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Qabil Ashirov

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The dynamic development in Azerbaijan's economy already creates opportunities for it to compete with developed countries. Using the right mechanisms and formulas creates ample opportunities for innovation.

Besides, the Government does its best to support durable and stable economic growth in all sectors of the economy. For this purpose, reforms are being implemented and new rules are being adopted in accordance with reality and requirements of days. Since the banking system plays an important role in the economy and without the banks, the economy cannot increase, the government pays special attention to this sector.

In 2023, the licenses of two banks whose amount of total capital is less than the minimum amount determined by the Azerbaijan Central Bank have been canceled. In a competitive environment and modernization period, the demands are increasing. As a result, the banks that cannot meet the requirements are closed. Ensuring financial stability is one of the main responsibilities of the Azerbaijan Central Bank.

Speaking to Azernews, the economist Eyyub Karimli underlined that in general, the reasons for closing banks can be different. We also observe it in international experience. Banks are closing all over the world. For example, a few months ago, we witnessed the closure of two large banks in America. He pointed out that bank closures are usually related to their liquidity.

“As for the recently closed banks in Azerbaijan, the licenses of those banks were terminated due to the fact that the total capital did not reach the limit set by the Central Bank. In general, I think that such situations are natural in a market economy based on relationships. Banks may close or new banks may open. Any private enterprise that cannot withstand competition and cannot build its business according to the requirements of the new era can be closed,” he said.

He stressed that the main priority at the moment is that the bank's depositors are not harmed in this process. It is reported that 99 percent of deposits are insured in the mentioned bank. As we know, the government has a certain policy on insured deposits. So, depositors will get their money back from the insurance fund.

“Increasing the total capital allows banks to become financially stronger and reduce the risks that may be encountered, as well as increase competitiveness and ensure stability. On the other hand, this also allows customers' deposits to have a more reliable and stable financial situation. Also, the world is changing, the world economy is developing dynamically. It goes without saying that there is a great need to strengthen our banks, and the process of concentration of aggregate capital is already taking place in banks. That is, weaker banks merge around stronger banks, or several weaker banks merge and continue their business, and weaker banks exit the market. I believe that the increase of total capital will have a positive effect on the health of the banking sector,” he added

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Qabil Ashirov is AzerNews’ staff journalist, follow him on Twitter: @g_Ashirov

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