Azernews.Az

The decision of the Central Bank of Azerbaijan (CBA) to increase five-fold the minimum capital of existing and newly established banks came as a surprise to some in the banking sector.

CBA's measure raises the minimum total capital of banks to 50 million manats from the current 10 million manats, effective in 2014. The new requirement is expected to promote increase of equity and strengthen the position of Azerbaijani banks in terms of capitalization, which will result in an even more enhanced stability of the domestic banking system.

A local banker has said, "When in 2007-2008 the central bank increased its regulatory capital requirement from 5 million to 10 million manats, it was known that this process will continue in the future. And we were expecting an increase of the minimum requirement to 25 million manats, so, 50 million manats was unexpected for us."

Sahib Guliyev, deputy general manager of the Baku branch of National Bank of Pakistan (NBP Bank), told Trend news agency that as the decision on boosting the capitalization of operating banks will come into force from January 2014, the banks "will have time to take the necessary measures".

On the other hand, Guliyev believes that this requirement will cause some financial difficulties for many banks in the country.

According to him, there are not many banks in Azerbaijan that have such hefty cash resources, and it isn't easy to raise large amounts of money. Accordingly, CBA's decision could help to ensure that small and medium-sized banks will be forced to consolidate.

"It is normal, as today there are 43 banks, which is a lot, and the optimal number of banks for Azerbaijan should be no more than six," Guliyev added.