Growth of Azerbaijani insurers' capital to strengthen market
The growth of Azerbaijani insurance companies' capital will positively impact the market, head of the State Insurance Supervision Service of the Azerbaijani Finance Ministry, Namig Khalilov believes.
He said the lack of profitability of some insurance companies in Azerbaijan has nothing to do with the raising of the minimum normative on the authorized capital of these companies.
"We are talking more about the financial possibilities of their shareholders. There are a number of companies with capital exceeding that level, which we might set as a new regulatory requirement. This issue is being discussed now. Moreover, we are waiting for the amendments to the law "On insurance activity" to come into force. In the future we will consider the possible increase in the minimum capital requirements for insurance companies," Khalilov said.
He said the need for changing the standard is for the market's protection.
"The insurance company will need sufficient capital, which will act as a buffer, in case, if the insurance company faces a lack of reserves, or it calculates the tariffs incorrectly, or for example, the reinsurance program has not been properly compiled. The higher the capital of the market participants, the more reliable and protected it is," Khalilov said.
The current capital requirement for insurance companies stands at five million manats ($6 million) and the same requirement for re-insurers amounts to ten million manats ($12 million).
Over ten years the insurance market capitalization increased by 16 times, while the incomes of insurance companies grew by 17.5 times. In 2002-2013 the minimum requirement for the insurers' capital increased from one to five million manats (approx. $1.2 million to $6.3 million).
Last year the aggregate capital of the insurance market was 343.44 million manats ($437.89 million), as well as the paid capital of the market stood at 294.06 million manats ($374.93 million), other capital reserves amounted to 49.39 million manats ($62.97 million).
There are 28 insurance companies and one reinsurance company in Azerbaijan.
Azerbaijan's banking sector needs to be more systematic
Azerbaijan's banking sector needs to be more systematic, a Board member, Director of Retail Business Development of Bank VTB (Azerbaijan), Ilnur Salyahov said.
"The market of lending to individuals is in an active phase of development, and over the past year and a half it has grown substantially. Banks started working more actively with clients of this segment, often unreasonably reducing loan requirements. In this regard, the average number of active parallel loans to one borrower markedly increased," Salyahov told Trend.
The expert said that such an approach may lead to very dangerous trends.
"Banks themselves, including a majority of corporate banks (working with clients of corporate segment only), did not manage to technologically and conceptually rebuild their businesses to organize qualitative assessment procedures for borrowers - individuals, properly measuring portfolio risks. On the other hand, there is also the desire of borrowers "to gain" loans for improving their welfare, but often without understanding and assessing how to return these debts later. This is a usual "disease" of the new younger market, although it is better not to step on the same rake again, and learn from others' mistakes," Salyahov stressed.
As the experts said, 2013 is remembered with the introduction by the Azerbaijani Central Bank of a ban on sale of banking products outside the branches, prolongation of terms on additional capitalization of country's banks for another year, as well as significant growth in assets and portfolio of Bank VTB (Azerbaijan).
"Azerbaijan's banking sector needs to be more systematic in the organization of business, stability of banking institutions, as well as improvement of the level and quality of customer service," Director of Retail Business Development of the bank added.
There are 43 banks operating in Azerbaijan. As of November 1, 2013, banks issued loans to 14 991.4 million manat. Out of the total portfolio, loans to 783.2 million manat were overdue (5.22 percent) compared to 763.7 million manat between January-October 2012. In the year, overdue loans increased by 2.55 percent.
Ministry: Punishment for tax crimes should be tightened in Azerbaijan
Punishment for tax crimes should be tightened in Azerbaijan, Head of the Department for Preliminary Investigation of tax crimes under the Ministry of Taxes of Azerbaijan Vidadi Mammadov said.
Coercive measures considered for the violation of tax legislation can be divided into two parts, Mammadov said.
"The first covers financial sanctions and administrative fines envisaged by the Tax Code and Code of Administrative Offences of Azerbaijan for late or incomplete payment of taxes. The second category includes punishments for tax evasion in large and especially large amounts envisaged by the Criminal Code of Azerbaijan.
Therefore, tax evasion or evasion from payments on compulsory state social insurance in a large amount should be punished by imprisonment of up to three years. If this evasion is committed in an especially large amount, or by an organised group, the maximum term of punishment should increase to seven years of imprisonment. A person who committed crime for the first time is exempt from criminal liability in the case of full payment of damages, according to the Criminal Code," Mammadov said.
For comparison, the Criminal Code of the Russian Federation envisages imprisonment of up to two years for tax evasion and imprisonment up to six years for evasion for an especially large amount, Mammadov said.
"If we compare the details of every clause, we can see that in Azerbaijan, a taxpayer who committed a crime for the first time is exempt from criminal liability in the case of his paying the amount which he evaded, in other words, without paying stipulated penalties and interest.
However, in Russian legislative practice, a taxpayer must pay the full damage including penalties and interest. Experience shows that due to the fact the payment of penalties and interest is regulated by civil law, it is often delayed by taxpayers, or not made at all. In this regard, I believe there is a need to improve legislation in this sphere, as well as to tighten penalties for crimes related to tax evasion," Mammadov said.