Azerbaijan’s Fiscal Market is Open: Interview with President of Moscow Interbank Currency Exchange

Business Materials 2 November 2007 17:58 (UTC +04:00)
Azerbaijan’s Fiscal Market is Open: Interview with President of Moscow Interbank Currency Exchange

Azerbaijan, Baku / corr Trend I.Khalilkova / A delegation of the Moscow Interbank Currency Exchange led by its President Alexander Potemkin ciisted Azerbaijan this week at the invitation of the Baku Interbank Currency Exchange (BBVB). Heads of two exchanges held in Baku talks on larger circle of issues regarding the development of exchange infrastructure.

Potemkin spoke about prospects of cooperation with BBVB, interests towards the Azerbaijan securities and crisis of mortgage in the United States in an interview with Trend .

Question: What are the prospects for cooperation between the financial systems of Azerbaijan and Russia?

Answer: We have close professional relations with the representatives of the Azerbaijani financial community. Close contacts, first of all with BBVB, which enters the CIS International Association of Exchanges. The key objective of our visit to Azerbaijan is to expand overview about the activities of the fiscal market of your country. Indeed, there are also interests. I'd like to have closer contacts among exchanges and fiscal markets. It will enable our financial organizations and investors to come to the Azerbaijani market not only for direct investments at enterprises, but also for the implementation of portfolio investment, purchase of shares and bonds.

Question: To what were the legislations of Azerbaijan and Russia unified for non-obstacle integration of markets of the two countries and implementation of portfolio investments?

There is legislation. Judging on what we heard [during the visit], the economy and fiscal market of Azerbaijan are open enough. We did not any see any special restrictions on operations of capital character. There is an opportunity for non-residents at the commercial banks for opening accounts in national currency. It is possible to invest and even take out capital as profits and as major capital if there are grounds.

It is important that not only for private investments to move in one direction, but follow free movement at the capital market in the securities section. Azerbaijani emitters should place their securities in different markets, including in the Moscow-based capital market.

Question: Is there any interest towards the Azerbaijan securities in the Russian market?

Answer: Such interest is quite possible. It is done for search of mutual interest. Now I am not ready outline the limits, because they are in the initial level. Nevertheless, presently we have not seen such liquid development of the stock market in Azerbaijan, but saw people who are actively involved in it and take every effort to make it happen. In this sense, we can be indeed profitable and are prepared to share with technologies, help banks in launching wider circle of tools. We discussed it in Azerbaijan and more probably, the talks will end with signing of documents, which will exactly consolidate mutual intentions and commitments. More probably, at the first stage it will be a memorandum on understanding between the exchanges, which will enable to determine the frames of future relation and future agreements. More probably this is a trilateral agreement between MICEX and two Azerbaijani exchanges, because there interesting topics in the spheres of currency and stock exchanges.

Question: How do you estimate the integration of the currently markets of Azerbaijan and Russia and to what extent is it actual amid the consolidation of national currencies with respect to US dollar?

Answer: There is a world of reserve currencies, where euro and dollar belong, but there is also world of attractive of currencies, who claim at the role of international accounts. Ruble [Russian currency] is entering this category gradually, though it would be disputable to state that one can replace another. A problem of fall in dollar can be resolved through the problem of outflow of funds into euro and it is the common medicine. Now there is an opportunity for use of ruble for international settlements and following the consolidation of the financial system it becomes more realized. It was possible earlier as well, but now it is less risky. As to conversion of AZN to ruble, the problem is not on agenda now.

Question: What damage did the crisis in mortgage in the United States cause the Russian fiscal market?

Answer: First of all it touched upon the banking system due to capital outflow caused by crisis in confidence. It resulted in shock in Russia's banking system as well. Major problem that we have experienced was mass outflow of non-resident's capital invested in different Russian tools. Over two weeks some $10bln has flown out of Russia. At the beginning it affected the operations at the currency market, because there was conversion to dollar or euro with further transition to foreign accounts of foreign investors, who raised funds in Russia. They mobilized funds, because the companies; business was not so good. It is not linked with the problems of the Russian market, but the banking system of Russia suffered of that definitely. It was shock. The outflow of big funds had high impact on bank liabilities.

What measures have been taken by the MICEX to come out from the existing situation?

Answer: To help the banking system to overcome the situation, the Central Bank of Russia held REPO operations with the securities to cover insufficiency in liabilities. They mobilized own portfolio of securities, placed in securities and received short-term funds through REPO operations, which were held at MICEX. It is not so important to see the Central bank assisting the banks, whilst the REPO tool enables the market to help itself. The experience gained through sad way is considered favorable.

Question: To what extent the financial environment in Azerbaijan is prepared to resist the situation which the markets faced in connection with mortgage crisis in the United States?

Answer: It not fully prepared. During the discussions in Baku it was revealed that these problems did not affect the fiscal market and baking system of Azerbaijan strongly. More probably, these are the problems of low development of the fiscal market and insufficient involvement of the financial system in the world processes However, there is not problem, which is explained with the independence on financing and refinancing, opened for big commercial banks of Azerbaijan. Those receiving much actually face with a problem of capital outflow. Now the problem is not related to insufficiency of tools, but that the investments or loans are not so big. So, the financial system is not vulnerable. However, it cannot be regarded as trouble, but a hint for the necessity of much work for attracting capital to the Azerbaijani market.

There are grounds to suppose that the present financial system of Azerbaijan is actively integrating into the financial space. The 'open doors' policy, open economy, removal of all restrictions for operations with capital character held by our Government greatly contribute in it.