Central Bank of Azerbaijan not expects serious growth in banking figures in 2009

Azerbaijan, Baku, June 27/ Trend , I.Khalilova/

The Central Bank of Azerbaijan (CBA) does not expect significant growth in bank performance in 2009. There is a definite increase compared to last year, Director of CBA Loan Organizations Supervisory Department Rashad Orujov said.

"At present the portfolio of problem loans comprises 3.8 percent of the total loan portfolio of banks and a risk limit is 10 percent while exceeding volume of overdue loans in the world experience," Orujov said.

Within last three months, the Azerbaijani banking sector experienced an increase in this indicator. The total volume of banks' loans was $6.18 billion as for June 1.

Under the current instable situation on the global financial markets, a drop in lending is considered normal, which is also observed in the Azerbaijani banking sector, but over the past two months, even the banks have activated lending.

In previous years, significant growth of the Azerbaijani banks' loan portfolios was achieved by attracting funds from world financial markets, but now these markets are experiencing a liquidity crisis, and in such amounts, local banks will not be able to lend.

Generally, in early 2008, the Central bank urged to pursue a cautious policy, based on an assessment of all elements in the market. The growth rates of loan portfolios for the period averaged 70 percent, which was due to the need of people and economy to meet the needs of the financial resources.

However, such growth must always be accompanied by institutional development. In this regard, CBA urged banks to create an institutional platform to start improving the assets and operations. Today Azerbaijani banks manage assets averagely worth 150-200 million manat and respectively, their risk management, capital adequacy, corporate governance system should meet the best standards.

As for June 1, assets of banks amounted to 9129.8 million manat

If regulations are violated and requirements of the bank legislation are not fulfilled, the Central Bank imposes sanctions on banks. Such sanctions were imposed in July 2007 on nine banks, which have been banned to draw deposits. On July 9, 2008, two of these banks' licenses were withdrawn and liquidation procedures are currently being carried out. At present four banks function on the baking market with the limited license and the remaining 42 banks are members of the Azerbaijan Deposit Insurance Fund.

In response to the crisis on global financial markets, the Central Bank strengthens prudential regulations in order to improve work on loans with collateral, for liquidity management, and ongoing supervision of banks focuses primarily on risk management. The CBA has raised the requirements for collateral to 150 percent, if the real estate mortgage in favor, while in other cases required, as before, 100 percent security, said Orujov.

The banking system of Azerbaijan in 2007 reached the highest rates of growth over the past four years as a result of extensive foreign borrowing and attracting equity capital into the country. During the year, the bank's assets grew by 72 percent, bonds - 59 percent, including deposits - 48 percent.

On June 27, the official exchange rate is 0.8041 manat to $1.

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