BAKU, Azerbaijan, May 7. The majority of emerging markets (EMs) in the Europe, Middle East and Africa (EMEA) region will continue to take a cautious approach to the implementation of bank failures., Trend reports via S&P.
S&P noted that Azerbaijan and Kazakhstan are carrying out reforms to improve the quality of regulation and supervision.
"In other countries, factors such as lack of transparency, a volatile institutional environment, and political interference are among the factors affecting our assessment. Therefore, in most of these countries, where a legal bankruptcy framework does not exist, we expect regulators to continue to use solutions to deal with banking crises. For example, in some countries, banks are allowed to operate for a long time without meeting minimum capital adequacy requirements. Additionally, in some countries, there may be a need to strengthen the legal framework to allow regulators to intervene and take direct action against struggling banks.
Some EMs, among the first to implement international regulations, still delay the implementation of bankruptcy frameworks, and in our opinion, this could have serious consequences for their banking systems.
We also acknowledge that some countries in the Central Asia and Caucasus regions are taking steps towards adopting bankruptcy frameworks — among them, Azerbaijan and Kazakhstan are ahead of others. As for other countries, if they decide to take steps in this direction, we believe that the adoption of these frameworks may take considerable time.
Georgia is also one of the countries that decided to adopt a bankruptcy framework. The country has already passed legislation regarding the creation of a bankruptcy fund and has applied minimum capital and corresponding liability (MREL) requirements for the country's three systemically important banks. Additionally, resources have been allocated to the Bankruptcy and Liquidation Department within the Central Bank, and the implementation of the bankruptcy framework has begun," the S&P added.
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