By Nigar Abbasova
Devaluation of the national currency and other unfavorable processes seriously affected and challenged the financial sector of Azerbaijan, forcing the state to interfere in the situation and take serious steps to overcome the difficulties.
The sector is now passing through the stabilization period, while relevant agencies develop mechanisms to accelerate the process and improve the situation.
Chairman of the Board of Directors of Financial Market Supervisory Body (FMSB) Rufat Aslanli said that the authority is now engaged in the preparation of normative legal base for the creation of transit bank, mentioning that the bill will allow to define main responsibilities of temporary administrators appointed to troubled banks.
The legislature of the country envisages appointment of temporary administration but lacks the precise description of operations that the administrator is authorized to implement.
The proposed amendments envisage granting of a right of selling assets [of troubled bank] at auction to other banks and further implementation of recovery operations by means of funds acquired at the auction, should a bank loses its paying capacity or faces shortages of capital. The other option is creation of transit bank that will get liabilities and assets of any troubled bank and sell the assets to healthy investors.
Aslanli mentioned that the changes will allow to use international experience to improve the banking sector of the country and strengthen banking legislation. The Azerbaijan Deposit Insurance Fund (ADIF) will act as asset manager till the bank is sold to investors.
Commenting on the recent revocation of licenses from local banks, Aslanli mentioned that FMSB doesn’t plan to revoke licenses of banks in the near future, mentioning that the issue is currently not on agenda. He underlined that main objective is sustainability of financial sector. He said that the authority had been working with shareholders of banks to restore their capital, but they failed to provide capitalization of financial institutions. However, he mentioned that a number of banks have managed to solve the problem of insufficient amount of capital. Some 32 banks are currently implementing their operations in Azerbaijan, including 2 with state involvement.
Commenting on the issue of restructuring and further privatization of the International Bank of Azerbaijan (IBA), the largest bank and financial services group in Azerbaijan and the region, Aslanli said that the government is currently working on narrowing of IBA’s assets, mentioning that FMSB has a close contact with the government as part of the bank’s recovery. He said the process of reducing is underway, and the IBA assets are being gradually transferred to other market participants, expressing his confidence that the process of the bank's recovery will be completed next year.
The preliminary audit conducted by the CBA jointly with the Finance Ministry revealed that the volume of bad assets amounted to some 70 percent of all assets.
Some 10 banks, including Bank Standard, Zaminbank, Dekabank, Kredobank, Atrabank, Bank of Azerbaijan, Gandjabank, Texnikabank, Parabank and Caucasus Development Bank has been closed in the country since early 2016. Depositors of closed banks have already received about 667 million manats ($ 404.4) as compensations.
Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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