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National Bank of Azerbaijan to receive technical aid to improve risk management system

Business Materials 9 February 2009 14:27 (UTC +04:00)

Azerbaijan, Baku, Feb. 9 / Trend , I.Khalilova/

The National Bank of Azerbaijan (NBA) began negotiations with USAID to receive technical assistance to improve its risk management system, NBA International Relations Department head Farid Bakhshiyev said on Feb. 9.

"This will be a complex project covering the entire banking system," Bakhshiyev said.

On the backdrop of the global financial crisis, risk management is an important issue.

Last year, the Azerbaijani banking sector faced two major factors from abroad, NBA Chairman Elman Rustamov said. First was the sudden and complete disappearance of finances from world markets. There was sufficient supply to the capital market in the first half of the year before stagnation and Azerbaijani banks enjoyed this greatly. The second factor was psychological and informational integration.

Rustamov said Azerbaijan is located in a global information space. Events at world financial giants - their bankruptcies and nationalizations - had a negative impact on the country's financial sector, depositors, creditors and bank owners.

Rustamov added that the banking sector was prepared for the crisis. It was able to draw in guarantee-free loans amounting to $2.5 billion from external markets. That was 25 percent of all bank liabilities, while in some countries this figure reached 70 or 90-100 percent of GDP.

The crisis began in neighboring Kazakhstan earlier than in other countries. Given Kazakhstan's experience, Azerbaijani bank debts to foreign creditors were maintained at a conservative level. Last year Azerbaijani banks paid part of its external debt at $1.1 billion. This year $1.4 billion will be paid off.

"A number of preventive measures were implemented and bank requirements were toughened. However, these requirements were designed not only to make things more rigid. The banking sector received active assistance by easing monetary policies and cutting interest rates several times. This played a role in stabilizing the situation as a whole," Rustamov said.

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