USAID technical aid on financial stability in banking sector in Azerbaijan to end

Business Materials 9 February 2009 15:48 (UTC +04:00)

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

The technical aid of the U.S. Agency on International Development (USAID) to the National Bank of Azerbaijan (NBA) in the sphere of financial stability expires to the end of 2009, NBA International Relations Department director Farid Bakhshiyev said.

The USAID launched the project worth 3.5 million dollar two years ago. The project must be updated in the terms of the global financial crisis.

"Taken into account the stabilization of the inflation rate and decreasing foreign resources of liquidity in the terms of global financial crisis, NBA introduced corrections in its money and loan policy and softened percentage rate. This happens in many countries, chairman of the Board of Directors of NBA Elman Rustamov said.

At present, the percentage rate equals zero in many countries. The work in this direction will be continued in Azerbaijan, Rustamov added.

The banking sphere is capitalizing weakly. In terms of scantiness of foreign financial resources, the sphere needs additional capitalization and additional aid from domestic financial resources. The liquidity of the banking sector equals the foreign debts. This is good activities.

"The most concerning issue is the stabilization of main indexes in the banking sector over three months. This is the stability of deposit basis, and stabilization loan issuing. The NBA money policy was softened within a year and percentage rates were cut," Rustamov said.

Since 2008 and presently the NBA percentage rate were decreased from 25 percent to five.

As a result of cutting the reserve requirements banks were additionally issued liquidity funds in the amount of 400 million manat. This has played a role in stabilization of the situation, Rustamov added.

The norms of compulsory reserving on bank liabilities both in manat and dollar were reduced from 12 to three percent, but norms of compulsory reserving on foreign liability were reduced from 5 percent to zero.

Over the five years, the indexes of the banking sector have increased ten times.

"The banking sector has played a relevant role in forming the business activity in the country. From this point of view we believe that reduction or suspension of some services by banks, in particular loan is an alarming factor," Rustamov added.

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