Azerbaijan's Central Bank not agree with Standard & Poor's forecasts

Business Materials 11 June 2009 12:07 (UTC +04:00)

Azerbaijan, Baku, June 10 / Trend N. Ismayilova /

Research of the Azerbaijani Central Bank proves stability of the country's banking sector contrary to negative forecast of Standard & Poor's international rate agency, Central Bank's board chairman Elman Rustamov said.

"I do think that negative forecast of the agency are well-grounded. There are opinions that it is necessary to expect the second wave of world crisis. But we research situation on the market. According to our estimations, there are no grounds for anxiety," Rustamov said.

The only problem of Azerbaijani banking sector is growth of loan debt of enterprises and population for banks, he said.

Standard & Poor's rate service indicated in its report that banking system of the country is vulnerable towards possible deterioration of solvency and liquidity after several years of rapid growth in consequence of high branch and economic risks that new and fragmentation banking system of the country faces.

As of late 2008 roughly 49 percent of all loans of system were nominated in foreign currency that stresses dependence of quality of Azerbaijani assets on improbable devaluation of national currency.

"We expect that deterioration of loaning terms and strengthening of slump in economy will lead to significant increase of banks' expenses on loaning and increase of problematic grants. We estimate joint problematic assets of Azerbaijani financial system in the amount of 35-50 percent," report of Standard & Poor's said.

Moreover, analysts of the agency think that leadership of the country can strengthen control and regulation of organizations having difficulties during stress financial situation. But it will render limited special financial support for private banks. 

According to agency, Azerbaijani banking system (sovereign rate of the country ВВ+/Stabile/В) is characterized by high level of dollar, dependence of economy on output of oil, concentration of banks on certain borrowers and branches of industry, as well as poor practice of risk-management.

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