Azerbaijani Central Bank to strengthen attention to quality of capital of banks

Azerbaijan, Baku, Feb. 10 /Trend, I.Khalilova/

The Central Bank of Azerbaijan (CBA) does not consider raising the minimum capital requirements for banks, which now total 10 million manat, director of the CBA department for supervision on credit institutions Rashad Orujev told Trend.

"This amount can be considered fairly high. For example, Russia has recently agreed to increase the minimum requirement from 3 million euros to 5 million euros, Orujov said. - On the other hand, yet we do not see such a great need to increase the minimum requirement from 10 million to 20-30 million manat, and there is no decision on this issue".

Meanwhile, the Central Bank has a separate program on capitalization with different banks, with which a framework agreement was signed, based on which the banks will carry out the process of capitalization. According to Orujov, minimum requirement has been defined for each of these banks individually, depending on the situation, and there is not a single standard for the entire sector.

"At present the urgent issue is the question to improve the quality of the elements of capital, namely, at the expense of what elements and resources may be increased banks' capital that is now the subject of the global financial community - Orujov said. - A hybrid element that the entire world included in the capital is considered to be unstable and short-term. We have this situation radically different"

According to him, the hybrid element can rarely be found in the capital base of the Azerbaijani banks. The capital of the Azerbaijani banks has been formed mainly due to the share capital and earned capital (profits from previous years). It is possible to see subordinated loans in the capital of some banks.

"However, we are going to once again review our rules to make a strong emphasis on stable elements of capital - equity, once again review our requirements for hybrid elements in order to prevent the growth of capital at the expense of unstable elements in the future. In this case, we intend to study innovations available in this regard," said Orujov.

The norm of capital adequacy set by the Central Bank at 12 percent is also considered an enough high level, as the regulatory requirement of the Basel Committee is 8 percent.

"However, we intend to revise the regulatory framework on this indicator and will work individually with each bank," said Orujov.

Official exchange rate on Feb. 10 is 0.7956 AZN/USD.