Status of Central Bank to be increased

Business Materials 10 June 2009 18:56 (UTC +04:00)

Azerbaijan, Baku, June 10 / Trend I. Khalilova /

Amendments are planned to be made in National Bank law to increase flexibility of the Azerbaijani Central Bank and tools for rapid reaction in terms of world crisis and solve problems to overcome post-crisis situation. These amendments were discussed at the parliamentary committee on economic policy on June 10.

"Urgency of amendments in banking legislation is connected with world economy suffers crisis. National economy was also affected by its negative consequences," the Central Bank's board chairman Elman Rustamov said during presentation of project of changes and additions in the law. 

Moreover, Azerbaijan affected slightly from crisis. International organizations confirm it.

These changes are part of anti crisis actions as it is necessary to strengthen status of the Central Bank as independent structure in current situation," Rustamov said. 

First, amendments are envisaged in connection with change of name of the National Bank for the Central Bank upon decision of referendum dated march 18, 2009. 

The gravest changes are envisaged to solve problems of banking system with liquidity.

According to amendments, the Central Bank will be able to give grants to banks, including subordinated loans within certain terms and order to ensure stability of banking system and protect interests of banking loans and deposits.  

Up to now the Central Bank could give loans to commercial banks for six months with prolongation for a year and a half. It is very short term in terms of crisis, Rustamov said.

Another innovation is that the Central Bank will be able to finance social-economic projects, as well as to provide real sector of economy with financial aid and grant banks purposeful loans upon state guarantees. The Central Bank will be able to purchase them on initial market upon terms of securities emission in case of necessity to provide debt obligations on purposeful loans owing to state guarantees and paying off these obligations fully or partially owing to state debt securities.

Purposeful loans can be directed to support big enterprises. For example, aluminum industry needs great financial aid. But banks can not provide with necessary resource as state budget that was formed and additional funds were not envisaged for these purposes, Rustamov said.   

"The central Banks increased loan resources twice to finance banks and big enterprises within last 8-9 months in other countries.

We also can assist and give loans via banks," he said.

According to amendments, the Central Bank will be able to support banking system by executing obligations on foreign borrowings in case of necessity.

"The Central Banks have independent status and are more flexible in making decisions given execution of money-loan policy of the country worldwide. It is necessary to increase role of the Azerbaijani Central Bank for rapid reaction in terms of crisis," Rustamov said.

The committee recommended passing law bill for approval of plenary meeting of Milli Mejlis after discussions.