Compulsory Norm of Foreign Borrowings Reservation to be Buffer between Risks of World Financial Markets and Banking System in Azerbaijan – NBA

Business Materials 9 April 2008 13:09 (UTC +04:00)

Azerbaijan, Baku, 9 April / Trend corr. I.Khalilova / National Bank of Azerbaijan (NBA) has introduced the obligatory norms of reserving the foreign borrowings of bank sector on 5% rate, Rufat Aslanli, NBA deputy manager, stated.

In 2007, the Azerbaijani bank sector has attracted funds from abroad, although the liquidity is observed in world financial markets. Analyses shows that the funds were cheaper than the attracted resources in domestic market that make them more attractive for the local banks.

"This causes arbitrage, increase in risks and sensibility of financial system to foreign shocks," Aslanli noted. Compulsory reserving of resources on 5% rate will increase their cost to 1% point.

Previously the foreign borrowings were attracted on 9 or 10% rate yearly, but now it is implemented on 10 or 11% rate. Decrease of arbitrage is necessary to balance the sources of various resources of the banking system.

The number of attractions by Azerbaijani banks from abroad made up 1/5 part of the total deposits in the banking system. Total number of borrowings is $1.2bln.

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