Azerbaijan, Baku, Oct. 22 / Trend I.Khalilova /
The Central Bank of Azerbaijan (CBA) has identified the main areas of activity in maintaining the stability of the banking system in the near future.
For this end, the Bank has identified a number of essential areas such increase of the transparency and the quality of the banks' capital base, tightening of the requirements to cover the risks and disclosure of the taken risks, restriction of financial leverage, and the establishment of counter-cyclical requirements for redundancy of capitals, including the formation of provisions, and the revision of liquidity standards, CBA Research and Development Center Director Emin Huseynov said.
"These measures are intended to increase the stability of the banking system, main channel of financial intermediation in the market economy and source of long-term stable resources of the economic growth," Huseynov said.
The sufficiency of the banks' total capitals on the effectiveness of internal controls is quite high thanks to the activities undertaken to improve corporate governance in banks and organization of the assessment of risk management.
"However, only the main capital has the countercyclical characters, so it is necessary to introduce additional indicator of assessment of capital adequacy and indicator of financial leverage designed to curb excessive imbalance between capital and assets," Huseynov said.
He said the CBA has developed supervisory decisions and regulation for this indicator, and is applying it in the supervision process. Further measures should include changing the capital requirement, which involves improving the quality, stability and transparency of the capital base of banks, including the establishment of reserve capital.
"The factors affecting the level of capital adequacy include not only the risks of individual banks, but also the macroeconomic risks, that is, the systemic risks that will inevitably affect each bank. The increase of capitalization will be contributed by improvement of motivation at banks, aimed not at the current work, but to achieving the ultimate strategic indicators in the banking activities. We have certain developments on this issue that have been recommended for implementation in the banks," Huseynov said.
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