Azerbaijani banks to violate requirements for capital adequacy even if norm decreases
Baku, Azerbaijan, Dec. 29
By Azad Hasanli - Trend:
Azerbaijani banks will violate the requirements for capital adequacy, even if the adequacy norm decreases from 12 percent to 10 percent, a source in the banking circles told Trend.
"The devaluation has seriously affected the capital of banks, forcing them to create reserves, and some of them have already violated the requirement for capital adequacy," said the source. "Therefore, reducing the norm to 10 percent is an insufficient measure."
The Central Bank of Azerbaijan switched to the floating rate of the national currency (manat) from Dec.21, 2015. As a result, the exchange rate of the US dollar and euro to manat rose by 47.6 percent and 47.9 percent and stood at 1.55 manats and 1.685 manats, respectively on the mentioned day.
The source said that the central bank should "turn a blind eye" to the discrepancy of norms at least for six months or a year.
"Such violations have a chain reaction, so if requirements for capital adequacy are violated, requirements for open foreign exchange position, liquidity and other factors are also violated," said the source.
At the same time, the source said that in this case the regulator can again cancel the requirements for open foreign exchange position limit for banks.
After the February devaluation of the manat, the regulator temporarily suspended the requirements for open foreign exchange position limits, which allowed banks to expand operations in the foreign exchange market, not being afraid to exceed the normative framework of the regulator. However, in the second half of the year, the regulator once again restored these requirements.
"Also, the question of insuring the entire amount of bank deposits for three years is also being discussed now," the source said. "If such a decision is made, the problem with the liquidity of banks will be solved, because banks will receive a large flow of funds."