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Central Bank of Azerbaijan not hurries to shift to new standard Basel-2

Business Materials 20 June 2009 13:29 (UTC +04:00)

Azerbaijan, Baku, June 20 / Trend , I.Khalilova/

The Central Bank of Azerbaijan (CBA) does not consider necessity to shift the country's banking sector to new standards Basel-2, head of the CBA Supervision Department over credit institutions' activities Rashad Orujov said on June 20. 0

"The global crisis showed that the Basel-2 system has a lot of weaknesses that are currently being discussed in the Basel Committee," Orujov said. "It is necessary to change a lot in this system so the Central Bank of Azerbaijan has decided not to hurry to shift to the Basel-2 Standards."

According to the results of evaluation of the banking system to determine its impact on the state of the new standards, the Central Bank has decided to apply the second and third element of the three existing ones.

The first element involves the agreement on capital, the second - the requirements of the current Oversight Committee (Capital management) and the third - market discipline (disclosure).

"We started to move towards the second and third components, but we will not hurry to sign the agreement," the CBA official said.

The first element undergoes assessment by banks and its introduction is connected not only with the banking sector, but it has a greater issue on the economy's readiness as a whole. And this requires not only the participation of the Central Bank. Specific solutions in terms of full transition to the Basel-2 have not yet been accepted by the CBA.

On introducing the second element (by Capital management), the CBA establishes requirements for capital management policies, but the rules do not change. Even during the transition to Basel-2, norms will be maintained, but requirements for capital measurement will change.

The Basle-2 Standards is a special method of risk assessment and a more advanced method for calculating the capital. EU and major countries delay a full transition to the Basle-2 each year, as they evaluate macro-prudential indicators and see that jump to these standards could affect the level of financial services (qualitative and quantitative indicators), and this may lead to a reduction of financial services of the real sector, which could slow economic growth.

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