Azerbaijan Banks Association talks restructuring foreign currency loans

Baku, Azerbaijan, Jan. 10

By Anvar Mammadov - Trend:

Azerbaijani banks will carry out restructuring of foreign currency loans within the framework of the revision of interest rates and the maturity of loans in agreements, head of the Azerbaijan Banks Association Zakir Nuriyev told Trend.

"In connection with extension of maturity period of debt, formation of a new schedule of payments in accordance with capabilities of client will be required," he said. "At the same time, an individual approach to each client is necessary, since the possibilities of customers are different."

It will be difficult for banks to cover the difference between the old and the new currency rate at the expense of own funds, so not every bank can allow customers to return the credit card debt according to the old rate, according to Nuriyev

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.

"It should be noted that the restructuration abilities of banks are limited," Nuriyev said. "Banks will not be able to cover the difference between the old and the new currency rate at their own expense."

"For that, one needs to understand what own funds of banks consist of - it is the first and second tier capital," he said. "Tier I capital is a bank's authorized capital, which the bank cannot spend, so as not to violate the requirements of the Azerbaijani Central Bank for the minimum total capital. Tier II capital is a capital formed of profit, which is not at a level that would allow banks to go for this decision as a result of corrections of the manat rate last year."

Nuriyev said that currently the Association of Banks regularly holds talks with banks on restructuring.

"We regularly discuss this topic with banks and I wish to state that no bank discusses any change in exchange rate policy on loans with its customers," he said. "It should be noted, however, that banks cannot do so, either. Since the time the new rate was set by Azerbaijani Central Bank, it is automatically entered in the balance, and the balance is automatically calculated at the new rate. Banks cannot manually enter a different rate, it is simply impossible."

The head of the association noted that the Azerbaijani government has already been sent a proposal to cover the difference resulting from the recalculation of payments by banks on foreign currency loans in accordance with the new rate at the expense of funds of the Central Bank of Azerbaijan.

"This is possible at the expense of funds worth three billion manats, formed as a result of the revaluation of foreign exchange reserves of the Azerbaijani Central Bank after the change of the manat rate last year," said Nuriyev. "But no response from the bank has been received so far."

There are 43 banks in Azerbaijan. According to the Azerbaijani Central Bank, as of December 1, 2015, banks issued loans worth 18.744.3 billion manats, including 10.893.1 billion manats (58.1 percent) in the national currency, 7.851.1 billion manats (41.9 percent) in freely convertible currency.

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