Seco considering possibility to cover shortages of funds to upgrade risk management system in Central Bank of Azerbaijan

Business Materials 4 June 2009 16:32 (UTC +04:00)

Azerbaijan, Baku, June 4 / Trend , I.Khalilova/

The State Secretariat for Economic Affairs (Seco) is considering providing additional funding to the Central Bank of Azerbaijan (CBA) to upgrade the risk management, head of the national program in Seco Naila Safarova said on Thursday.

"We see an opportunity to meet the shortage of financial resources under this project, for which the Agency for International Development (USAID) has already provided technical assistance ", Safarova said.

Total project cost is around $800,000, of which half a million dollars have been already allocated by USAID.

"We are also interested in this project and is considering the provision of technical assistance to the Central Bank, since the improvement of risk management is a response to the crisis measures", Safarova said.

This mechanism provides the establishment of Alarm Systems - a system for responding to crisis, namely to define necessary preventive measures to minimize risks in any financial situation.

In the context of the global financial crisis the risk management issue is the most important.

CBA Board Manager Elman Rustamov said earlier that the banking sector of Azerbaijan faced two major factors that came from abroad last year. First is a sudden complete disappearance in the world financial markets, money, that is, there were made enough proposals in the capital market in the first half of last year, and Azerbaijani banks used these to a large extent.

The second factor was the psychological and information integration. According to Rustamov, Azerbaijan is in a global information space. Events that occur in the financial giants of the world, bankrupt, nationalized by governments, of course, had a negative impact on the financial sector of Azerbaijan, depositors, creditors and owners of banks.

The head of the Central Bank considers the banking sector in Azerbaijan has entered into a crisis well prepared. Sector attracted from external markets without guaranteed loans amounting to almost $2.5 billion. This was at 25 per cent of all bank liabilities, while this figure reached 70, and sometimes 90-100 per cent of GDP in some countries. For example, crisis reached neighboring Kazakhstan earlier than other countries. Given the experience of Kazakhstan, the level of banks' debt to foreign creditors was maintained at a very conservative level, and since last year Azerbaijani banks have paid part of external debt - $1.1 billion. This year $1.4 billion will be paid.

"A range of preventive measures have been taken and requirements to banks have been toughened. A vivid aid was rendered to the banking sector through easing CBA's mony policy and reduction of rates in several times, which have played a significant role to stabilize the situation as a whole," Rustamov said.

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