Azernews.Az

By Gulgiz Dadashova

Credit and investment capacities of Azerbaijan’s banking sector have doubled over the past two and a half years.

Director General of the Central Bank of Azerbaijan (CBA) Rashad Orujov made the remark at the VII International Banking Conference of the CIS states in Baku on November 14.

"After a decision to increase fivefold the minimum requirement for total capital of banks in Azerbaijan, credit and investment capacities of the banking sector increased by more than two times," Orujov said.

The CBA requirement for the minimum total capital of banks was set at 50 million manats for late 2014. When the CBA announced its decision to raise the requirement for total capital from 10 to 50 million manats on July 25, 2012, only 10 banks exceeded this threshold, which account for 87 percent of the assets of the entire banking sector.

He said the decision not only increased the capital of the market, but also raised the banking sector efficiency.

During this period, the ratio of the banking sector assets to non-oil GDP increased from 62 percent to 78 percent, he stressed.

Currently the banks, which form more than 99 percent of banking sector assets, meet the new capitalization requirement.

"Since early 2014, the banking sector assets increased by 15 percent, credit investments - 15 percent, deposits - by nine percent, and the level of non-performing loans in the total loan portfolio of banks was 5.6 percent," Orujov said.

Orujov believes the increasing capitalization allowed banks to improve the quality of their services. It also increased competition in the market.

"In parallel with the rapid increase in the capitalization, the CBA tightened the requirement for corporate governance and risk management in banks," Orujov said.

Chairman of the Board of the International Bank of Azerbaijan, Jahangir Hajiyev also said that the CBA decision on the fivefold increase of the minimum capital requirements for banks in Azerbaijan showed its effectiveness.

The total capital of the banking sector in Azerbaijan amounted to about 3.8 billion manats as of September 1, 2014, which is 1.2 percent more than in early August 2014, and 10.6 percent more compared to early 2014 and an increase of 22 percent for a year, he noted.

Hajiyev stressed that the international rating agency Moody`s confirmed a stable outlook on the banking system of Azerbaijan in April 2014. "Against the backdrop of negative forecasts for the other countries, it is estimated by Moody`s that over the next 12-18 months, Azerbaijani banks will continue to benefit from a favorable operating environment, stable assets quality and adequate capital reserves," he said.

The capitalization of Azerbaijan's banking sector increased by 20.25 percent in September 2014 compared to September 2013 and amounted to 3.792 billion manats as of October 1, 2014.

The number of banks with capital exceeding 10 million manats [the applicable regulatory requirements of the Central Bank], totaled 42 in January-July 2014, which shows an increase compared to late June 2013. The share of this category of banks in the total capital of all banks in the country was 99.7 percent by the end of the reporting period.

Currently, 44 banks, two of which are state-owned, operate in Azerbaijan. Also, 22 banks operate with foreign capital.

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