By Nigar Abbasova
The World Bank (WB) and Azerbaijan’s Financial Market Supervisory Body (FMSB) will start realization of the second phase of the project on financial sector modernization.
FMSB Chairman Rufat Aslanli said that the project will cover three directions, in particular formation of effective regulative framework for financial sector, increasing sustainability of the banking sector and protection of consumer rights.
Aslanli made the remarks while addressing the event dedicated to launching of the second phase’s implementation on February 24. He noted that the second phase will also cover such issues as bad loans, rendering of help for troubled banks and others.
“Azerbaijan is implementing broad reforms to transform its financial sector by improving its regulation and institutions. Continued cooperation with the World Bank and SECO will allow us to benefit from the best international practice and the expertise,” Aslanli said.
The WB mission will stay in Baku until March1, and discuss a variety of issues covering the insurance market, strengthening of the financial market and problem of overdue loans. Besides, the mission will also discuss the issue of improving the deposit insurance system in Azerbaijan.
The first phase of the Financial Sector Development Program was completed in June 2016. The Swiss State Secretariat for Economic Affairs (SECO) allocated a grant of $4 million for its implementation in 2012.
The SECO is also expected to allocate $3 million as part of technical assistance to the second project on modernization of financial sector in Azerbaijan. The agency, which is responsible for planning and implementation of economic and trade policy measures, is expected to initially allocate some $2.2 million. Further, SECO will allocate additional $400,000 by November 30, 2018, and the same sum by November 30, 2019. The three tranches are expected to be totally drawn by August 2021.
Parabank may turn into NBCO
Aslanli further touched upon the issue of transforming Parabank (which earlier lost its banking license) into non-banking credit organization.
He said that FMSB will consider the issue in the upcoming meeting of the Board of Directors. Should the authority take the decision , the country will see the first transformation of bank into NBCO, while uninsured depositors will be offered to put the financial means in bonds.
The license of Parabank was revoked due to the failure to comply with statutory minimum capital requirements of the regulator as well as to manage activities in a safe and prudent manner.
In late 2016, Azerbaijan Deposit Insurance Fund (ADIF) completed payment of compensations to insured depositors of Parabank.
The volume of paid compensations amounted to 42.9 million manats ($24.5 million). The volume of uninsured deposits in Parabank stands at 43 million manats ($ 24.64 million). Non-banking credit organizations in Azerbaijan do not have the right of raising deposits from the population.
Aslanli said that the FMSB will introduce certain changes to the insurance legislation of the country, noting that the main objective is to assist insurance companies in generation of long term charges. He recalled that last year was dedicated to rendering assistance to the banking sphere.
“The current stability in the sector allows us to create a platform for profound reforms,” he said.
Aslanli also said that Bashak Inam insurance company will leave the insurance market of the country, saying that FMSB took the decision after the company appealed to the authority with the request.
Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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