Azernews.Az

By Aynur Karimova

The Central Bank has offered the consolidation of banks in Azerbaijan in an effort to revitalize the banking system which now operates 42 members.

Experts believe that the process should go on voluntary basis through enabling the banks to make decisions by themselves.

Consolidation is not a compulsory measure, economy expert Farhad Amirbayov believes.

"It should be completely voluntarily, taking into account the own sensible motives of banks. It is impossible to conduct this process [consolidation]," he said.

Earlier, Elman Rustamov, the Chairman of the Central Bank, told journalists that the consolidation may affect five to seven banks on the system.

“This is a sensitive issue as the banks held deposits which are to be insured. That should produce no problem as the banks will become even bigger after merger,” he noted.

Amirbayov hesitated to name the exact number of banks needed in Azerbaijan now. "It is always a subject of discussion, and no one can say whether the number of banks operating in Azerbaijan is sufficient," he added.

"Any consolidation envisages the merger of "good" and "bad" assets. It is normal for any company or bank to have "bad" assets on their balance sheet. Business does not always adhere to the plan. It is dealt with not only the expediency of consolidation, but the ability to manage this process. This is very complex process, requiring to involve appropriate experts," the expert stated.

Consolidation does not mean that merging the the banks with only bad operation, Amirbayov stressed.

"Consolidation allows stable banks, which have deliberately decided to merge, to increase their share in the market and to gain more revenues. This strategy would be more correct if is aimed both growth of profit, and growth of market share," he added.

The International Finance Corporation and the European Bank for Reconstruction and Development support the consolidation of banks in Azerbaijan, regarding it as a way leading to financial recovery of the banks.

There are already good examples of consolidation of banks in the country.

For instance, UniBank was formed by the merger of two commercial banks in 2002 - MBank and Promtexbank, where the EBRD acquired a 15-percent share, and 8.3333 percent is owned by the German Investment Corporation DEG.

Bank of Baku merged with IlkBank in 2005.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

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