By Akbar Mammadov
Azerbaijan's Central Bank (CBAR) has liquidated the license of - AGBank OSJC and NBC Bank OSJC, the CBAR announced on May 12.
Thus, the total number of banks in Azerbaijan having a license decreased to 26.
On April 28, with the decision of the Board of the Central Bank of Azerbaijan (CBA) dated April 28, 2020, the licenses of Azerbaijan’s AtaBank OJSC and Amrahbank OJSC were canceled, AGBank OJSC and NBCBank OJSC have been appointed as temporary administrators, and all the powers to manage these banks, including the general meeting of the bank's shareholders, have been transferred to the temporary administrator.
"According to the assessments made by the interim administrator of NBCBank, it has revealed that the bank's financial condition is unsatisfactory, capital is completely lost, there are serious problems with liquidity, it is unable to fulfill its deposit obligations and the corrective measures applied to the bank are not followed", the CBAR said.
The Azerbaijani Central Bank highlighted the fact that as a result of risky and non-prudential credit policy applied by NBCBank OJSC, 54 percent of the bank's loan portfolio ($42 million) as of April 30, 2020, excluding mortgage loans provided by the Mortgage and Credit Guarantee Fund of the Republic of Azerbaijan is in non-working status.
Thus, according to the CBAR, after corrections to the targeted reserves, the bank's total capital amounted to minus AZN 24 million. In order to restore capital position, additional capital investment in the amount of $43.5 million was required. "In addition, the interim administrator found that the bank had consistently falsified its prudential and statistical reports".
As to the AGBank OSJC, the CBAR noted that the clarifications made by the temporary administrator at AGBank OJSC also confirmed that the financial condition of the bank was unsatisfactory, the capital position was completely lost and it became worse.
"As of April 30, 2020, 51 percent of the bank's loan portfolio is non-performing. After corrections to the targeted reserves, the bank's total capital amounted to minus AZN167 million. In order to restore capital position, additional capital investment in the amount of AZN 212 million ($124.7 million) was required", the CBAR added.
Hence, taking into account all these facts, due to the complete loss of capital, inability to fulfill obligations to creditors, as well as the failure to carry out current activities in a reliable and prudent manner the Board of the Central Bank liquidated the licenses of AGBank OJSC and NBCBank OJSC and appealed to the court to liquidate both banks through bankruptcy.
Thus, the total amount of protected deposits of the population in the four banks (AtaBank OJSC, Amrahbank OJSC, NBCBank OSJC and AGBank OJSC) whose licenses were cancelled is AZN 686 million ($403.5 million) and covers a total of 215,000 depositors.
"More than 99 percent of the total deposit portfolio in these banks are protected deposits, and they are fully compensated", the CBAR noted.
According to the decision of the Board of Trustees of the Deposit Insurance Fund, Kapitalbank OJSC has already been selected as an agent bank to compensate for protected deposits in Atabank OJSC and Amrahbank OJSC, and the protected deposits will be fully compensated in accordance with the Law of the Republic of Azerbaijan on Full Deposit Insurance.
Azerbaijan's Central Bank also stressed that all the liquidated banks are members of the Deposit Insurance Fund, and the deposits of the population protected in these banks will be paid at the expense the realisation of the assets of the banks liquidated by the Fund without attracting any state funds and the calendar fees paid by banks.
According to Elman Rustamov, Chairman of the Board of the Central Bank of Azerbaijan, the process of returning funds to depositors of Atabank OJSC and Amrahbank OJSC, whose licenses have been liquidated since April 28, will begin on June 1.
Akbar Mammadov is AzerNews’ staff journalist, follow him on Twitter: @AkbarMammadov97
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