Central bank: High level of capital adequacy of Azerbaijani banks makes it possible to cover potential losses

Azerbaijan, Baku, August 5 /Trend, I.Khalilova/

The Central Bank of Azerbaijan (CBA) does not consider it necessary to provide financial support for the banking sector.

The preventive measures of the Central Bank provided the banks with a high level of capital adequacy, which is capable to cover potential losses, a source at the CBA told Trend.

"The Law on Central Bank has been amended accordingly to allow the Central Bank to provide material support for the banking sector if necessary, said the CBA. - But the banks also have high liquidity, which in turn ensures the timely implementation of obligations, including repayment of external loans."

As of July 1, 2010, the rate of capital adequacy in the banking system amounted to 17.2 percent and the current liquidity two to three times exceed the norms set by the Central Bank.
According to the international rating agency Fitch Ratings, liquidity risk and refinancing in Azerbaijani banks are at the background, Moscow's Fitch Ratings banking analytical group head Vladimir Markelov told Trend.

He said that Azerbaijani Central Bank actively assist in stabilizing the situation in the banking sector. It refinanced a number of banks with high external debt burden, thus allowing them to refinance foreign loans.

According to the agency, liquidity risk and refinancing are at the background, since much of the external debt of the banks were repaid. The "liquidity cushion" of assets increased due to lower demand for credit in the economy and also due to tighter control of banks in respect of loan during crisis.

About 47 banks have licenses to conduct banking activities in the territory of the republic. Total assets of Azerbaijani banks as of June 1, 2010 amounted to 12.042 billion manat. In May, the capitalization of the banking sector in Azerbaijan amounted to 2,046.67 million manat.

Official rate on August 5 is 0.8034 AZN/USD.

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