Azernews.Az

Tuesday March 19 2024

WB: Azerbaijan’s financial sector on its way to recovery

22 February 2018 11:00 (UTC+04:00)
WB: Azerbaijan’s financial sector on its way to recovery

By Amina Nazarli

Azerbaijan’s financial sector is on its way to recovery, the World Bank told Azernews.

The past few years in general have been very saturated for banking sector. The previous year was not an exception, since the Institute of Banking Ombudsman, the Financial Literacy Council, as well as Azerbaijan Credit Bureau were established in the country. This has not been without revocation of licenses, however, not in such numbers as in 2016.

If 2016 was a real test for Azerbaijani banks, then 2017 became for them a year of reforms, active stabilization adaptation to new economic realities and preparations for the resumption of growth. Global oil prices slumped in 2014, hitting Azerbaijan’s banking sector hard.

The country devalued its currency, the manat, twice in 2015, putting the financial sector under acute stress. Ten banks lost their licenses in 2016 because they could not meet capital requirements.

"The government has undertaken many crucial reforms since 2015. Among other things, in 2016 the government set up a new financial regulator, the Financial Market Supervisory Authority (FIMSA), tasked with supervising Azerbaijan’s banking and insurance sectors and securities markets," the WB underlined.

To fully restore market confidence and support private sector development, Azerbaijan still must address several critical challenges, according to the Bank.

To absorb losses from toxic assets and finance growth, Azerbaijani banks need capital, the banks recommended. “Making room for new lending and investments requires legal and regulatory changes to enable restructuring, selling, or writing off non-performing loans (NPLs). Restoring market confidence and soundness—as well as fostering competition and integrating Azerbaijan with global financial markets—require Azerbaijani banks to enhance governance, improve business practices, strengthen risk management, and adopt stricter financial disclosure and reporting standards.”

The Bank also recommended strengthening of the Financial Market Supervisory Authority (FIMSA) of Azerbaijan.

"Maintaining financial stability while protecting depositors’ and investors’ rights requires strengthening FIMSA’s powers to set and enforce prudential rules independently. Moreover, reducing the risks and costs of lending to small and medium enterprises (SMEs) requires continuing ongoing efforts to strengthen credit market infrastructure and create an enabling framework for SME finance," the Bank said.

The World Bank Group is providing extensive advisory support to Azerbaijan under several existing programs. As just one example among many, based on international experience, the World Bank Group advised the authorities to develop a comprehensive 5-pillar strategy to address NPLs. We stand ready to offer further guidance, and we remain committed to supporting Azerbaijan on its path to prosperity.

--

Amina Nazarli is AzerNews’ staff journalist, follow her on Twitter: @amina_nazarli

Follow us on Twitter @AzerNewsAz

Loading...
Latest See more