Azernews.Az

The main reason for the increase by Azerbaijan's central bank of the minimum capital requirements for local banks is that the global financial crisis has caused a lack of liquidity and many bank shareholders have refused to support these institutions, the country's banking circles believe. Currently, eight banks in the country are operating with a loss.

The minimum total capital of existing banks, as well as the authorized capital of newly established banks, was increased five-fold to 50 million manats by the decision of the Central Bank of Azerbaijan (CBA), adopted on July 25. The decision will come into force from January 2014.

Currently, nearly 92 percent of the banking market in the country is made up by banks within the top twenty.

The central bank's decision is intended to ensure that shareholders support their banks, which indirectly affects the pace of consolidation in the domestic banking market, banking experts say.

First of all, it will lead to more active emission of shares by banks, and they will not delay their placement, which will be certain feed for stock exchange, brokers, and so on, a banking expert believes.

At the moment 15 banks [there is a total of 43 banks in the country] can follow the new regulatory requirement of CBA. Banks whose shareholders are private individuals will have another reason for a positive decision to merge. The banks that are members of a holding will not have a problem, since this issue will be resolved by the holding, and banks with foreign capital won't face problems either, experts note.

According to market players, there should not be problems with banks whose capitalization exceeds 30 million manats, but the banks with less capital are in an entirely different situation.

Even before the global crisis, rumors circulated on increasing the capitalization of banks, and it is not by mere chance that many banks in Azerbaijan have already formed the required level of capital.