Azerbaijan, Baku, 10 November/ Trend / The actions of world's central
banks, which have repeatedly lowered the key interest rates in order to protect
their economy from the global financial crisis, will have a positive effect on
the markets of the countries.
More loans will be directed to real economy, liquidity flows will cease to be
so high. The decline in interest rates will definitely push the decline in
loan-deposit rates of commercial banks. The European countries, including Azerbaijan, where people are linked to credits, will feel tremendous relief.
The European Central
Bank (ECB) cut its base interest rate from 3.75% to 3.5%, the Bank of England lowered
its rate from 4.5% to 3%. The central banks of Switzerland, Czech Republic, Sweden, Canada, Japan and the U.S. Federal Reserve go in the same vein.
The National Bank of Azerbaijan has also continued to decline its interest
rates. As a result, the borrowing rate was reduced to 10% - first from 15% to 12%,
and then, starting from October 31, to the current 10%. The maximum limit
declined from 20% to 17% and reached 15%, and the minimum limit decreased from
3% to 1%.
But against the background of expectations of positive developments in the
economies of countries, lowering the discount rate has another side as well.
For example, the decline in deposit rates may affect the profits of commercial
banks, which may be threatened loss of the positive trend of individuals' money
influx. In Azerbaijan, for example, the deposit base of Azerbaijani banks in an
annualized pace grew by 38.5%, but in September 2008 it decreased by 1.7%. The
Azerbaijani banks have not yet considered a change in interest rates on
deposits, and plan to do that not earlier than next year when considering their
strategies for next year.
The decline in the discount rate in Azerbaijan is not a forced measure, and the
rate should not be reduced to the level of Europe and the United States, as the National Bank of Azerbaijan in time protected the banking sector from the
global financial crisis. External borrowings of the Azerbaijani banking sector made
up 18% of the total drawn funds and reached $2bln. As compared with other
countries where external debts reach 90-100%, the figure is low and allows securing
the Azerbaijani banks from the influence of the global financial crisis.
Leyla Abdullayeva, expert of the Trend analytic centre.
The correspondent can be contacted at [email protected]