of a huge technological revolution and a global economic reordering, authorities are also seeking to strengthen their monetary sovereignty and end reliance on any single reserve currency.

This structural transformation of the international monetary system is the deeper and more enduring driver of demand for gold, suggesting that strong demand for the metal, which serves as the natural bridge to monetary multipolarity, is here to stay. As Shakespeare’s Cloten rightly observes about gold in Cymbeline: “what can it not do and undo?”

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Thu, 17 Sep 2026 17:53:00 +0400 <![CDATA[ Global Economic Convergence Is Stalling ]]> https://banks.am/en/news//31231 https://banks.am/en/news//31231 Keun Lee, a former vice chair of the National Economic Advisory Council for the President of South Korea, is Professor of Economics at Seoul National University.

Keun Lee 

The global economy has undergone a dramatic transformation over the past two decades, driven not least by the 2008 global financial crisis, the United Kingdom’s 2016 vote to leave the European Union, and the escalating rivalry between the United States and China. The International Monetary Fund’s latest World Economic Outlook, published this past April, shows how such shocks have affected the fortunes of emerging and advanced economies.

When then-Goldman Sachs economist Jim O’Neill coined the term BRIC in 2001, the four emerging-market economies to which he referred—Brazil, Russia, India, and China—were viewed as having enormous growth potential. Over the past quarter-century, however, progress has been highly uneven.

Start with the largest emerging economy. China’s relative economic power—measured by its GDP in current prices, relative to US GDP—peaked at 76.6% in 2021. It fell to 70.4% in 2022, owing largely to its zero-COVID policy and a real-estate downturn, and to 63.8% last year. The IMF projects it will grow slightly to 64.9% in 2027. The limitations of China’s export-dependent growth model, together with targeted US efforts to contain the country’s rise, are imposing a distinct constraint on nominal GDP growth, suggesting that, when it comes to relative economic power, we may have already seen “peak China.”

But when it comes to living standards—measured using per capita GDP, adjusted for purchasing power parity (PPP)—China continues to narrow the gap with the US. From 2021 to 2026, China’s per capita GDP relative to the US rose from 29.2% to 33.5%, with the income gap narrowing by roughly one percentage point annually. On this trajectory, China’s per capita GDP will exceed 40% of the US level by the early to mid-2030s. That would place China in the high-income category in relative terms.

By absolute measures, China will reach this milestone even sooner. It achieved a per capita gross national income of $14,230 in 2025 and is projected to reach a per capita GDP of $14,874 in 2026, well above the World Bank’s high-income threshold of $14,375. China thus appears to have avoided the dreaded middle-income trap.

[[gallery1]]
India is on the opposite convergence trajectory, catching up with the US in economic scale but progressing slowly in living standards. In 2000, India was the world’s 13th-largest economy, contributing 1.4% of global GDP. By 2022, it had risen to fifth place, behind the US, China, Germany, and Japan. Although a weak rupee and GDP revisions caused India to fall behind the UK and remain in sixth place in 2025 and 2026, the country is projected to climb back up the rankings, becoming the world’s fourth-largest economy next year.

By contrast, India’s PPP-adjusted per capita GDP grew only modestly over the past decade, from 10.4% of the US level in 2016 to 13.6% this year. That is an average annual increase of just 0.3 percentage points.

Russia’s economic size relative to the US peaked at 13.6% in 2013, the year before its illegal annexation of Crimea, which prompted a spate of Western sanctions. By 2016, it had dropped to 6.8%, but it has stabilized between 7% and 8.8% over the past five years, despite the Ukraine war. Russia’s PPP-adjusted per capita GDP has also remained steady, hovering between 54.7% and 55.6% over that period.

Brazil has lost ground in both relative economic scale and living standards. Its relative GDP dropped from 16.8% of the US in 2011 to 8.7% in 2019, and it currently stands at 8.1%. Similarly, Brazil’s relative per capita GDP slid from 30.8% in 2011 to 25.9% in 2019, and it has remained around that level. South Africa, which joined the BRICS in 2010, has also experienced a persistent decline in relative income over the past decade. Both countries appear to be firmly stuck in the middle-income trap.

[[gallery2]]
Major advanced economies are also losing ground to the US in terms of both economic power and incomes. Germany’s relative GDP fell from a peak of 26% in 2008 to 16.8% this year—a result of a weak euro, energy-price shocks, and declining competitiveness in the high-tech manufacturing, automotive, and semiconductor sectors. Its PPP-adjusted per capita GDP reached 97% of the US level in 2011, but it has since fallen steadily, reaching 91.1% in 2020 and 81% in 2026.

Japan, for its part, has been falling behind since the 1990s. Its relative GDP has plummeted from 74% of the US at the beginning of that decade to 13.5% this year. Over the same period, its PPP-adjusted per capita GDP shrank from 86% of the US to 63% in 2026. As for the UK, its relative economic output fell from 21.5% of the US in 2007 to 13.2% in 2026, and its relative per capita GDP fell from 81.3% in 2016 to 71.6% in 2026.

For a while, the world’s advanced economies (other than the US) were rapidly losing ground to their emerging counterparts: the GDP gap between the G7 and the BRICS contracted from 57 percentage points in 2000 to 25 percentage points in 2016, when the G7 accounted for 47.3% of global GDP, compared to 22.5% for the BRICS. The BRICS’ catch-up momentum has stalled since 2016, not because the G7 has been doing better, but because everyone has been doing worse.

[[gallery3]]
Meanwhile, the US continues to outperform other major economies. Though its share of global GDP has fallen since its 2001 peak of 31.4%, it has remained above 25% over the past five years and stands just above 26% in 2026. For all the talk of global convergence, the past decade has seen America pull further ahead while most of the world has struggled to keep pace.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Mon, 14 Sep 2026 00:10:00 +0400 <![CDATA[ The Vanderbilts: Lessons from the rise and fall of America’s richest family ]]> https://banks.am/en/news//31223 https://banks.am/en/news//31223 Banks.am and wealth management company Wilco are launching a joint series of articles exploring succession planning and family governance.

As Armenia marks the 35th anniversary of its independence, the country is entering a new stage: the intergenerational transfer of substantial private wealth. Much of this wealth has been built from scratch over the past three and a half decades. Today, its owners and their families are beginning to navigate the complex process of passing businesses and assets on to the next generation – often without the benefit of previous experience or established traditions in this area.

We will present specific historical examples, accompanied by commentary from Wilco experts, to illustrate how these lessons can be applied to the Armenian context.

Once you’re in New York, you’ll most likely want to visit one of the city’s most iconic landmarks – Grand Central Terminal, or simply “Grand Central,” as it’s commonly known. Near the station, you’ll find a bronze statue of a man standing about 3 meters tall and weighing 4 metric tons, once considered the largest statue in the United States. It is a monument to Cornelius Vanderbilt, one of the most successful and wealthiest American entrepreneurs of the 19th century.

[[gallery1]]
Vanderbilt, whose name is closely intertwined with the history of Grand Central’s construction, managed to turn $100 borrowed from his parents at the age of 16 into a railroad empire. Decades later, he had amassed a fortune of approximately $100 million. By comparison, this was more than the total funds held by the United States Treasury at the time.

However, in just a few generations, this immense family fortune had all but vanished.

So how did it all begin?

The rise of the Vanderbilt Empire

In 1817, Cornelius met Thomas Gibbons, the owner of a ferry business, who offered him the opportunity to captain one of his steamboats operating between New York and New Jersey. This marked Vanderbilt’s introduction to the most sought-after and innovative “technology” of the time – the steamboat. It broadened his horizons, gave him valuable experience, and helped him build a network of new connections. By 1830, Vanderbilt was already operating his own steamships, serving New York and the surrounding regions. His first major step toward success had been taken.

[[gallery2]]
The most significant turning point in Vanderbilt’s career came in the early 1860s, when, at the age of 67, he sold his steamships and began investing in railroad companies, including the New York Central Railroad. Shortly thereafter, he built a new train station in Manhattan – and Grand Central was born. Today, a statue of Vanderbilt stands in front of the station that bears his legacy. Nearly a decade of success in the railroad business earned him the title of the “King of the American Railroads.”

America’s richest man leaves a legacy

Cornelius, who had 13 children from his first marriage, died in 1877 at the age of 82, leaving the vast majority of his fortune – about 90 percent – to his eldest son, William Henry. According to a widely repeated account, when passing his fortune on to his son, he offered this parting advice: “Any fool can make a fortune, but it takes intelligence to preserve it.”

[[gallery3]]
Although William outlived his father by only eight years, he used that relatively short period to further expand the Vanderbilt railroad empire. Many researchers note that he doubled the fortune he inherited from his father, increasing it to approximately $200 million.

Following William Vanderbilt’s death, the family fortune was divided among his children, marking the beginning of the decline of the Vanderbilt family empire.

The beginning of the end, or “The Curse of the Vanderbilts”

Cornelius Vanderbilt was convinced that the bulk of the family’s wealth should be passed on to a single heir, but William Vanderbilt, who died in 1885, bequeathed his fortune to his three sons: Cornelius II, William Kissam, and George Washington. As the estate was divided, the Vanderbilt family’s drive to continue expanding the business began to wane, while expenses continued to rise. Until his death in 1899, Cornelius Vanderbilt II – who was the most involved in the family business and showed the greatest interest in it – managed the family’s railroad companies and continued the philanthropic work begun by his father.

William Kissam worked alongside his brother but showed considerably less interest in preserving the family’s vast legacy. After Cornelius’s death, William took over the management of the family’s companies, but soon decided to hand control of the railroads to an outside firm. He subsequently withdrew from active business and devoted himself entirely to his favorite pursuits: sailing competitions, horse breeding, and the social events of America’s high society.

His younger brother, George Washington Vanderbilt, had little interest in business and even less in developing or expanding the family enterprises. Instead, like many other members of the family, he preferred to acquire estates and build lavish mansions, where his extravagant parties became the talk of the country. To bring his grand visions to life, he hired some of the most renowned architects of the day, paying them enormous sums. Among the most memorable of his projects was the 250-room Biltmore Estate in North Carolina, which occupies an area of approximately 60,000 hectares. It is said that the estate “devoured” $4.4 million of George’s $5 million inheritance.

[[gallery4]]
The late 19th century was marked by enormous expenses and a struggle to maintain their social standing for the Vanderbilts. The family acquired expensive collections of works by European artists and mansions; on Fifth Avenue in Manhattan alone, they built 10 mansions. At the same time, enormous sums were spent on maintaining these homes – even though they stood empty for most of the year.

[[gallery5]]
As a result, vast estates, personal luxury, and lavish spending to maintain their high social status consumed a significant portion of the family’s wealth.

The final dissipation of the family legacy

Gradually, the family business began to lose its cohesion, fragmenting among an ever-increasing number of heirs. Although the transportation business reached its peak during World War II, the development of trucks, ships, and aviation significantly weakened the railway industry’s position. Shares of the New York Central began to be put up for sale, and after several bankruptcies, the company came under the control of the government-owned Amtrak in 1971.

[[gallery6]]
By 1947, all 10 of the Vanderbilt mansions built on Fifth Avenue in New York had already been demolished, and their interior decorations and furnishings had been sold at auction. Today, the iron gates from one of these mansions stand at the entrance to the Conservatory in New York’s Central Park.

By the mid-20th century, many of the family’s famous estates had been sold or turned into museums, as the heirs’ debts continued to grow. There is a popular – albeit somewhat exaggerated – belief that when 120 Vanderbilt heirs gathered in 1973, not a single one of them was a millionaire anymore.

The most famous Vanderbilt of our time

The most famous member of the Vanderbilt family today is Anderson Cooper, Gloria Vanderbilt’s son and a sixth-generation descendant of Cornelius Vanderbilt. Although descended from the family of Cornelius Vanderbilt, once considered the richest man in the United States, Cooper did not inherit the vast fortune that had been passed down through generations. By then, much of the Vanderbilt wealth had already disappeared.

[[gallery7]]
In one interview, Cooper recalled his mother telling him that he would not be able to spend a single cent of the Vanderbilt inheritance. Cooper has since said on several occasions that he is grateful for this, arguing that inherited wealth “kills initiative” and can be a “curse.”

The rise and fall of the Vanderbilts is a powerful illustration of a simple truth: creating wealth is difficult, but preserving it and ensuring that it is not squandered from one generation to the next is even harder.

***

The history of the Vanderbilts is a prime example of the challenges faced by many families with substantial wealth: whom to entrust with their fortune and business, how to preserve family unity and shared values, and what tools can help ensure that wealth is not squandered from one generation to the next. We asked Karina Arutyunova, Director of Strategic Projects at Wilco and a specialist in family governance and succession planning, to share her insights on these topics.

Challenges are universal

Capital has no fixed address, but the challenges of planning for and transferring family wealth are universal. Generational conflicts, differences in perspectives, a lack of open dialogue, and the absence of shared principles and legal mechanisms for resolving intra-family disputes can all hinder the transmission of intangible assets – values, traditions, knowledge, and family history –to future generations. Yet it is precisely an understanding of family history, mutual trust, and a clearly defined approach to the future of capital and business that can lay the foundation for long-term prosperity and family harmony.
 
Building this foundation is the purpose of an entire field of global practice known as family governance. Far from being an abstract concept, it is a practical system that can include family councils, family constitutions, decision-making protocols, and mechanisms for resolving conflicts. In its more comprehensive form, this infrastructure takes the shape of a family office – a professional structure designed to manage a family’s capital, investments, and broader interests as a unified whole. At Wilco, we work both with families that are just beginning to build such an infrastructure, helping them establish the right principles from the outset, and with established family offices that require expertise on specific issues related to governance, management, and succession.

Effective succession planning is not just a private matter

In the West, family governance has a history spanning several centuries, whereas in our region, the practice of treating the family as a partnership – with governance structures, committees, and formal rules – is still in its early stages.

It is important to recognize that this is not simply a matter concerning the fate of individual families. How the first generation of entrepreneurs transfers its wealth will largely determine whether that capital remains invested in the region’s economy or gradually leaves it. Sound succession planning is therefore not merely a private matter; when substantial amounts of capital are involved, the way wealth is transferred can have broader implications for the economy of an entire country or region.

Understanding the purpose

There is no single legal instrument capable of resolving every issue, operating autonomously, and remaining effective without periodic review. The first step in estate planning is to clearly define its purpose: what the testator wants to happen after their passing – to their assets and to their family.

[[gallery8]]
For example, a will should clearly specify which assets and businesses are to be transferred not directly to the heirs, but to a specially established structure, such as a fund or trust. It should define who will manage those assets and determine to whom, in what amounts, and under what conditions distributions will be made to the heirs. This allows to protect not only the assets but also the heirs themselves—from their young age, their inexperience in business matters, and the advice of people with “good intentions.”

At the same time, the choice of a specific instrument is largely determined by the jurisdiction in which the capital is held. In CIS countries, for example, one of the most common mechanisms is the fund.

Planning tools

As the saying goes, “Truth is the daughter of time.” Only time can prove whether a decision is the proper one. Life is diverse and highly unpredictable; people today cannot completely protect their families, but they have access to planning tools that can significantly reduce risks compared to their predecessors.

Uncertainty or predictability – the choice is ours. ]]> Fri, 11 Sep 2026 22:42:00 +0400 <![CDATA[ The "New Rules of the Game" for Crypto-Asset Services - Explained by MB Legal ]]> https://banks.am/en/news//31210 https://banks.am/en/news//31210 The crypto-asset market in Armenia is entering a new phase. Previously largely unregulated, this field now has a clear legislative framework, licensing requirements, and defined rules of operation.

With the application of the Law "On Crypto-Assets" and the sub-legislative acts adopted on its basis, market participants stand before a new reality—one that offers opportunities while also entailing responsibility.

Banks.am spoke about the sector's new regulations and its established "rules of the game" with MB Legal partners Grigor Grigoryan and Anahit Sargsyan.

"Only legal entities may provide crypto-asset services"

Anahit Sargsyan

In the Republic of Armenia, crypto-asset services may be provided exclusively by legal entities. In this area, two subtypes of companies mainly operate.

[[gallery1]]
The first are investment companies that already hold a license from the Central Bank to provide investment services and, by obtaining additional authorization through the established procedure, may also provide crypto-asset services.

The second subtype consists of companies built from the ground up, which are registered and licensed by the Central Bank and created from the outset to provide crypto-asset services. In their case, the process is naturally longer and more complex, because it must pass through all of the Central Bank's regulations.

Investment companies, by contrast, already partially comply with some of the regulations and simply need to develop internal legal acts governing crypto-asset services and obtain additional authorization to engage in crypto-asset activities.

The legislation defines ten types of crypto-asset services, including the provision of advisory services

Anahit Sargsyan

From a legislative standpoint, there are today two principal legal acts in Armenia. The first is the Law "On Crypto-Assets," which was adopted in 2025 and provided for a transitional period. The provisions of this law were to enter into force after the Central Bank adopted normative legal acts. This took place in January of this year. As of now, six regulations have been developed by the Central Bank, and further ones are expected to be added before the end of the year.

[[gallery2]]
The Law "On Crypto-Assets" establishes the basic principles of providing services in the field, the definitions, and the licensing procedure, while the Central Bank's regulations set out the procedural and technical provisions—for example, what regulations and internal systems a company must have.

The law has also clearly defined the types of services in the crypto-asset field. These are: operating a crypto-asset trading platform, custody of crypto-assets, buying and selling crypto-assets on one's own and/or a client's account, receiving and transmitting orders for transactions in crypto-assets, placement of crypto-assets, portfolio management thereof, providing advice related to crypto-assets, transfer, and the issuance of asset-referenced tokens.

It is notable that the logic of the law is fairly close to that of the Law "On the Securities Market." This is why obtaining authorization to provide crypto-asset services is an easier procedure for investment companies. They already have a certain infrastructure and an understanding of the services.

"Armenia can become a regional platform for the crypto-asset market"

Anahit Sargsyan

Activity in this field in Armenia is quite considerable, and at its root lies the interest of not only local but also international companies. International companies that are already well known in foreign markets have approached us with inquiries. Moreover, they regard Armenia not only as a new market, but also as a platform for gaining access to the CIS countries.

As I noted, our experience shows that investment companies too often turn to us for advice in this field. If I were to represent the percentage breakdown of MB Legal's clients, we would get a 60%–40% ratio, in which the first, larger percentage consists of investment companies.

[[gallery3]]
This is understandable, because for these companies this can become a new business model and direction of development without major complications.

The law is new and still in a phase of amendments. I believe that the adoption of the law on crypto-assets is a positive signal not only for the local but also for the international market.

Yes, this alone cannot guarantee clear attractiveness, but the very fact that the Republic of Armenia has decided to regulate the field is a positive signal to international companies. This is the right approach, and work in this direction should continue.

"In working with clients, the first step is the correct 'diagnosis'"

Grigor Grigoryan

The crypto sector is quite risky, and the aim of managing risk is one of the foundations of the current legislation. In an unregulated field, funds obtained through crime, for example, could be legalized via crypto-assets. A "free" field can naturally lead to abuses.

[[gallery4]]
As for activity in the crypto-asset field and the risks associated with it, it is important to remember: engaging in activity subject to licensing without the appropriate license gives rise to liability. Of course, the transitional period—until January 31, 2027—applies only to those legal entities and individual entrepreneurs that, as of July 4, 2025, were already providing these services in Armenia. As of now, the completion of the sector's legislation is also ongoing.

My colleague noted that there are ten services subject to licensing in the crypto-asset field. But their scope is not always clear-cut—for example, the provision of advice. So, in relations with a client, it is first and foremost important to clarify: is their business model subject to licensing, and if so, what license is needed? Here too there are a number of subtypes and procedures. This is the first analysis we conduct with our client. So, the first step to operating in the new reality is the correct "diagnosis."

"The crypto-asset practice is one of the most active at MB Legal"

Grigor Grigoryan

he Law "On Crypto-Assets" entered into force on July 4, 2025, and the main licensing regulations on January 31, 2026, and we too announced this change. We began working with the first clients in the field as early as March–April, and a fairly well-known and large international client approached us for advice.

[[gallery5]]
To sum up, today this is one of the most active areas of MB Legal's practice. We constantly participate in events related to the sector's regulation and try to stay informed. This is a field with truly great potential.

"The Central Bank is open to discussions in this direction"

Grigor Grigoryan

As of now, our clients can be divided into several groups. The first are investment companies, to whom we also provide the initial "diagnosis" service, so that it becomes clear what additional authorization is needed within the bounds of the current legislation.

Moreover, during this process, questions arise that are not yet regulated by law. It is important that the Central Bank is open to discussions in this direction, and we have already had several meetings. The Central Bank also wants to cooperate with the large crypto companies that make up the second-largest group of our clients. There are globally known crypto platforms that regard Armenia as a kind of "hub." So, the development of regulations is taking place, in a certain sense, through a team approach.

[[gallery6]]
The third group that turns to us consists of small clients, often individuals, who carry out, for example, exchanges in the crypto field and still do not have a good grasp of the changes taking place. We guide them as well on the necessary type of license and explain the procedures.

Depending on the type of license, there is a list of required documents and requirements. For example, a company providing crypto-asset services must have a certain policy, which we also help develop and put into practice. A minimum capital amount is set, which varies depending on the type of services. For instance, the base minimum threshold of total capital for a company providing only individual advisory services related to crypto-assets is 10 million Armenian Dram (AMD). Moreover, the total capital must be at least that amount and no less than 25 percent of the fixed expenses calculated under Central Bank Regulation 7/02.

Liability after the transitional period

Grigor Grigoryan

At the end of the transitional period, previously operating legal entities must be registered and licensed with the Central Bank or cease providing and offering regulated services. Individual entrepreneurs cannot continue to provide these services under their status after the period ends. The transitional period does not apply to new participants and does not exempt them from other legislative requirements applicable during that time.

[[gallery7]]
For violations, the Central Bank may apply a warning and a fine, and in the case of persons holding the relevant status, may also remove the manager from registration, declare the license invalid, or terminate the authorization on the grounds provided by law. Under Article 85 of the Law "On Crypto-Assets," the fine may reach 300 percent of the profit gained or the loss avoided through the violation, if a larger fine is not set for a particular violation. If that amount cannot be determined, a fine of up to 15 percent of the annual revenue or income—calculated on the basis of the last year's published annual financial statements with an audit opinion—is provided for legal entities.

If the grounds established by law are present, civil, administrative, or criminal liability is also possible. For example, entrepreneurial activity without the necessary license may give rise to criminal liability under Article 281 of the Criminal Code, if all the elements of the offense are present, including large-scale property damage. In other words, criminal liability does not arise automatically from the mere fact of the absence of a license.

"Regulation is an additional opportunity for the market"

Grigor Grigoryan

The market for crypto-asset services existed in Armenia, but it was unregulated. Having regulation is not a difficulty but—with the right approach—an additional opportunity. If regulations are transparent, any field will only be glad to have "rules of the game." Regulations inevitably also bring a certain stabilization of the market.

Yana Shakhramanyan

Photos: Emin Aristakesyan

]]> Tue, 08 Sep 2026 22:30:00 +0400 <![CDATA[ What the World's Oldest Bank Reveals About EU Financial Integration ]]> https://banks.am/en/news//31194 https://banks.am/en/news//31194 Lucrezia Reichlin, a former director of research at the European Central Bank, is Professor of Economics at the London Business School.

Lucrezia Reichlin 

After seven hours of deliberations on August 20, the board of Banca Monte dei Paschi di Siena emerged with an extraordinary decision. Founded in 1472 and rescued by Italian taxpayers in 2017, Monte dei Paschi defended itself against Intesa Sanpaolo’s €30.6 billion ($35.7 billion) takeover bid by launching share-exchange offers for Banco BPM and Banca Generali, totaling roughly €34 billion, while distributing another €4 billion to its own shareholders.

Italians have a word for this kind of maneuvering: risiko, after the board game. Monte dei Paschi is trying to make itself too large and expensive to swallow. But the move also reveals something important about why European financial integration has proved so difficult.

At stake is not simply market share or cost savings. The move is about control over the investment bank Mediobanca, which Monte dei Paschi acquired last year; Mediobanca’s 13% stake in the insurance giant Assicurazioni Generali; and, ultimately, a large pool of Italian household savings. It is also about the network of institutions that has shaped Italian financial and industrial power for decades.

That is why a takeover battle among listed companies is being couched in the language of national interest. Trade unions have threatened mobilization. The identities of shareholders supporting the different sides are treated as political news. And the cross-border element—the French bank Crédit Agricole owns 29.3% of Banco BPM—is treated almost as an intrusion.

The lesson is straightforward. Banking in Europe remains national in ways that European Union policymakers have consistently underestimated.

The standard explanation for the failure to complete the banking union and create an integrated European capital market is that governments do not want to share financial risks. German taxpayers, it is often said, do not want to insure Italian bank deposits. While there is some truth to this, Monte dei Paschi points to another obstacle.

A national banking system is not merely a mechanism for providing credit. It also sustains governments’ influence over where national savings go: which firms receive finance, which industries expand, which regions attract investment and, not least, who buys government debt.

[[gallery1]]
Before the European monetary union, governments exercised this influence much more openly, through public ownership, credit controls, and direct intervention. European liberalization largely abolished those instruments. But the political interests behind them survived, albeit in less visible forms. European financial integration is often viewed as a technical project for improving efficiency. From the perspective of national governments, however, the banking union and the EU Savings and Investments Union offer remarkably little in exchange for weakening one of the few remaining channels through which they can influence the allocation of domestic savings.

For example, when a national banking system gets into serious trouble, the ultimate fiscal responsibility still lies largely with the national government. Italy recapitalized Monte dei Paschi in 2017 under European rules, but with Italian public money. If a much larger Monte dei Paschi were to encounter serious difficulties, the Italian government would again come under enormous pressure to intervene.

In short, EU policymakers are asking governments to accept less control over their banking systems without fully relieving them of the responsibility for dealing with a systemic crisis. That is not an attractive bargain.

Europe should try a different tack. Instead of making governments surrender their remaining influence over national banking systems to complete financial union, the EU should focus on building a genuinely European financing channel for investments that national systems are poorly equipped to provide.

The need is increasingly obvious. Europe must finance electricity grids, defense spending, energy infrastructure, digital networks, and other projects whose economic value crosses borders. National banking systems, designed primarily to intermediate national savings and finance national borrowers, are not well suited to this task. Such a channel should therefore extend beyond banks, allowing investment funds, insurers, specialized lenders, and other financial institutions to originate and finance European projects.

The objective should be to create a large market for claims backed by European investment. Importantly, the European Central Bank could help enable such a market within the confines of its price-stability mandate. Through its collateral and eligibility rules, the ECB already determines which financial assets can be easily exchanged for central-bank liquidity. Those rules can be designed so that sound claims financing European projects are attractive to hold and trade. A limited amount of public capital could thus absorb some initial risk and help mobilize much larger amounts of private finance.

Rather than asking governments to sacrifice national interests, the EU would be offering them a tangible benefit: a source of finance for investments they cannot efficiently provide on their own. National firms could participate in building grids, ports, defense systems, and other European infrastructure. Banks could earn fees by originating, arranging, and distributing securities, without having to hold the resulting credit on their balance sheets. And European savings would acquire a route toward European investment that does not depend entirely on national banking systems.

[[gallery2]]
Over time, this financing channel could become more attractive than the national alternatives for genuinely European projects. Governments would not formally surrender their existing powers; they would simply have less reason to use them. That distinction matters, because European integration has often advanced when new EU arrangements gradually supersede national instruments.

The battle over Monte dei Paschi is not just another episode in Italy’s endless banking risiko. It exposes a political economy that EU financial reform has largely ignored. The next time a European Council communiqué calls for integrating Europe’s capital markets, policymakers should remember that governments are concerned not only about who bears the financial risks, but also about who controls the savings and credit on which national economic power rests. Instead of asking governments to give up more, Europe must build something that national authorities have an incentive to use.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org ]]> Fri, 04 Sep 2026 22:30:00 +0400 <![CDATA[ MDBs Are Becoming a New Global Safe Asset ]]> https://banks.am/en/news//31148 https://banks.am/en/news//31148 Erik Berglöf is Chief Economist of the Asian Infrastructure Investment Bank.

Despite all the geopolitical chaos, one can still find some comfort in today’s capital markets. The walls of the multilateral order may be cracking, but in the quiet corners of global finance, a remarkable counternarrative is unfolding: multilateral development banks (MDB) are not only surviving but thriving. Thanks to MDBs’ ability to borrow at costs close to that of the US Treasury, they have created a new class of de facto risk-free assets that could help underpin the global financial system. 

Just consider the numbers. The average spread of MDB issuances over their referent US Treasuries has halved between the first half of 2025 and the first half of this year, falling from 10.8 basis points to 5.4. That is an extremely tight spread, effectively as safe as a Treasury itself. Across the MDB system, balance sheets remain robust, and the demand for new issuances has been strong. As the youngest member, the Asian Infrastructure Investment Bank’s most recent issuance priced a five-year $2 billion bond at a spread of 3.6 basis points (vis-à-vis five-year Treasuries) and had an orderbook—the measure of investor interest—of $13.9 billion.

[[gallery1]]
Yet this new financial edifice rests on a fragile geopolitical premise. Attacks on the multilateral system have sharpened dramatically in recent years, leading some commentators to speak of the “death of multilateralism.” Some parts of the system—not least the United Nations—are facing severe cuts, while others are just frozen. Meanwhile, official development assistance, whether bilateral or through multilateral institutions, is being slashed almost everywhere.

Under the circumstances, MDBs look remarkably resilient, with their lending volumes increasing. Although capital increases from member states may not be immediately forthcoming, no country has withdrawn from an MDB. That may partly be because the process is complicated by design, but it also reflects the fact that MDBs have responded to calls for reform. They have realized that they depend on confidence: in their balance sheets, in their governance, and in the durability of the public backing that allows them to borrow efficiently and lend at scale.

That is why MDBs have launched the most ambitious capital-adequacy reform in a generation. The G20-sponsored Independent Review of MDBs’ Capital Adequacy Frameworks (CAF)—which examined 17 key recommendations—has driven balance‑sheet optimization across the system, and the results are already clear. The World Bank, for example, has lowered its equity-to-loans ratio to 18% (from 20%), unlocking $70 billion in new lending capacity over a decade. And similar numbers (in relative terms, even larger numbers) can be found across other MDBs.

Taken together, CAF reforms are expected to unlock $600-800 billion in additional lending capacity over the next decade. MDBs have also intensified their engagement with credit-ratings agencies, holding seven technical roundtables since 2023 to ensure that rating methodologies reflect their preferred-creditor status and historically low default rates. As a result, some of the rating agencies have already responded and begun to change their ways.

The current combination of political pressure and financial innovation produces a paradoxical outcome. Even as shareholders threaten withdrawal, MDBs have strengthened their financial models and reduced their balance-sheet constraints. Their bonds trade at near‑Treasury spreads because reforms have built greater capital efficiency, and because Treasuries themselves have become riskier, not because geopolitical risks have subsided. In fact, the dysfunction that makes multilateral cooperation so difficult has made MDBs more attractive as a haven.

[[gallery2]]
Of course, there are obvious limits to how much can be achieved by individual MDBs implementing measures to release more capital. After all, these institutions may need to keep some powder dry for crisis situations like the current one in the Middle East. Future reforms may need to target the whole MDB system. For example, one proposal would create a common liquidity buffer—with central banks signing on to a common facility—to reduce the need for liquidity in individual institutions. That alone would improve most MDBs’ credit rating by at least half a notch (with a move from AAA to AAA+ representing one full notch).

There are also proposals to channel a fraction of global reserves into MDB hybrid capital, creating a new class of safe assets while boosting development finance. If realized, such innovations could position MDBs as a genuine alternative pillar within the global financial architecture. (By the same token, an overreliance on implicit shareholder support without addressing governance deficits or ensuring that reforms are not rolled back could breed moral hazard.)

For now, the paradox stands: even as multilateralism faces an existential threat, the MDBs born out of that system have become the closest thing to a safe harbor—precisely because they have reformed faster than their political masters have retreated. In fact, MDB instruments may become even more important as US bond markets begin to wobble. It is a welcome, albeit precarious, irony. The task for policymakers is to ensure that it does not become a tragic one.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Fri, 28 Aug 2026 22:30:00 +0400 <![CDATA[ Wilco Model: “We’re like a co-pilot for the client” ]]> https://banks.am/en/news//31154 https://banks.am/en/news//31154 The name Wilco was not chosen at random. It comes from aviation: “Will comply” – meaning “the order has been received and will be executed.”
This idea lies at the heart of the company’s philosophy. Wilco positions itself as the client’s “co-pilot” – someone who does not take the controls or decide where to fly, but who helps the client stay on course and navigate turbulence when needed.

According to Wilco CEO Irina Belysheva, wealth management is based on a simple principle: not to make decisions for the client, but to help them better understand their own goals, risks, and opportunities. The client remains the pilot of their own “airplane,” determining the direction of their life, family, and business, while Wilco strives to be the expert who sees the entire route.

This approach is particularly important for families whose wealth has grown beyond the scope of simple investing, and for whom the focus extends beyond asset management to business structuring, tax and legal matters, succession planning, their children’s education, and preparing the next generation.

A New Chapter in the Company's History

Wilco’s current story in Armenia began about a year ago, when the company – which had been operating since 2008 – gained a new owner, adopted a new mission, and underwent a rebranding. Management has set a goal of transforming the company from a local investment company into a world-class wealth management company.

“For me, the biggest challenge wasn’t the business model or finding clients. The most difficult aspect was assembling the people. We had to figure out: would we be able to build a team that not only had extensive professional experience but also believed in Armenia’s long-term potential?” explains Irina Belysheva. 

Today, the Wilco team includes leading experts from Armenia and several other countries, some of whom have moved to Armenia with their families. The CEO considers building this team one of the most important achievements of the company’s first year.

According to her, the experience of professionals from different markets brings additional dynamism to the company. At the same time, beyond diverse professional and cultural backgrounds, a shared set of values is essential. At Wilco, these values are trust, creativity, and vitality.

The product isn’t the first thing – it’s the last
 
One of the key differences between wealth management and traditional investment services is in where the process begins. In the traditional model, a financial product is first created and then offered to the client.

[[gallery1]]
“Our approach is the opposite: first, we need to understand the needs and challenges of an individual or family, and only then develop a solution. Every family has its own circumstances, goals, and priorities. There are no one-size-fits-all solutions,” says Irina Belysheva. 

However, this approach can only work if the client is willing to speak openly about their financial situation.

“We, so to speak, act as a family doctor: if a person doesn’t tell us everything, we cannot offer a comprehensive solution,” notes Irina Belysheva. 

That is precisely why, for Wilco, trust is not simply one aspect of the service – it is its very foundation.

When money isn’t the most important financial issue

During Wilco’s first year operating under its new name in the Armenian market, several issues have emerged that are gradually becoming increasingly important to clients.

“In many businesses, the strategic horizon is still limited to a single year. But when we talk about family wealth, we need to think about the decades to come. It’s not just a matter of how to make more money. The more complex question is what will happen to that wealth afterward,” says Irina Belysheva. 

And this is where the issue of continuity and legacy comes to the forefront.

“What will happen if I’m gone tomorrow?”
 
Building capital, preserving it, and passing it on to the next generation are three distinct challenges. In Armenia’s business community, the first two have long been priorities since independence; the third, however, is now emerging with increasing urgency.

“For families, this is often one of the most difficult conversations to have, because it touches on both money and mortality. You may build a large business, but your children might live in another country, pursue a different career, or simply not want to carry on the family business,” says Irina Belysheva. 

This raises a question: Does the next generation understand what has been built? Is it ready to take on this responsibility? And if not, how to design a structure for transferring this capital? For Wilco, this is no longer simply a matter for individual families. The company views the issue of intergenerational wealth transfer as one of the keys to Armenia’s long-term and sustainable economic development.

Knowledge – before passing on a legacy to the next generation

Based on this logic, Wilco has launched its Next Generation and Financial Literacy initiatives. The company aims to work with the generation that will one day decide what businesses to build, where to live, how to invest, and how to manage their own capital.

The programs are designed to engage the children and heirs of Wilco’s clients of different age groups. Topics range from financial literacy and career guidance to understanding how businesses operate.

“We’ve already held a pilot Discovery Day, during which children aged 11-14 learned how our business works. They showed tremendous interest and expressed a desire to learn about other industries as well,” says Irina Belysheva. 

No one knows what the market will be like in 10 years

When discussing the future of Armenia’s financial market, Irina Belysheva highlights several trends that could reshape it: greater financial literacy, a broader range of investment instruments, and the gradual integration of household savings into the financial system.

[[gallery2]]
“Attitudes toward money must also change. Instead of simply holding onto savings, they need to be gradually integrated into the financial system. The government, the Central Bank, and private financial institutions – banks, brokers, investment firms, and wealth management companies – all have a role to play here. But financial instruments alone are not enough. For investment to grow, confidence and trust are also essential – in financial institutions, the regulatory environment, and the country as a whole,” says Irina Belysheva. 

Armenia is a country that not only attracts capital but also channels it

According to Wilco’s vision, one of Armenia’s key priorities should be to establish stronger capital flows between the Diaspora and Armenia.

“I don’t see this as simply an attempt to attract capital from the Armenian Diaspora to Armenia. It’s about building bridges. These bridges should enable Armenians living outside Armenia to participate in investment projects in Armenia, while those living in Armenia gain access to international markets,” says Irina Belysheva.

Under this model, Armenia could gradually become not just a country that attracts capital, but also a hub connecting different financial markets.

Wilco’s goal is to enable its clients to move in both directions: to maintain strong ties with Armenia while also gaining access to other markets.

“The plane is already in the air”

According to the company’s management, the first year following the relaunch laid the foundation for the next phase of development.

[[gallery3]]
“Our top priority right now is to grow our assets and revenue. If our first goal was to build an airplane, I can say that today the plane is already in the air and gaining altitude. Looking ahead, we also do not rule out international expansion and the development of new partnerships,” says Irina Belysheva. 

This year, Irina Belysheva was honored with the “Leading Woman in Wealth Management” award in Dubai. For her, the recognition is not only a personal achievement but also an opportunity to discuss Armenia’s financial market on the international stage.

Astghik Hovhannesov ]]> Tue, 25 Aug 2026 10:02:00 +0400 <![CDATA[ The AI Threat to Financial Stability ]]> https://banks.am/en/news//31140 https://banks.am/en/news//31140
US Federal Reserve Chair Kevin Warsh recently announced a new task force that will “survey the pace, the reach, [and] the economic impact of new general-purpose technologies, including AI, and explore the implications for the Fed” as it pursues its “employment and inflation mandates.” Notably absent from Warsh’s statement was any mention of the impact of AI on financial stability, the Fed’s de facto third mandate.

The Fed has shown some awareness of the risks AI poses for financial stability. In April, Warsh’s predecessor Jerome Powell, together with US Treasury Secretary Scott Bessent, convened a meeting to assess how advanced AI models could affect cybersecurity in the banking system. But even this approach was far too narrow.

In the United States, both the financial system and asset markets have become a one-way bet on AI. If current trends persist, outstanding AI data-center debt will surpass mortgage debt by the end of this decade. The Fed should now be asking whether the revenues from these data centers will generate enough cash to repay creditors on time.

That question is often conflated with two others: whether AI is a bubble and whether it is a transformative technology. One might be tempted to position this as a dichotomy—AI is either a bubble or a transformative technology—but this would be a mistake. The US railroad boom of the 19th century ended in the Panic of 1873, and the telecom and dot-com boom of the 1990s culminated in a stock-market crash. In both cases, the technology was genuinely transformative, but creditors and shareholders were wiped out anyway, because investment outpaced any plausible near-term return.

[[gallery1]]
Likewise, when it comes to AI, technological success will not guarantee financial success. The revenues AI will generate remain uncertain, but borrowers’ repayment schedules are fixed. AI tools can be widely adopted, and a data center can be heavily used, without producing enough cash to service their owners’ debts. The financial-stability concern arises from the mismatch between speculative future revenues and present contractual obligations.

The arithmetic is daunting. David Cahn of the venture capital firm Sequoia estimates that this year’s roughly $750 billion in hyperscaler AI capital expenditure will need to generate about $1.5 trillion in end-customer revenue over the life of the equipment to pay for itself. By his calculation, the entire AI buildout since the 2022 launch of ChatGPT now carries a cumulative payback minimum of some $3 trillion. Anthropic is rumored to have annualized revenues of around $60 billion.

The consulting firm Bain & Company calculates that funding the compute needed to meet anticipated AI demand by 2030 will require some $2 trillion in new annual AI revenue. Given that a bubble is what happens when an asset’s price far exceeds the cash flows it generates, such projections seem to support warnings that AI is indeed a bubble.

Already, funding for the AI buildout has shifted decisively from the tech giants’ cash flows to capital markets. Circular financing arrangements abound: chipmakers invest in AI labs, which use the money to buy chips, and cloud providers fund the startups that rent their servers. The result is a positive feedback loop between rising valuations and capital expenditures.

[[gallery2]]
Chip giant Nvidia has emerged as a backstop for the “neoclouds,” allowing thinly capitalized cloud providers to raise private financing on attractive terms. Tech giants accumulate massive off-balance-sheet liabilities through joint ventures and leasing structures. And a growing share of the capital comes from private credit funds, which often lend to projects affiliated with their own sponsors.

Unlike the railroads or fiber-optic cables produced by earlier manias, this investment does not leave behind durable assets. Chips comprise roughly half the cost of an AI data center, and they are effectively unusable after 3–5 years. The collateral might lose value faster than the debt is repaid.

Moreover, the broad-based productivity gains and labor-market effects that AI is widely expected to deliver are not yet visible in the data. A recent Fed staff note concludes that this is because AI remains in its “buildout” phase. But a productivity surge will also require businesses to make immense internal investments to reengineer their processes. Nevertheless, markets are already pricing in robust earnings growth, driven in part by AI-driven productivity gains, raising concerns about an “earnings bubble.”

Most discussions of the downside risk of the ongoing AI boom have focused on the stock market. But the bigger risk is to credit markets. We now have a “market-based” financial system, in which credit is intermediated less by banks than by bond markets, securitization vehicles, and nonbank lenders. The danger is not a 1930s-style run on bank deposits, but a 2007-style run on the shadow banking system: doubts about credit quality trigger a contraction in short-term funding, and borrowers must sell into a falling market, leading to further price declines. 

With short-term funding markets seizing up, the Fed would come under enormous pressure to backstop nonbank lenders and data-center debt, just as it backstopped money-market funds in 2020, at the start of the COVID-19 pandemic. But AI is even less popular today than Wall Street was in 2007. A bailout of both would likely destroy what remains of Fed independence.

There is a chance that massive AI capital spending will be vindicated, generating the revenues required to service trillions of dollars in debt. In that case, however, the implied labor-market dislocation would be without historical precedent. It is the coin-flip of nightmares: heads is financial instability, and tails is a biblical employment shock.

In any case, financial stability must be central to the Fed’s AI agenda. Even if this time proves to be different technologically, it might not be different financially.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Fri, 21 Aug 2026 22:30:00 +0400 <![CDATA[ Global Tax Reform Is the Key to a Fair AI Economy ]]> https://banks.am/en/news//31116 https://banks.am/en/news//31116 Zorka Milin is Co-Director of the Financial Accountability and Corporate Transparency (FACT) Coalition.

AI’s rapid advance and the resulting popular backlash have lent new urgency to an old question: How can we promote equitable economic growth from technological innovation while mitigating the negative social and environmental consequences? Both domestically and globally, the answer starts with corporate tax policy.

Anxieties about AI have less to do with any philosophical unease than with the societal effects. Financial gains are increasingly concentrated among a handful of firms and their shareholders, while the costs—from job displacement to rising energy prices—are borne by everyone else. In democratic societies, taxation is the primary mechanism for translating private gains into public benefits. When that mechanism breaks down, a backlash is inevitable.

Distributive justice is an equally salient concern at the global level. While the Global North is preoccupied with the significant public pushback against AI, the Global South faces a pressing need to mobilize domestic tax flows from multinational corporations, particularly tech firms, in the wake of drastic aid cuts. These problems stem from the same source: when companies shift profits out of the countries where they are generated to tax havens, that reduces public revenues for all governments.

[[gallery1]]
The digitalization of the global economy has demonstrated the insufficiency of the international tax system. But the need to shatter the status quo has never been clearer. AI has supercharged the trend of taxable value being decoupled from physical corporate presence—long a prerequisite for a country’s right to tax. Training data, compute, and intellectual property can be scattered across many jurisdictions, far from where workers or users are located, fueling debate about where value is created.

US-based multinational tech giants, some of which are poised to win big from the AI revolution, have created a playbook that companies like OpenAI and Anthropic could follow. Because their profits are mostly generated from intangible assets such as software, they can shift them to tax havens, manipulating decades-old norms to pay rock-bottom rates. It is no wonder that so many Big Tech firms have been embroiled in tax controversies.

[[gallery2]]
For example, a 2013 US Senate investigation and a subsequent 2016 European Commission investigation revealed that Apple had shifted a large portion of its billions of dollars in global earnings to its Irish subsidiaries, which then paid a tax rate on Apple’s European profits as low as 0.005%. The uproar culminated in European Union authorities ordering Apple to pay Ireland a staggering €13 billion ($15 billion) in back taxes and sparked a major international tax overhaul at the OECD.

The inability to tax the profits of digital companies demands nothing less than an overhaul of the international tax system. Policymakers have attempted to arrest the global tax race to the bottom by introducing minimum taxes at both the national and global levels. The United States enacted a corporate alternative minimum tax in 2022, but it has since been diluted. The same is true of the global minimum corporate tax adopted under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, whose planned reallocation of taxing rights from headquarters to market countries has stalled.

Tax-justice groups have criticized the Apple court decision and the OECD reforms for failing to consider developing countries’ interests. To create a fairer and more predictable system, African governments have proposed a Framework Convention on International Tax Cooperation under the auspices of the United Nations, with negotiations currently underway in New York.

[[gallery3]]
The world ultimately needs a robust and durable multilateral tax framework (whether at the UN, the OECD, or elsewhere) to capture the value of AI-driven economic activity where it occurs. But a global minimum corporate tax and the reallocation of taxing rights, while both necessary, would not help governments tax AI companies in the near term, as many have yet to turn a taxable profit. That is why a growing number of jurisdictions are looking beyond taxes on net income and introducing digital-service taxes (DSTs) on gross revenues.

More than 20 countries are considering or have already implemented DSTs, prompting threats of retaliatory US tariffs. Moreover, different versions of such taxes are currently in effect or have been proposed in several US states. In all these cases, policymakers recognize that DSTs are a valuable release valve, be it globally or at the subnational level.

While not a long-term substitute for reforming an obsolete global tax system, DSTs are at least a stopgap. They provide proof of concept by normalizing the once-radical idea that taxing rights should align with where users are located, not just where companies choose to incorporate or play accounting games. DSTs may not be the final destination, but they are an important and necessary first step toward a fairer international tax order.

[[gallery4]]
DSTs, like broader multilateral tax reforms, have come under fire from short-sighted politicians and experts who insist on defending the status quo. But these leaders fail to recognize that the status quo is fiscally and politically untenable. This was the case before AI arrived but has come into sharper focus as the technology spreads.

If AI-driven profits are subject to the same asymmetric global tax architecture that has allowed digital activities to be undertaxed, there is a good chance that Big Tech’s outsize power will only grow. There is also the risk of resistance to AI hardening into a legitimacy crisis, which means that society may miss out on its potential benefits. Corporate tax policies are the battleground where public trust in this new technology, and our governing institutions, will be won or lost.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Sat, 15 Aug 2026 00:10:00 +0400 <![CDATA[ How AI Could Reinforce Dollar Dominance ]]> https://banks.am/en/news//31104 https://banks.am/en/news//31104 Chenxu Fu is an economist at the ASEAN+3 Macroeconomic Research Office (AMRO). 

Xianguo Huang is Senior Economist at the ASEAN+3 Macroeconomic Research Office (AMRO).

The signing of a 20-year data-center lease probably does not register as a monetary event. Even the announcement of a dollar-pegged stablecoin linked to the AI boom would not necessarily be given this label. But such developments are proliferating—and contributing to the formation of a system in which a critical input for the global economy is priced, paid for, and ultimately recycled into dollar assets.

This is not a new concept. Since the 1970s, the pricing of oil in US dollars has increased global demand for the currency and generated export revenues for oil producers, which often directed them toward US markets. But the petrodollar is a template, not a prophecy. It shows that when production, payments, and asset-recycling reinforce one another, an indispensable input can embed a currency in global markets.

AI might generate its own version of this dynamic. Discussions about who will “win” in the AI economy often focus on the race to build the most advanced models. But the true transformation begins when model performance converges, and companies integrate AI into everyday operations. At that point, just as we talk about dollars per barrel today, we may find ourselves considering dollars per unit of compute.

Energy underlies this metric. AI is far from weightless. Data centers convert electricity into billable computing capacity, which is now being secured years in advance. When Anthropic signs a 20-year lease with TeraWulf, an infrastructure provider, it looks a lot like an industrial firm securing long-term production capacity. This is a supply-side wager that demand for compute will persist.

[[gallery1]]
The demand side may well reward that bet. To be sure, though many firms are experimenting with AI, few have reengineered their operations around it. But OpenAI’s new consulting arm Deployment Company (DeployCo) aims to change this by embedding engineers within companies to integrate AI into their workflows. Once such systems are in place, compute will become a recurring operating expense.

This brings us to the first channel that will reinforce dollar dominance. If the AI supply chain is dominated by US-linked firms and priced in dollars, global digital production will have to source dollar liquidity, and the revenues will land inside a largely dollar-based financial system. Unlike oil revenues, these proceeds would not accumulate abroad before being recycled into US markets.

But the invoice is only the visible layer. Beneath it, invisible infrastructure is forming: the payment rail on which agentic commerce will increasingly run. OpenAI’s partnership with Visa, which aims to build this infrastructure, points to a more programmable future. Should AI agents begin procuring services, arranging logistics, and reordering inventory with minimal human intervention, payments must be automated and machine-native.

This is the second channel that will reinforce dollar dominance. Dollar-pegged stablecoins, in particular, could provide the programmable settlement that agentic commerce requires. The announcement of Open USD—a dollar-pegged stablecoin with the backing of more than 140 payment, financial, and crypto firms—signals that dollar tokens are already being positioned for this transformation.

The two channels could eventually merge. The same rail that enables programmatic settlement of agentic commerce through dollar-pegged stablecoins could facilitate compute payments as easily as any other. Dollar invoicing would thus be combined with stablecoin settlement, turning technological dependence into monetary dependence.

In principle, tokenized deposits or central bank digital currencies could do the same job as dollar-pegged stablecoins. But payment systems reward early network effects. The question is not whether dollar stablecoins are the only option, but whether they become the first to work efficiently across borders at scale.

This infrastructure also recycles, as demand for programmable dollars is translated into demand for the safe assets that back them—notably, US Treasuries. Agentic commerce has barely gotten off the ground, and already stablecoin issuers rank among the largest buyers of Treasury bills.

Collectively, these developments point to the possible emergence of an energy-compute dollar loop. Electricity powers data centers; data centers produce compute; compute enables the automation of business activity, including payments that favor programmable settlement; and stablecoin reserves flow into US Treasuries. The result would be a self-reinforcing cycle linking AI infrastructure, digital payments, and US financial markets.

Remarkably, no government appears to be orchestrating this process. Whereas the petrodollar was built on official agreements, its AI-based successor is being constructed largely through commercial decisions. Cloud providers secure land and power. AI firms package models into services. Payment groups construct stablecoin rails. Stablecoin issuers purchase Treasuries. Each step is logical on its own; together, they quietly reinforce dollar dominance.

[[gallery2]]
This has important implications for policymakers outside the United States—particularly in countries that have spent years trying to reduce their dependence on the dollar. The ASEAN+3 countries, for example, have sought to settle trade in local currencies, link national payment systems, and pool reserves to protect against dollar shortages.

While the ASEAN+3 cannot prevent the self-reinforcing dollar loop from forming, they can limit their dependence on it. The key will be to combine energy, AI, and payments into a single strategic agenda. Regional data centers, powered by affordable and increasingly clean energy, could increase local firms’ access to compute. And the development of local-currency tokenized settlement for agentic commerce would reduce dependence on dollar systems and keep transactions visible to regulators.

The goal for other countries is not full technological self-sufficiency, which is probably not possible any time soon. Rather, it is to participate in digital production without accepting a new layer of dollar dependence as the price of entry. After all, unlike petrodollar arrangements, the emerging AI system offers countries no seat at any summit table.

While policymakers and economists debate the future of dollar dominance, AI companies, cloud providers, and payment networks might already be writing it into the next chapter of international monetary history. Those who hope to shape that chapter must act now—or risk being left off the page.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Wed, 12 Aug 2026 22:35:00 +0400 <![CDATA[ EY Armenia: Recent Tax Changes will Significantly Affect Businesses in Armenia ]]> https://banks.am/en/news//31080 https://banks.am/en/news//31080 Armenia has introduced a broad package of tax legislative changes that will affect businesses across multiple industries, including e-commerce, retail, manufacturing, tourism, jewelry production, and cross-border operations. 
While some amendments are already in force, others will take effect from 1 January 2027 and may require companies to review their tax reporting, compliance processes, and accounting methodologies.

“The recent amendments represent one of the most extensive packages of tax changes adopted during the year. Companies should carefully assess how the new rules may affect their tax compliance, reporting processes and business operations, particularly in areas such as e-commerce, tax administration and foreign currency transactions accounting,” said Kamo Karapetyan, Partner and Head of Tax Practice at EY Armenia.

What's new?

New VAT framework for EAEU e-commerce marketplaces

One of the most notable changes concerns the taxation of cross-border electronic commerce within the Eurasian Economic Union (EAEU).

Under the new rules, electronic marketplace operators may become responsible for calculating, reporting, and remitting Armenian VAT on certain cross-border B2C sales to consumers in Armenia, regardless of VAT registration thresholds. The new rules will enter into force on 1 January 2027 and are expected to impact online platforms and businesses engaged in cross-border e-commerce.

Special VAT regime for gold and jewelry industry

Armenia has introduced a new VAT mechanism for manufacturers and traders of gold and jewelry. 

Instead of taxing the entire sales value, VAT will generally be calculated based on the value added during production or resale, bringing taxation more closely in line with the economic substance of these transactions.

Expanded Powers for Tax Authorities

Businesses may also face increased scrutiny from tax authorities.

Tax authorities now have broader powers during thematic reviews and may initiate up to three reviews per year in certain circumstances. The changes are designed to strengthen tax compliance oversight and expand the authority's ability to verify taxpayer positions.

Tax professionals note that companies should ensure their internal records, supporting documentation and tax reporting procedures are sufficiently robust to withstand increased review activity.

Higher criminal liability thresholds for tax offences

Another important development concerns tax-related criminal liability.

The monetary thresholds triggering criminal liability for tax violations have been significantly increased. As a result, many lower-value tax disputes may be addressed primarily through tax administration measures, including additional assessments, penalties, and fines.

Foreign currency accounting reform and other amendments

The reform package extends beyond VAT and tax administration matters.

Among other changes, the legislative package revises the tax accounting rules for foreign currency transactions, expands opportunities for transaction adjustments and goods returns, introduces new VAT exemptions, and includes various changes affecting profit tax, VAT administration, and non-resident taxation.

Businesses engaged in international transactions and foreign currency operations may be particularly affected by the updated accounting methodology and exchange rate application rules.

Why it matters for businesses

According to EY Armenia, the reforms could require companies to:

• Review existing tax accounting methodologies and exchange rate application rules;

•Adapt to new VAT requirements applicable to certain industries and transactions;

• Strengthen focus on tax compliance and tax reviews;

• Update internal controls, tax reporting, and documentation processes; and

• Reassess existing tax positions and compliance risks

A detailed overview of the legislative changes and their potential implications for businesses is available in EY Armenia's latest Tax Alert: 

https://www.ey.com/en_am/technical/tax-and-law-alerts/major-tax-and-vat-changes-affecting-businesses-in-armenia ]]> Thu, 06 Aug 2026 00:05:00 +0400 <![CDATA[ The EU’s Incredible Shrinking Banking Sector ]]> https://banks.am/en/news//31074 https://banks.am/en/news//31074 Howard Davies, a former deputy governor of the Bank of England, is a professor at Sciences Po.

A quarter-century ago, each of the five biggest European Union banks had a market capitalization larger than that of the biggest US bank. Now the market capitalization of the biggest US bank, JPMorganChase, is higher than that of the top five EU banks combined. (The EU is coy about names, but we can presume that the EU banks include France’s BNP Paribas, Germany’s Deutsche Bank, and Spain’s Santander).

This striking fact about market capitalization is cited in a European Commission report on banking regulation published in late July. The Commission is not noted for lauding the achievements of the US financial sector, so the purpose must have been to sound a wake-up call to those EU member states that remain resistant to the reforms recommended in reports on European competitiveness written in recent years by former European Central Bank President Mario Draghi and former Italian prime minister Enrico Letta.

The reasons for this dramatic turnaround in relative values are many and various. One obvious factor is that the US economy recovered far faster from the 2008 financial crisis than the EU did, outperforming Europe by almost 20 percentage points since 2009. Another is that US capital markets are deeper and more flexible, giving companies more sources of capital and allowing banks to manage their balance sheets more actively.

[[gallery1]]
Moreover, cost-to-income ratios in EU banks have remained stubbornly high, and many local regulations stand in the way of a genuine single market. The convoluted merger dance involving Unicredit and Commerzbank may turn out to have a happy ending, but the time it has taken illustrates how difficult banking consolidation has been to achieve. We still have no pan-European banks worthy of the name, except perhaps Revolut.

The EU’s legacy banks would also blame excessively conservative prudential regulation by the ECB. There are signs that the European Commission itself, more directly exposed to political pressures than the ECB, is coming around to that view.

[[gallery2]]
The Commission is becoming more receptive to the argument that the need to encourage bank lending, especially to small and medium-size enterprises, which are more dependent on bank borrowing in Europe than they are in the US, should be a consideration influencing the setting of capital requirements. Maybe, as the saying goes, the ECB is achieving the stability of the graveyard, where nothing moves.

[[gallery3]]
The difficulty is that the evidence on the relationship between bank capital and growth is mixed. Recent research by the management consultancy Oliver Wyman and financial research firm Autonomous points to a reduction in return on equity of about 1%—significant, but not transformative—arising from the ECB’s more conservative approach by comparison with the US Federal Reserve. The ECB, no surprise, contests that conclusion, and points to the long-term advantages of a highly resilient banking sector.

But that is a static approach, and there are, from the EU banks’ perspective, worrying signs of a growing transatlantic divergence. The Fed has clearly abandoned the Basel Endgame proposals which provoked such hostility a couple of years ago. The Fed’s current proposals, articulated by Vice Chair for Supervision Michelle Bowman, include a reduction in the supplementary leverage ratio, a lower G-SIB (Global Systemically Important Bank) surcharge, and other changes which, together, would reduce required capital for a large US bank by about 5%. That would suit President Donald Trump’s administration.

The Bank of England is moving cautiously in the same direction, and earlier this year announced a reduction in the benchmark Tier 1 capital requirements from 14% to 13% (down to the equivalent of a CET1 ratio of around 11%). That is hardly a radical move, and the British banks want more, but it is a step in the direction of a more competitive approach, which the government itself has called for.

But the ECB remains hawkish for now. Its head of supervision, Claudia Buch, argues that tough capital regulation has not constrained credit expansion in practice. She agrees with the need for simplification (hands up if you oppose simplification) but resists arguments for any overall reduction in capital.

Instead, the ECB continues to argue that banks could do more to help themselves by controlling costs more effectively. And while the price-to-book ratios of big EU banks remain below those of their US competitors, they have at last been rising.

In fairness, the ECB is not alone. While Canada has modestly relaxed its capital requirements, other significant economies have not. Australia and Japan remain conservative and resistant to change. China’s regime is hard to compare, but on the face of it, policymakers are sticking to their traditional line—“Basel plus one” percent—on capital requirements.

[[gallery4]]
In each case, the political and economic contexts are different. Europe is stuck in a low-growth equilibrium, and its leaders are desperately searching for an escape route. However weak the argument, cutting capital requirements seems to offer the prospect of some relief. That is clearly driving current thinking at the European Commission.

That could set the stage for an interesting confrontation between the Commission and the ECB this autumn, pitting the Brussels doves against the Frankfurt hawks. Normally, the outcome of that fight would be easy to handicap: the ECB holds most of the cards. But there are other considerations to bear in mind. The issue could play into discussions about who succeeds Christine Lagarde as ECB President in 2027. If the German economy remains stagnant, Chancellor Friedrich Merz might be well-disposed to someone a little less keen on ever-stronger capital buffers than his compatriot Frau Buch.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org ]]> Wed, 05 Aug 2026 00:10:00 +0400 <![CDATA[ Where Will Global Financial Fragmentation Lead? ]]> https://banks.am/en/news//31035 https://banks.am/en/news//31035 Şebnem Kalemli-Özcan, Professor of Economics at Brown University and Director of the Global Linkages Lab, is a former senior policy adviser at the International Monetary Fund and former lead economist for the Middle East and North Africa at the World Bank.

Şebnem Kalemli-Özcan 

The global monetary order is fragmenting. Each use of financial sanctions by the United States raises the option value of an alternative to the dollar, making diversification a form of strategic insurance. But while managed diversification is healthy, a disorderly scramble for the exits would not be.

Europe learned a version of this lesson in 2010, and its experience remains the best evidence we have about what currency unification can and cannot deliver. Since debates about geopolitical fragmentation always revive the late economist Robert Mundell’s dream of a world currency—or its modern variant of two leading currencies, the dollar and the euro—we should be mindful of the euro’s real-world experience over the past quarter-century.

The euro crisis was the perfect test of the optimal currency area (OCA) theory that Mundell had presented in his 1961 paper, because his criteria—factor mobility (especially that of labor), fiscal transfers, and symmetric shocks—turned out to be exactly the dimensions along which the eurozone would be challenged. A monetary union without a fiscal union and labor mobility, facing asymmetric shocks, behaved precisely as the theory predicted: it transmitted stress it could not absorb. The crisis thus seemed to vindicate Mundell’s OCA theory.

[[gallery1]]
Of course, OCA criteria are not fixed in time, but rather are shaped by economic integration itself. In a 2001 paper, my colleagues and I showed that regions and countries with more specialized production structures have output fluctuations that are less correlated with everyone else’s. Combined with our earlier finding that capital-market integration causes such specialization, we concluded that financial integration pushes shocks toward greater asymmetry.

We then described the mechanism behind this pattern in a 2003 paper, showing that the more a group can share risk—across German regions, US states, or EU countries, for example—the more its members can afford to specialize and trade. Thus, insurance buys specialization, which in turn buys trade and output asymmetry. The empirical upshot of Mundell’s theory is that regions within federations share risk heavily and specialize extensively, whereas sovereign countries share almost no risk at all. The euro, on this reading, still cannot be an OCA. It had the integration that drives specialization and asymmetry, but it lacked the federal insurance that makes asymmetry survivable.

Without such insurance, a single currency misallocates capital, leading to declining productivity. As we show in a 2017 paper, the interest-rate convergence that accompanied the euro’s arrival did send a flood of cheap capital into Spain, Italy, and Portugal—exactly the “downhill” flow the textbook promised. But the textbook also predicted that this capital would find its most productive uses, and it did not—a misallocation story. In economies with size-dependent financial frictions, the falling cost of capital drew investment toward firms with high net worth rather than high productivity. As the dispersion of returns to capital across firms widened, total factor productivity fell.

This pattern appears in Spain, Italy, and Portugal, but notably not in Germany, France, or Norway, where financial markets are deeper. The euro did not merely expose its members to asymmetric shocks they could not insure against; the capital it attracted was systematically misallocated, dragging down the productivity of the periphery.

So, these mechanisms explain why monetary union has proved so much harder in practice than its architects hoped. Could the world nonetheless converge to a durable dollar-euro duopoly? Current trends suggest not. Geopolitical fragmentation is pushing the system toward many currency blocs, not toward one or two central banks. The political logic of the moment favors assertions of monetary sovereignty of every nation, not its surrender.

[[gallery2]]
A generalized version of the European story is also the story of the past four decades of financial globalization. The textbook case for globalization in the 1990s promised that capital would flow downhill from rich economies to poorer ones, equalizing returns and accelerating convergence. Instead, the paradox that Robert Lucas had observed in 1990 held. Instead of capital flowing from developed to developing countries, China’s savings flowed to the US, producing the persistent imbalances and domestic grievances that now drive US trade policy. Likewise, integration was supposed to let countries insure one another against shocks. Instead, consumption remained less correlated than output across countries. It was the reverse of what efficient risk sharing predicts. The world got the contagion without the insurance.

What about the current digital-currency revolution? A naive reading casts it as a global-single-currency enabler; but, in practice, the opposite is happening. Stablecoins, the fastest-growing form of cross-border digital money, are roughly 97% dollar-denominated, and US legislation now deliberately channels digital-dollar activity into privately issued Treasury-backed tokens, with the explicit strategic aim of entrenching the dollar. As a response, China’s e-CNY—and perhaps a future digital euro—is being built as an instrument of national monetary sovereignty, for the express purpose of creating payment rails that can operate outside the dollar system. The technology that could in principle have delivered Mundell’s single world money is instead deepening dollar dominance and fortifying national monies. It is fragmenting, not unifying, the monetary order. It is only a matter of time before every country pushes for its own digital currency.

Mundell’s wished-for destination is unreachable because the world is nowhere near an OCA: labor does not move freely across borders; there is no global fiscal authority to transfer resources from booming regions to slumping ones; and shocks are profoundly asymmetric across countries. 

A single global currency would do to the world what the euro did to its periphery. It would drive further specialization and more asymmetry over time, with no fiscal union to insure against it. The man who gave us the tools to evaluate OCAs also gave us the decisive argument against the single world currency.

The international monetary system today is best understood not as Mundell’s map of regions choosing exchange-rate regimes, but as a network of trade and financial linkages through which monetary influence propagates. Resilience in such a system will come neither from a single global currency nor from a scramble into national fortresses, but from the deliberate management of the linkages that constitute the network.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Thu, 30 Jul 2026 22:30:00 +0400 <![CDATA[ The Mismeasure of Europe’s Economy ]]> https://banks.am/en/news//30993 https://banks.am/en/news//30993 Sami Mahroum, Founder of Spark X, previously held posts at INSEAD, the OECD, and Nesta.

The debate over European competitiveness has long focused on the widening gap with the United States. But that is the wrong question. What matters is not whether the gap is widening, but the fundamentally different mechanisms through which each economy creates wealth: Europe derives much of its wealth from accumulated assets; the US relies on the continual creation of new ones.

This distinction is at the heart of the debate over how to measure the US-EU productivity gap. Paul Krugman argues that, in terms of purchasing power parity, Europe’s relative position has remained broadly stable. Fellow Nobel laureate Philippe Aghion and his co-authors, for their part, contend that at constant prices, Europe has steadily lost ground since the 1990s. Both, however, are measuring the gap; neither explains what drives it.

Europe is indeed less productive than the US, and the gap has widened by constant-price measures. But Europe is also richer than it was a decade ago: output per capita has risen, and the European Union’s employment rate reached a record 76.1% in 2025. Moreover, Europe does not feel poorer, since much of its wealth is embodied in its cities, institutions, and reputation.

What has slowed, then, is not wealth accumulation itself but the rate at which it is renewed. Slower renewal, rather than decline, is the defining feature of what might be called a “stock economy,” in contrast to America’s “flow economy.”

“Stock” and “flow” are ideal types of wealth creation, not accounting categories. A stock economy generates steady returns from assets accumulated over time: historic cities, supplier networks, legacy brands, regulatory credibility, technical know-how, and the trust that lowers transaction costs. A flow economy must continually create new wealth through frontier innovation, entrepreneurship, and rapid scaling. Europe relies heavily on inherited coordination, whereas America depends on perpetual renewal.

To be sure, Europe’s stock is far from passive. Dense supplier networks, reputational capital, and institutional credibility generate genuine productive efficiencies. Once such assets are in place, however, some of the value they generate takes the form of economic rents instead of rewards for productive investment. Landowners in prime locations, incumbents sustained by legacy brands, and protected sectors capture that surplus by controlling inherited assets. The same stock that creates efficiency also fosters entrenchment.

Milan’s fashion ecosystem illustrates how accumulated cultural resources translate into what economists call “amenity value.” As Leïla Kebir and Olivier Crevoisier’s work on the cultural geography of Swiss watchmaking shows, such inherited cultural resources continue to shape contemporary production. Simply by carrying a Milan address, a new fashion label can command an instant premium, as the location itself signals heritage, taste, and authenticity.

The distinction between stock and flow economies has significant implications for the productivity-measurement debate. Because national accounts record both actual and imputed rents as output, part of what both Krugman and Aghion treat as productivity gains reflects returns on inherited assets rather than newly created wealth.

The productivity gap, in other words, reflects not only varying levels of dynamism but also the extent to which output comes from inherited assets rather than new wealth creation. A study of the economic impact of UNESCO World Heritage designations in Italy found that listed localities experienced faster growth in both resident populations and the share of high-income taxpayers, fueling demand for luxury housing. Strip away those passive legacy rents, and Europe’s dynamic core might look thinner than either Krugman or Aghion acknowledges. Viewed this way, Europe is less an economy in decline than one living comfortably off a remarkable inheritance while struggling to convert it into new growth.

Nowhere is the distinction clearer than in each economy’s signature industries. Europe’s defining global industry is luxury: a stock-based sector in which heritage and reputation become more valuable with time. America’s economic flagships are software and, increasingly, AI, where value depends on pushing the technological frontier.

The limits of the stock economy become apparent when firms try to scale. While Europe is home to more than 35,000 startups and many world-class companies, scaling is fundamentally a flow process. Europe’s capital is abundant but rooted, its talent is embedded in existing institutions, and its markets remain fragmented.

[[gallery1]]
As a result, European savings are largely invested abroad. According to the European Parliament, roughly €300 billion ($343 billion) in savings leave the EU each year, much of it funding American innovation. In his 2024 report on European competitiveness, former Italian Prime Minister Mario Draghi reached a similar conclusion: Europe struggles to translate its scientific excellence, vast savings, and industrial depth into rapidly scaling firms.

Yet Europe has several institutional mechanisms for turning stock into flow. The first is the corporate spin-off, which allows incumbents to serve as incubators. ASML, the Dutch maker of the advanced lithography machines essential to semiconductor manufacturing, emerged as a joint venture between Philips and ASM International before becoming an independent company. NXP and Signify were spun off from Philips, and Infineon from Siemens. Each converted accumulated capabilities into firms built for a new technological cycle.

[[gallery2]]
The second mechanism is the joint venture, which pools established capabilities into a new industrial champion. Airbus, created by combining Europe’s national aerospace champions, became Boeing’s only serious rival. The creation of STMicroelectronics through the merger of French and Italian semiconductor firms followed the same logic.

Last but not least is the recycling of accumulated wealth into patient capital. The Novo Nordisk Foundation, for example, channels the returns from one generation’s success into the next generation of research and firms.

[[gallery3]]
These mechanisms are not European versions of the Silicon Valley playbook. They represent Europe’s own way of turning inherited assets into new growth engines. Europe’s mistake over the past few decades has been trying to graft a venture-capital‑driven flow economy onto a stock‑based socioeconomic architecture built around powerful incumbents, stable rents, and incremental change. The result has been a series of sporadic VC booms that failed to transform the broader economy.

Rather than imitating Silicon Valley wholesale, Europe’s challenge is to build institutions capable of unlocking trapped resources: incumbents that spin off new firms, national champions that pool capabilities, and foundations and family capital that support startups as they scale.

Seen through this lens, the Krugman-Aghion debate is less about choosing the right productivity metric than about what those metrics leave out. Although they do a good job of measuring productivity at the technological frontier, they do not capture how much of Europe’s apparent performance rests on inherited assets whose productive potential remains unrealized.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Fri, 24 Jul 2026 22:15:00 +0400 <![CDATA[ Postmodern Economics ]]> https://banks.am/en/news//30997 https://banks.am/en/news//30997 Angus Armstrong is a research professor at the Institute for Global Prosperity at University College London, Director of Rebuilding Macroeconomics, and Chief Economic Adviser at Lloyds Banking Group.

If it is true that art imitates life, works of imagination can reflect underlying truths about our own experience. The English artist David Hockney, who died last month, certainly understood that. In reflecting on his brilliant and endlessly joyful work, even the most dismal-minded economist might learn something about how to interpret reality.

Hockney saw that art comes not just from the mind but, more precisely, from memory. Like memory, art is always necessarily interpretative—never a perfect copy—and different artistic schools and movements reflect different ways of interpreting reality.

Modernists, for example, consider the world to be generally knowable as a domain where structure is roughly stable and scientific discovery always leads to progress. Such a perspective is rather idealistic, relying on minimal principles to reveal an inherent order, as in Piet Mondrian’s mesmerizing abstract lines and blocks of bright color.

Modern macroeconomics is similar. On the basis of a few simple axioms about human decision-making and an assumption about how we form consistent expectations, economists have developed a grand theory of how the economic system works. With the right parameters, the thinking goes, we can study the workings of the economy with confidence that we have the right representation of reality.

The validity of this approach goes back to 1954, when the discipline developed a formal proof of the existence of a perfect equilibrium under ideal economic conditions. This work elevated the profession to the “queen of the social sciences,” thanks to its quantitative rigor and application to related disciplines.

[[gallery1]]
For policymakers the message could not have been simpler: Fashion the world in the image of economists’ ideal conditions and you can be free of messy normative or political judgments about the distribution of resources. Yes, reality is a bit more complicated, but complexities can be ironed out by using inflation targets and fiscal rules to head off any wandering expectations.

We have now seen six British prime ministers in the past decade set out their economic strategies using almost exactly this framework. It has not gone particularly well, but we seem to be trapped in the same way of thinking.

Hockney had a different sense of reality. Eschewing the idea of a single truth, he showed that the world unfolds before us in ways we cannot fully understand. We have different perspectives on reality, which is itself indeterminate.

The actual economy is not some isolated knowable system of causal relations that are occasionally perturbed by an external shock. Economist Armen Alchian reminded us long ago that our axioms are not a description of human behavior and decision-making processes, only a simplification.

Yet uncertainty need not leave us paralyzed. On the contrary, Frank Knight suggested a century ago that intelligent life probably would not even exist without uncertainty, and George Shackle maintained that living with uncertainty is the price we pay for having an imagination. We don’t just rationally choose between existing products. We create knowledge for ourselves by seeking to harness the inherent uncertainty of experience.

We all must plan ahead. But if the future cannot be known, the question is how we approach forecasting. Former US Federal Reserve Chair Ben Bernanke recommended that the Bank of England consider “alternative modeling frameworks,” even heterodox models. This is consistent with Hockney’s insight. If economic forecasting is to be a useful practice, it must account for different perspectives.

[[gallery2]]
If economists were to reduce the weight on equilibrium models, we could then explore other potential outcomes. Doing so might call our attention to parameter values where dynamics change, causing cascades of economic activity (or tipping points) that are much more important for decision-makers to be aware of. It may well reveal areas where the economy is developing serious problems—a truly worthy contribution to the debate.

Since a single model tells only a single story, those who cling to it can easily end up trapped in TINA (there is no alternative) thinking—as British prime ministers have done. The only logical response is to use alternative models. When these contradict one another, we can still make decisions on the basis of John Maynard Keynes’s “balance of evidence,” rather than sticking to the pretense of knowledge.

Even in the messier world of fiscal policy, we continue to estimate the precise long-term impact of public investment by using a very conventional production function. Alfred Marshall may have established organization as a fourth factor of production, but since such functions ignore any change in organizations, alternatives are never considered. Robert Solow was right to caution that production functions are only illuminating parables.

[[gallery3]]
Accepting radical uncertainty means accepting that knowledge is always fallible and incomplete, even with all the information that could possibly be gathered. This distinction will matter more and more as we deploy AI. Corporate board members still will need to “feel” satisfied—rather than simply being told—that all reasonable eventualities have been considered. That requires human involvement and knowing where outputs come from.

We will eventually follow Hockney’s footsteps into a world of postmodern macroeconomics, with uncertainty at its core, rather than an exogenous shock to an otherwise stable equilibrium. This economics will invite different perspectives and experimentation, and different institutions will support the creation of new knowledge. Our challenge will be to find the right structures, and to make way for a world in which crude utilitarianism gives way to justice, dignity, and fairness—values to which Hockney was deeply committed.

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Fri, 17 Jul 2026 22:35:00 +0400 <![CDATA[ Net profit of the Armenian banking sector in 1HY 2026 equals to approximately $573 million ]]> https://banks.am/en/news//31004 https://banks.am/en/news//31004 We are presenting to your attention summary of the results of the Armenian banking sector for 1HY 2026, prepared and published exclusively on Banks.am by a specialized consulting company RUMELS Management Solutions.

Ruben Melikyan has more than 25 years’ experience, as a successful c-level executive (CEO/CFO), with a successful track record leading diverse management teams in different areas, like audit, micro-finance, retail, FMCG and banking. Ruben Melikyan is an ACCA member; he graduated from Oxford University (EMBA) and received a Certificate on “Advanced Corporate Valuation” from NYU.

The purpose of this study is to analyze the main financial indicators of the Armenian banking system in 1HY 2026.

Net Profit

The total net profit of all Armenian banks during 1HY 2026 is equal to 214.3 bln AMD (USD 573 million), which is by 13,6 bln AMD, or by 6,8% more than it was recorded in 1HY 2025.

All banks registered a profit during the mentioned period.

The largest profit was recorded by Ardshinbank, amounting to 68,8 bln AMD. 


[[gallery11]]
Total loan portfolio

The total loan portfolio of the banking sector during 1HY 2026 increased by 11,4%.

As of 30.06.2026, the total loan portfolio amounted to 8,56 trillion AMD, and its share in total assets is 62%.

The mentioned total loan portfolio includes retail and corporate loan portfolios.


[[gallery12]]
The market share of 5 largest banks (Ameriabank, Ardshinbank, Acba bank, Inecobank  and Amio bank) by total loan portfolio is 65,1%.

Ameriabank has the largest market share - 22,9%.

[[gallery13]]
Bonds

During 1HY 2026, the total balance of bonds issued by Armenian banks increased by 304 bln AMD, or 57,8%.

The significant increase was primarily attributable to Ardshinbank’s issuance of USD 600 million in Eurobonds.

As of 30.06.2026, the total balance of issued bonds amounts to 830 bln AMD.

13 out of 17 banks issued bonds.

[[gallery14]]
Total Equity

During 1HY 2026, the total equity of the Armenian banking sector increased by 77 bln AMD, or 3,6% and amounted to 2.23 trillion AMD. 

This growth was mainly attributable to:

- Net profit of 214 bln AMD; 
- Increase of share capital of Amio bank and Fast Bank by 20 bln AMD and 5 bln AMD, respectively
- Declared dividends amounting to 169 bln AMD.
 
During 1HY 2026, 11 banks declared dividends amounting to 169 bln AMD

Ardshinbank - 100,3 bln AMD,
Ameriabank - 25,4 bln AMD,
Unibank - 9,3 bln AMD,
Inecobank - 9 bln AMD,
Acba bank - 7,5 bln AMD,
Evocabank - 5 bln AMD,
Converse Bank - 4,3 bln AMD,
AraratBank - 4 bln AMD,
Armeconombank - 2 bln AMD,
ArmSwissBank - 1,1 bln AMD,
VTB Bank (Armenia) - 0,76 bln AMD,

[[gallery15]]
To learn more about the financial analyses for mentioned and other periods, please follow this link. ]]> Fri, 17 Jul 2026 16:20:00 +0400 <![CDATA[ Europe's Competitiveness Bogeyman ]]> https://banks.am/en/news//30946 https://banks.am/en/news//30946 Daniel Gros is Director of the Institute for European Policymaking at Bocconi University.

Daniel Gros 

China looms large in trade-policy discussions everywhere, but the precise concerns vary. Whereas the United States has long regarded China as a destroyer of American industry and a geopolitical rival whose rise must be contained, Europe has been more concerned about the national-security implications of Chinese dominance in a few strategic sectors, such as rare-earth minerals. Recently, however, European policymakers have begun sounding more like their American counterparts, arguing that surging Chinese imports threaten domestic industry. 

While China’s dominance in sectors like rare earths always had strategic implications for Europe, it did not mean much for European employment or output. And the competitive pressures European Union firms did feel from China were largely offset by European industry’s strong foothold within China. 

This is now changing. European companies find it increasingly difficult to compete in the Chinese market, even if they are heavily invested there, while Chinese exports to Europe are surging. The EU’s bilateral trade deficit with China reached nearly €360 billion ($419 billion) last year—almost double that of the US—affecting many of Europe’s core industries, such as automobiles. 

Chinese exporters are bolstered by vast government subsidies and policies focused on ensuring dominance in high-tech industries, compounding Europe’s frustration. Now, calls for European leaders to protect domestic industry from Chinese competition are growing louder, with even figures who have criticized US President Donald Trump’s tariffs advocating for Europe to respond to “unfair” Chinese subsidies with levies of its own. 

It’s a politically potent argument, but it is not based on sound economics. Fairness does not factor into a rational economic policy. What matters is whether a given action—such as introducing tariffs or even disregarding World Trade Organization rules (because “others are doing it”)—would bring net benefits to the economy. And, in this case, the answer is no. 

It might seem obvious that imposing a tariff on imports from China would give European industry a leg up against its strongest competitor. But this protection comes at a high cost. For starters, intermediate inputs comprise over 40% of total EU imports from China, meaning that tariffs would increase the costs of production throughout the European economy. A tariff on batteries, for example, would place considerable strain on producers of battery electric vehicles, imperiling the EU’s large trade surplus in the sector. 

[[gallery1]]
This surplus is important. Warnings that Chinese imports pose a threat to European automakers usually focus on the number of Chinese vehicles entering Europe, noting that China-made cars now account for 7% of car sales in the EU. But nearly 40% of the EU’s total car production is for export, and the unit value of European auto exports is twice as high as that of imports from China. This implies that export markets may account for up to half the value of production. 

For the auto industry, like many others, success in export markets is necessary not only to survive, but also to retain technological leadership. For now, Europe is often exporting high-end differentiated products, which are not interchangeable with the imports China has to offer. But Europe’s advantage on this front is rapidly being eroded, as Chinese producers climb the quality ladder. 

It is far from clear that tariffs would preserve European competitiveness against Chinese exports that can compete in global markets on price, standards, and innovation. In fact, recent data show that the key problem for Europe is not so much surging imports, but the weakness of extra-EU exports, which have been declining for four consecutive quarters (until Q1 of this year). 

Tariffs might offer temporary relief to a few sectors, but they cannot restore technological leadership, industrial dynamism, or export competitiveness. Recent experience in the US reinforces this view: while Chinese exports to the US have fallen, this redirection of trade flows has not been accompanied by an American industrial renaissance. Production instead shifts to third countries, while higher input costs weigh on downstream industries. 

[[gallery2]]
The challenge for Europe today is not to shield itself from Chinese exports, but to remain competitive in spite of them. To this end, it should increase investment in innovation, pursue greater integration of the Single Market, work to lower energy costs, and pursue policies that strengthen its ability to compete globally. 

Where China raises genuine security risks—such as through its dominance in critical minerals or other strategically important products—targeted measures like stockpiling, supply-chain diversification, and expansion of strategic reserves are justified. But these are exceptions. For the bulk of European industry, success will depend not on keeping Chinese products out, but on ensuring that European products are still in demand globally. 

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Fri, 10 Jul 2026 22:30:00 +0400 <![CDATA[ “The determined succeed:” Discussion by Mughnetsyan and Parikyan Law Firms ]]> https://banks.am/en/news//30973 https://banks.am/en/news//30973 On June 19, a discussion on global business mobility, international investment opportunities – particularly in the United States – and investment-based immigration pathways was held in Yerevan. The event was initiated by Mughnetsyan & Partners Law Firm in cooperation with its U.S. partner, Parikyan Law Firm, and organized by AxelMondrian & Partners.

Banks.am attended the discussion and highlighted some of its key moments.

“15 years of experience – more than 10,000 legal cases and projects”

Edik Harutyunyan, Business Development and Communications Specialist, AxelMondrian & Partners, Discussion Coordinator

Today’s discussion is hosted by two respected law firms. Representing Armenia is Mughnetsyan & Partners Law Firm, with its Founding Partner Gnel Mughnetsyan and Managing Partner Tsoghik Muradyan. Representing the United States is Parikyan Law Firm, with its Founding Partner Kristine Parikyan.

[[gallery1]]
Founded in 2009, Mughnetsyan & Partners has grown into one of Armenia’s leading full-service law firms. Over more than 15 years of operation, the firm has handled over 10,000 legal cases and projects. This firm delivers innovative and practical solutions to complex legal challenges by combining deep legal expertise with extensive professional experience. Parikyan Law Firm, based in the United States, specializes in U.S. immigration law. The firm provides comprehensive legal services to individuals and businesses seeking to live, work, invest, or establish operations in the United States.

[[gallery2]]
It is no secret that when making business and investment decisions, entrepreneurs and investors primarily evaluate factors such as expected returns, potential risks, and the overall feasibility of a project. In recent years, however, investors – including those from Armenia – have increasingly taken into account the additional opportunities offered by the countries in which they invest. These may include more favorable tax and legal frameworks, greater global mobility, improved access to international markets, as well as pathways to residency or citizenship. 

Today, we will explore these opportunities through the insights and experience of representatives from these two law firms.

Residency opportunity: “Escape tool” or additional means for business development?

Gnel Mughnetsyan, Founding Partner, Mughnetsyan & Partners Law Firm

The idea of global business mobility should by no means be interpreted as an “escape tool.” In today’s economic environment, it should be understood that economic and entrepreneurial activities can also be carried out beyond the borders of the Republic of Armenia, within the framework of a transnational approach, creating numerous opportunities for business expansion.

[[gallery3]]
Today, we see that entrepreneurs who have concentrated their capital in one place, within a single jurisdiction, face numerous challenges. The primary goal of today’s meeting is to show our partners that there are opportunities to decentralize capital, on the basis of which one can also obtain residency status while carrying out transnational entrepreneurial activities.

Why has the U.S. been and continues to be viewed by investors as the most attractive destination?

Tsoghik Muradyan, Managing Partner, Mughnetsyan & Partners Law Firm

Summarizing the experience of our partners, I would like to mention a few reasons why the United States has always attracted investors.

The first factor is business scalability and global reputation. When a company transfers its assets to the United States, it makes its brand more reliable and stable. This also opens new opportunities in relations with financial institutions.

[[gallery4]]
Asset diversification is another significant factor, as the United States offers a stable economic and political environment, which has always been attractive to investors.

The third factor is the independent judicial system, under which property rights in the United States are protected as the highest value.

As mentioned, making investments and transferring assets can also lead to a certain legal status. In other words, by making an investment, you not only achieve a business outcome but also have the opportunity to obtain residency status.

“Making an investment alone is not enough to obtain residency status in the United States”

Kristine Parikyan, Founding Partner, Parikyan Law Firm

When investing in the United States, it is important to have proper planning from the very beginning. Setting clear goals is essential.

Today, several visa options are available to Armenian citizens. For example, the E-2 visa is one of the most common, based on the trade agreement between the United States and Armenia. 

[[gallery5]]
This type of visa allows you to obtain non-immigrant status if you invest more than $100,000. There is also the EB-5 program, which requires a larger investment and allows you to obtain a Green Card. Another option is the L-1 visa, intended for companies opening branches in the United States, which allows company managers or founders to relocate to the United States. Therefore, it is important to choose from the outset the option that best suits the company or the individual.

At the same time, it is important to understand that making an investment alone is not enough to obtain residency status, permanent residency, or citizenship. First, you need to demonstrate that your company is ready to begin operations and that you have employees in place.

“Can we get citizenship right away?”: stereotypes about the process

Kristine Parikyan, Founding Partner, Parikyan Law Firm

The first question we usually hear from clients is: “If we make a large investment, can we immediately obtain citizenship?” (smiles – ed.). Of course not. First, you need to obtain residency status, and only then can you talk about citizenship. In addition, you need to demonstrate the source of the investment, its legality, and undergo thorough checks of both the invested funds and the person making the investment.

Legal issues an Armenian company or individual interested in the U.S. market may face 

Tsoghik Muradyan, Managing Partner, Mughnetsyan & Partners Law Firm

First of all, as my colleague mentioned, it is important to demonstrate the source of the invested funds. This process must be completely transparent.

[[gallery6]]
The intellectual property sector is also an important consideration. If you have a registered trademark or another intellectual property asset in Armenia, you need to understand the mechanisms for protecting it in the international market as well. You should decide whether the company will operate under the same trademark and discuss this possibility with an American partner. The market is much larger, and a particular name may already be in use. Depending on the type of business, there may also be a need to relocate employees. Therefore, employment contracts, as well as all related formalities and regulatory requirements, should be clearly prepared.

Existing risks and “tempting” offers on social media

Kristine Parikyan, Founding Partner, Parikyan Law Firm

From an immigration perspective, the primary risk is, of course, denial. In particular, if an immigrant investor or another immigrant visa application (such as EB-5 or EB-1) is denied, the system records your immigration intent. This may later affect your ability to obtain non-immigrant visas (such as a B-2 tourist visa or other temporary visas), as applicants must be able to demonstrate that they do not intend to reside permanently in the United States.

[[gallery7]]
Today, social media is full of inaccurate information and “tempting” offers that can create risks. The only way to avoid them is to work with qualified professionals who have many years of experience in the field of immigration law.

“Armenian business is interested in the U.S. market”

Tsoghik Muradyan, Managing Partner, Mughnetsyan & Partners Law Firm

Armenian companies are definitely very interested in the U.S. market. I can say this based solely on the number of clients who have approached us on this issue. Moreover, the circle of interested businesses is quite broad. We are being contacted by representatives of companies operating in many different sectors. This strong interest served as the basis for today’s discussion. We want to clearly inform our partners about the challenges they may face and the solutions available to them.

Success comes only to those who make decisions

Gnel Mughnetsyan, Founding Partner, Mughnetsyan & Partners Law Firm

We have talked about procedures, but the number one guarantee of success in any business is determination. Ninety percent of the people in this hall are truly determined, and together with our professional knowledge, we will be able to make the right decisions.

[[gallery8]]
I believe that if a person is able to make decisions, they will definitely be successful. The people gathered here today are decision-makers.

Yana Shakhramanyan
Photos by Emin Aristakesyan

]]> Thu, 09 Jul 2026 16:55:00 +0400 <![CDATA[ Europe Needs the Digital Euro ]]> https://banks.am/en/news//30945 https://banks.am/en/news//30945 Brian Judge is Research Director of the Program on Finance and Democracy at the University of California, Berkeley.

Brian Judge 

After years of preparation, the EU’s three governing bodies—the European Parliament, the European Council, and the European Commission—are finally ready to begin formal negotiations on the digital euro. When they do, a project once conceived as a technocratic modernization of monetary infrastructure will become one of the most politically contested items on the bloc’s agenda. 

The Commission and the European Central Bank (ECB) have described the digital euro as an effort to adapt fiat currency to the digital age. That framing, while incomplete, carried the project through the technical preparation phase. It will not carry it much further. 

[[gallery1]]
The digital euro is not merely a technical upgrade. It is a political project in the long tradition of European institution-building, and its success or failure will ultimately depend less on engineering than on whether Europe’s leaders are willing to defend it. 

Resistance is likely to emerge from several directions. US President Donald Trump’s administration has adopted an openly hostile stance toward central bank digital currencies while promoting dollar-denominated private stablecoins. Russia will almost certainly treat the digital euro as another front in its hybrid war against Europe. And within the EU itself, Euroskeptics will seize on the project as proof of technocratic overreach and turn it into a magnet for conspiracy theories. 

European policymakers have spent years laying the technical groundwork for the digital euro. They must now approach the political struggle over its future with the same rigor. 

For nearly 80 years, Europe has pursued what the late British historian Tony Judt described as the construction of collective capacity to compensate for individual weaknesses. The European Coal and Steel Community, the common market, the single currency, the Schengen Agreement, and EU enlargement—each was an act of political will that helped turn the catastrophe of World War II into a durable system of shared institutions. Taken together, these efforts constitute one of the most successful political experiments in modern history. 

But Europe’s decades-long integration project is under immense strain. As Russia continues to wage war on Europe’s liberal democracies, American security guarantees can no longer be taken for granted. Meanwhile, China is reshaping global trade in ways that pose an existential threat to Europe’s industrial base. 

As German historian Kiran Klaus Patel has argued, the EU’s self-image has often outpaced its actual achievements. In practice, integration has been uneven, fueling resentments that far-right parties across the continent have exploited to gain power and undermine the European project. 

For many Europeans, “Europe” registers less as a political community than as a distant abstraction—a source of regulations, constraints, and acronyms that rarely improve daily life. The freedoms European integration has delivered are real but easily taken for granted. The costs, by contrast, are concrete and easy to resent. Any political project sustained by elite consensus and treaty law would be inherently fragile. 

[[gallery2]]
At the heart of this fragility is what the late German philosopher Jürgen Habermas described as the “lure of technocracy”: the temptation to advance European integration through mechanisms that circumvent the democratic publics in whose name it is pursued. 

The digital euro, conceived by experts in Frankfurt and Brussels, risks falling into the same trap, because decisions that are technically sound but poorly understood are easy targets for political attacks. A recent Bundesbank survey underscored the problem, finding that only 42% of Germans had heard of the digital euro, and just a quarter of those could accurately explain what it is. 

Habermas, however, pointed toward a remedy: a shared European identity grounded in broad participation in common institutions. The digital euro could provide precisely that kind of shared experience. Most forms of European integration, from regulatory harmonization to fiscal rules, remain invisible to ordinary citizens. But a digital currency would allow hundreds of millions of Europeans—most of whom know little about the institutional mechanics of integration—to interact daily with the same payments system, using the same interface, wherever they are in the eurozone. 

The single market has proved remarkably easy for American companies to dominate. About two-thirds of the eurozone’s credit-card transactions rely on Visa and Mastercard, and 13 of its 21 members lack a domestic alternative. Each transaction carries fees that function as a private tax on European commerce. The EU’s current push for strategic autonomy in defense, semiconductors, and cloud infrastructure means little if it does not extend to the payment systems that underpin Europe’s economy. 

[[gallery3]]
For a generation that has experienced integration primarily as a set of constraints, the digital euro could become a highly visible European institution that makes life easier. Few initiatives on the European agenda could demonstrate the tangible benefits of integration and cross-border cooperation as effectively. 

Whether the coming years re-establish the European project for a radically reconfigured world or mark the beginning of deeper fragmentation may well depend on how the debate over the digital euro plays out. A united EU would remain a continental power uniquely committed to liberal democracy, human rights, and a sustainable future, while a fractured Europe would be far more vulnerable to external coercion. 

The ECB cannot make the political case for the digital euro. The European Commission, national governments, and the European Parliament must do so. And they must be honest about what they are defending: the digital euro is not simply an effort to modernize the eurozone’s payments system; it is a European institution that happens to take the form of a payments system. 

Policymakers must make that case clearly and forcefully. The digital euro must not become another technocratic artifact, imposed from above and widely distrusted. It must be a living expression of Europe’s highest ambitions. 

Copyright: Project Syndicate, 2026.
www.project-syndicate.org 

]]> Sat, 04 Jul 2026 00:04:00 +0400 <![CDATA[ The Microfinance Debate Is Missing the Point ]]> https://banks.am/en/news//30918 https://banks.am/en/news//30918 Sophie Sirtaine is CEO of the CGAP. 

Buhle Goslar is Executive Committee Chair of the CGAP and Chairman of the Board of Directors of Lula.

Over the past five decades, microfinance has grown into a $1.5 trillion global industry, reaching hundreds of millions of households that conventional banks have never served and likely never would. It has enabled unbanked people around the world to start businesses, build assets, keep children in school, and withstand shocks that might otherwise have been devastating. 

Yet microfinance has also faced vocal criticism. In some markets, rapid expansion has outpaced consumer protections, leading to over-indebtedness and encouraging lenders to prioritize commercial interests over client welfare. 

These concerns should be taken seriously. Any industry that serves millions of people—from consumer goods to construction and manufacturing—has had to confront issues like poor governance, bad actors, and harmful practices by strengthening safeguards and improving standards. Microfinance is no exception. 

For too long, however, the industry has been focused on the wrong question: Does microfinance work? Decades of randomized controlled trials, whose findings on average were often treated as definitive yes-or-no verdicts, have reinforced a deeply misleading framing. Asking whether microfinance works is like asking whether a certain medicine works without specifying the patient, dose, or condition being treated. 

A recent analysis by the CGAP—an inclusive finance innovation lab (of which one of us is CEO)—helps move the conversation forward. Drawing on more than 400 impact studies, it replaces the facile question of whether microfinance works with more useful ones: When does credit create opportunity? When does it strengthen resilience? When does it leave people worse off? Why do outcomes vary so dramatically across borrowers and markets? 

[[gallery1]]
These questions can offer microfinance institutions—as well as the investors, donors, and capital markets that fund them—a stronger basis for decision-making. Identifying the conditions under which microcredit creates value or causes harm can lead to better investment strategies, more effective regulation, and ultimately, better outcomes for the people it aims to serve. 

The analysis highlights five factors that largely determine whether credit helps or harms: who receives the loan, how the loan is designed, what it is used for, where it is offered, and when it becomes available. 

Microcredit tends to work best when borrowers already have some experience running a business and control how the funds are used. It is also more effective when repayment schedules are aligned with household cash flows, rather than following demanding, rigid weekly installments, and when loans finance investments that generate steady returns over time. 

Pay-as-you-go solar is a prime example. Households that cannot afford a large upfront purchase can often manage small monthly payments that are lower than what they previously spent on kerosene. Here, microcredit finances an investment that quickly pays for itself. 

Microcredit can play an equally important role in strengthening resilience, though its benefits are often underestimated by randomized trials that focus on short-term changes in income or consumption. A family that uses financing to acquire a productive asset—a solar panel, a water pump, or income-generating equipment—is often better positioned to withstand a bad harvest, a medical emergency, or an economic shock. While this buffer effect may not show up in an 18-month trial, it is real and well-documented. 

The evidence on enterprise growth is similarly encouraging. For existing business owners, access to well-structured loans is consistently associated with higher profits, greater investment, and expansion. The mechanism is straightforward: credit acts as a lever, enabling entrepreneurs who already have customers, skills, and viable opportunities to invest and grow faster. 

Women’s economic empowerment offers another powerful illustration of how the same loan can produce very different outcomes. Women account for the majority of microfinance borrowers worldwide, and when they control how loans are used, the benefits often extend throughout the household, leading to higher spending on children’s health and education, more diversified income sources, and greater financial security. 

[[gallery2]]
But a loan issued in a woman’s name and controlled by someone else, such as a spouse or male relative, can leave her with the obligation to repay without any power over how the money is used. Direct disbursement into women-controlled accounts, transaction privacy, and products that reflect how women actually work and make decisions are therefore essential for credit to translate into genuine economic empowerment. 

The practical implications for providers and investors are clear. Rather than focusing solely on point-in-time repayment capacity, they should assess the viability of the opportunities borrowers intend to pursue and design products that align with how people earn and invest. 

To be sure, responsibility does not rest with providers alone. Regulators also play a critical role in facilitating responsible lending at scale, while evaluators must measure the impact of microcredit over periods long enough for its full effects to become apparent. 

The debate over the virtues and limitations of microfinance has obscured a crucial fact. Microcredit itself is neither inherently good nor inherently bad; its impact depends on how it is designed, delivered, and regulated. And even then, credit is only part of the financial toolkit people need, alongside insurance, savings, and payments. 

Responsibility therefore rests with all participants, from the institutions that provide credit and the investors and donors that fund it to the governments that oversee it. 

Rather than continuing to ask settled questions, the focus should be on the hundreds of millions of people who depend on microcredit. We now have a far clearer understanding of what separates success from failure than we did a generation ago. The challenge is to put that knowledge into practice. 

Copyright: Project Syndicate, 2026.
www.project-syndicate.org  ]]> Sat, 27 Jun 2026 10:10:00 +0400