Azerbaijan Banks Association forecasts decline of banking market
Azerbaijan Banks Association (ABA) has forecasted a serious decline in the country's banking market.
ABA president Eldar Ismayilov told Trend news agency on Thursday that due to problems implementing Azerbaijani Central Bank's new minimum capital requirements, up to ten banks of the 43 banks currently operating in Azerbaijan could be shut down.
According to the July 25 CBA Board decision, the minimum capital requirement for existing and newly established banks increased from 10 million manat to 50 million manat. The new regulation will take effect for existing banks on January 1, 2014.
"Up to ten banks could be shut down as a result of implementing Central Bank capitalization requirements and within the banking consolidation process," Ismayilov said.
According to Ismayilov, this process will also affect the members of association.
Many experts, including the international rating agency Moody's Investors Service, also expect a serious decline in Azerbaijani banking system participants.
According to Central Bank CEO Rashad Orujov, there is enough time for the banks to accumulate additional capital.
"We have thoroughly analyzed the details of the situation in the banking sector, the potential of banks in the country, and their ability to meet the new requirements before making this decision," Orujov said.
According to him, the new capital requirements will strengthen the capital position of banks, improve the quality of capital and the efficiency of financial intermediation, strengthening the financial stability of the banking sector and the sustainability potential, the development of corporate governance system and the protection of depositors and investors.