Single regulator to supervise financial market

By Aynur Karimova

Azerbaijan, which is keen to cope with the impact of decrease of revenues from oil sales, has replaced the individual supervisory authorities in the financial sector with a single regulator to simplify procedures and enhance control.

On February 3, President Ilham Aliyev signed a decree on the establishment of a public legal entity - the financial market supervisory body - in Azerbaijan.

The establishment of a financial market supervisory body in Azerbaijan is aimed at improving the management and regulation mechanisms of the financial market of the country.

Elman Rustamov, the Chairman of the Central Bank of Azerbaijan, believes this is a positive step to open new opportunities for pursuing a unified policy and regulatory standards on the financial market

To date, the supervision on the financial market of the country was carried out by several institutions.

This body, which will handle all the functions of the State Committee for Securities, the State Insurance Supervision Service under the Finance Ministry, and the Financial Monitoring Service under the CBA, will facilitate the CBA's work, Rustamov underscored.

"The CBA has retained its functions on ensuring the financial stability. We will work together to ensure stability in the financial sector, especially, the financial stability," he added.

The financial market supervisory body will be the heir of the entire property of the State Committee for Securities, the State Insurance Supervision Service and the Financial Monitoring Service.

The mentioned structures will be liquidated on the date the financial market supervisory body’s Charter enacts.

Azerbaijan’s economy has been hit by a series of negative shocks, in particular, a marked drop in oil prices, a significant slowdown of economic growth and considerable currency depreciation in trading partner countries.

After a sharp decrease in price of black gold, Baku has announced a series of measures to deal with financial difficulties.

With reserves falling and external shocks intensifying, the Central Bank had to devalue the manat, and shift to a managed float exchange rate regime. But the devaluations helped to improve competitiveness.

Since then, the CBA has allowed greater exchange rate flexibility, and took measures to prevent capital outflows. The next step was consolidation in the banking system through merging or liquidating some problem banks.

Last week, Azerbaijan set the oil price in the updated budget-2016 at $25 per barrel.

These economic developments in the world dictate the necessity to ensure efficiency and transparency of the financial system of each country, and Azerbaijan is not exception.

Effective ensuring of the activity of the financial markets, as well as the protection of the rights of creditors, investors and policyholders are required for more stability and sustainability of the financial system, and its competitiveness.

The financial market supervisory body will be established for the purpose of licensing, regulating and controlling activities of the market of securities, investment funds, insurance and credit institutions (banks, non-bank credit institutions, postal operator) and payment systems.

The financial market supervisory body will help to improve the control system to counteract legalization of money or other property received by criminal way and financing terrorism, as well as ensuring transparency and flexibility of the control system in these areas.

The principle of a single financial market regulation has been successfully applied in global financial centers, and the body to be established in Azerbaijan will be ruled by this progressive international experience in its activity, the Department of Economic Reforms under the President reported on February 4.

The supervisory body was established within the framework of ongoing structural reforms to improve the business environment, promote transparency and increase efficiency of public administration.

This body will implement all aspects of regulation of financial and banking activities based on best international principles.

To ensure transparency the body will be managed in accordance with the principles of collegial governance, and the principles of operational and financial independence will be taken as a basis.

According to the presidential decree, the charter, the structure and composition of the Board of the body will be determined within a month.

A source in the Committee on Securities told Reuters that there is no clarity who will lead the new supervisory body, reported.

"The presidential decree instructs to establish a working group to develop a status and a charter of the body, after which the form of accountability of the body will be known, and its manager will be determined," the source added.

It is expected that Azerbaijan will form a multi-year fiscal consolidation plan, bolster the monetary policy framework to support the move to exchange rate flexibility, further strengthen the financial sector and pursue structural reforms.


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

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