Baku, Azerbaijan, Oct. 13
By Ilaha Mammadli - Trend:
According to the stress testing of the banking sector conducted by the Central Bank of Azerbaijan (CBA), the banks will be able to maintain their solvency with the most pessimistic scenario, Elman Rustamov, the CBA chairman of board, said Oct. 13.
Rustamov made this statement at a plenary session of the Azerbaijani Parliament while discussing the draft state budget-2016 and the next three years.
"The capital adequacy level is the main index of the banking sector stability," he said. "It hits 17 percent in Azerbaijan given the international standard of 8 percent."
The total capital of the Azerbaijani banking sector has increased twofold for the last year and reached 4.2 billion manat.
He said that the sector liquidity indices hit 60-70 percent today, which exceeds the minimum requirement twofold.
"The quality of the banks' loan portfolio is satisfactory," he said. "Since early 2015, the Azerbaijani banks have issued the loans worth 7.5 billion manat. "More than 5 billion manat of them account for business loans."
The share of overdue loans in a total loan portfolio of Azerbaijani banks is 6.5 percent.
The CBA has taken a number of measures to regulate the financial capacity of borrowers to preserve the quality of loans within its authority.
According to the CBA recommendation, since early 2015, the banks have restructured about 110,000 loans totaling 600 million manat.
"This mitigated the debt burden of the population," Rustamov said. "The maturities on loans were extended as part of the restructuring. The interest rates were reduced. In some cases, the banks do not charge any interest for the grace period. I think that the banks must be more active in this process. "
In order to achieve such a financial consensus, the optimal balance should be found taking into account the interests of the banks and the population, he said.
Rustamov said that currently the Central Bank together with the government works to improve mechanisms to increase sustainability of the private banking sector. In particular, work on the improvement of Azerbaijani Deposit Insurance Fund is underway and it is planned to expand its coverage.
He said that in 2016, the issue of expanding access opportunities to credit resources will remain in focus in Azerbaijan.
"New initiatives to expand the access of the real sector, in particular small and medium-sized enterprises to sources of financing will be introduced," said Rustamov. "An active dialogue on the issue of interest rates lowering will be continued with banks."
He also mentioned the expansion of mortgage lending among the priorities.
"Until now, as many as 17,500 families received loans worth 700 million manats, and the banks issued mortgage loans worth more than half a billion manats through the Azerbaijani Mortgage Fund," said the chief banker of the country. "Given the increase in the level of employment at the expense of the real estate, revival of mortgage becomes important."
He went on to add that the Central Bank together with the ministry of finance has prepared a proposal to expand mortgage lending and submitted it to the government of Azerbaijan. Proposals include increasing the volume of mortgage loans and lowering of interest rates.
There are 43 banks in Azerbaijan, two of which are state owned ones.
The official exchange rate for October 13 is 1.0475 AZN/USD.
Edited by CN