Azerbaijan, Baku, June 27 / Trend I. Khalilova /
The Azerbaijani Central Bank does not intend to return to previous practice of normative requirement for minimal amount of banks' capital, director of Azerbaijani Central Bank department for control over loan organizations' activity Rashad Orujev said.
According to amendments in the law National Bank, the Central Bank is entitled to grant subordinated loans to banks. Subordinated loans can be directed to second level capital.
"It will be a new tool in arsenal of the Central Bank. In case of necessity, we can support capital base of concrete bank," Orujev said.
Sum of subordinated loan is not envisaged within regulations of the Central Bank. But 5-year-term is indicated without withdrawal till expiry of term, he said.
Presently, the Central Bank regulates banks by normative of capital adequacy which obliges banks to capitalize while approximation to ratio of joint capital towards 12 percent assets.
These banks will not be able to increase their assets, i.e. they will fail to draw deposits and other funds. They will lose Azerbaijan opportunity to allocate risks on assets while violating this normative in accordance with the law Banks.
Presently, average index of capital adequacy on banking sector hits 20 percent in the region compared to 12 percent in Azerbaijan. It demonstrates sufficient capitalization of banks towards risks from assets.
Earlier it was stated about working out of increase of minimal norm of capital by the Central Bank. First newly created banks and operating banks will be closer to this normative requirement.
Similar practice was introduced in Azerbaijan in 2006. It was used when normative in the amount of 10 million manat was introduced for new banks which must have formed authorized capital at this level. Later joint capital of banks operating in the country reached 10 million manat within three stages.
The Central Bank intended to increase necessary minimal amount of authorized capital while their registration to qualitative increase level of newly crated banks.
Presently, normative hits 10 million manat or $12 milion.
Joint volume of banks' capital increased twice exceeding 1 billion manat during 2007. It hit 1.705 billion manat given growth in the amount of 47.8 percent in 2008. As of June 1, 2009, it hits 1.625 billion manat.
Current level of capital is appreciated as Middle European one and higher in many countries. But it is considered as insufficient for capitalization of banking sector of the country in terms of dynamically developing economy.
Ban was imposed for drawing of population's deposits because of problems with capitalization towards 4 banks. Presently, their deposit portfolio was reduced to zero as they did not draw deposits during imposing of sanctions and term expired.
On June 27, official exchange rate is 0.8041 manat to $1.