Azerbaijani banks should be capitalized regarding future risks: Deputy Chairman of Central Bank

Azerbaijan, Baku, Oct. 6 / Trend , I. Khalilova /

The Central Bank of Azerbaijan (CBA) is not considering the issue of increasing normative requirements to the authorized capital of banks operating in the country, said Alim Guliyev, the first deputy chairman of CBA.

"However, due to the crisis situation, the Azerbaijani banks have losses that are now valued by banks and to restore them, each bank formed its own program of capitalization," Guliyev said. "The shareholders of banks have the task to increase the capital regarding future risks due to the losses."

In this regard, he said, the agenda of the Central Bank does not include an issue of increasing the minimum norm of capital. At present, a minimum size of the authorized capital for banks is 10 million manat. Because of non-fulfilling this requirement, five banks are prohibited from attracting deposits, and at present, their deposit portfolio is reduced to zero, since they have not attracted deposits since imposing sanctions, but the current term has expired.

"Depending on the structure of loan portfolio, each of them has a different amount of losses," said the deputy chairman. "And banks create reserves due to deterioration of loan portfolios."

Based on a standard credit, reserving comprises two per cent of their volume, but depending on the degree of risk, reserves may reach even up to 100 per cent.

"Today, on non-standard loans, banks have created reserves up to 80 percent, and reserving for overdue loans is up to 70 percent, that is, even in the worst situation, the Azerbaijani banks maintain the requirement for capital adequacy," Guliyev said.

According to the principles of Basel, the norm of capital adequacy, set by the Central Bank at 12 percent, is 8 percent, and it reaches 19 percent in the country's banking sector.

At present, the share of overdue loans of the banking sector in the country, taking into account reimbursement by the created reserves, comprises 3.6-4 per cent, and excluding reserves, it reaches 8-9 per cent.

As for Sept. 1, banks issued loans worth 7.6298 billion manat. In August, crediting of the economy grew by 5.5 per cent and increased by 6.5 percent in January-August and 18.2 percent in annualized pace.

The only public bank in the country (the International Bank of Azerbaijan) on the first of September were granted loans to 3.6327 billion manat with a specific gravity of 47.6 per cent (increased by 1.2 per cent in August), and private banks - to 3815.1 million manat with a density of 50 per cent (increased by 1.8 percent in August). The remaining 2.4 per cent fall in the share of non-bank credit organizations, which have been issued 182 million manat.

The only state bank in the country issued 3632.7 billion manats of credits with specific weight of 47.6 percent. Private banks issued credits worth 3815.1 billion manats with specific weight of 50 percent (increase by 1.8 percent as of August), the rest 2.4 percent accounts for non-bank loan organizations (they issued 182 million manats).

On Oct. 6, the official exchange rate is 0.8033 manat to $1.

Do you have any feedback? Contact our journalist at: capital@trend.az

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