CBA restores license of one bank

By Aynur Karimova

The Central Bank of Azerbaijan restored the license of the NBCBank on February 1, which was revoked on January 26.

The CBA has made such a decision due to the NBCBank's plans to consolidate with other banks operating in the country, Trend reported on February 2.

In this regard, a protocol of intents has been signed between the banks.

"NBCBank has appealed to the CBA, informing it about a desire to consolidate with other banks, as well as to carry out measures for improving the financial situation, ensuring fulfillment of the obligations, as well as restoring the capital position," the CBA reported.

The bank started implementing overdue obligations before its clients and creditors through additional capitalization of the bank.

"Given this fact, as well as the relevance of consolidation process to the strategy of development of the banking sector, a decision on termination of the license of the NBCBank was annulled. The bank will operate under the strict control of the CBA until the full completion of the consolidation process," the CBA said.

A source in the banking sector of Azerbaijan told local media that the NBCBank intends to merge its assets with Parabank and Dekabank, which merge for consolidation in April, 2016.

However, Parabank told day.az that they have no information about such a merger, while Dekabank has denied such a consolidation.

The NBCBank told day.az that the protocol of intents has already been signed, but did not reveal the names of merging banks.

A source in the CBA told local media that the third party of the consolidation is not Dekabank, but is Kredobank.

This is not the first case of consolidation. Azerbaijani AGBank and DemirBank earlier signed a protocol of intent about merger.

Meanwhile, the Caucasus Development Bank, which is active in the Azerbaijani banking sector, will discuss its merger with other banks on March 20 as well.

The bank reported that the shareholders will have an extraordinary meeting at the request of the Supervisory Board of the Caucasus Development Bank.

The Caucasus Development Bank intends to merge with Gunay Bank and Atrabank, Trend reported earlier.

The Caucasus Development Bank’s license was revoked upon a decision of the CBA on January 27.

The decision on the revocation of the Caucasus Development Bank's license was taken because the total capital of the bank did not correspond to the CBA's minimum requirement of 50 million manats ($31.13 million).

"The Caucasus Development Bank could not fulfill its obligations to creditors and failed to manage its current activity reliably and prudentially," the CBA said.

Since the beginning of 2016, the CBA has terminated the licenses of Texnika Bank, the Caucasus Development Bank, Atrabank, Gandja Bank, Bank of Azerbaijan, United Credit Bank and NBCBank. The license of the seventh bank - Texnika Bank - was revoked on February 2, 2016.

Currently, 37 banks have licenses for banking activity in Azerbaijan.

The consolidation of banks is likely to lead to financial recovery of the banks as this process is in the interests of both owners and clients of banks.

The consolidation will also allow stable banks, which have deliberately decided to merge, to increase their share in the market and to gain more revenues. This strategy would be more correct if targets growth of profit and market share.

The International Finance Corporation and the European Bank for Reconstruction and Development support the consolidation of banks in Azerbaijan, regarding it as a way leading to financial recovery of the banks.

Azerbaijan has experienced good examples of consolidation of banks earlier.

For instance, UniBank was formed by the merger of two commercial banks in 2002 - MBank and Promtexbank, where the EBRD acquired a 15-percent share, and 8.3333 percent is owned by the German Investment Corporation DEG.

Bank of Baku merged with IlkBank in 2005.

Depositors to receive compensation

Preliminary amount of compensation, which will be paid by the Azerbaijan Deposit Insurance Fund for the return of deposits in three bankrupt banks (the Bank of Azerbaijan, the Gandja Bank and the United Credit Bank), will amount to 28.83 million manats ($17.95 million).

Azad Javadov, the Executive Director of the ADIF, told journalists on February 3 that even if the rest liquidated banks [their total number is seven] are declared bankrupt, the ADIF will have enough money to pay out compensations.

The volume of insured deposits at Texnika Bank is 79.34 million manats ($49.39 million), the Atrabank – 7.56 million manats ($4.71 million), while the Caucasus Development Bank has insured deposits worth 1.52 million manats ($0.946 million), according to preliminary data.

“It is easy to calculate that even if these three banks are declared bankrupt, the total amount of reimbursable contributions will be slightly more than 117 million manats ($72.83 million), while the fund has 132 million manats ($82.17 million),” the head of the fund said.

Javadov noted that in case of shortage of money, the fund will attract a loan from the CBA.

He went on to add that the funds to the depositors of the Bank of Azerbaijan will be fully paid within 10 days. To date, the ADIF has paid out over 9 million manats ($5.6 million) to more than 430 investors of the Bank of Azerbaijan.

The ADIF will also pay 1.5 million manats ($0.934 million) to the 378 insured depositors of the Gandja Bank, according to Javadov.

Furthermore, the depositors of the United Credit Bank will be able to appeal to the ADIF for payment of compensation since February 9.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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