IMF assists Azerbaijan in developing consolidation strategy of banking sector

Business Materials 20 May 2011 18:33 (UTC +04:00)

Azerbaijan, Baku, May 20 /Trend, I.Khalilova/

The International Monetary Fund (IMF) has started to provide technical assistance to the Central Bank of Azerbaijan (CBA) in developing a strategy of consolidation of the banking sector, a government source told Trend.
IMF consultant Peter Hayward visited Baku from 4 to 13 May in order to conduct consultations.

The Central Bank has a long-term prospect to consolidate the banking sector.
Director of the CBA department for supervision on credit institutions Rashad Orujev told Trend earlier that "we think that the consolidation should be conducted in a natural way".
"In addition, the quantitative requirements of the Central Bank are tightened from in terms of capital - its level, adequacy. If to talk about quality requirements, the attention is strengthened to quality control, quality of risk management, technology, human resource banks," said Orujov.
In principle, complying with these requirements demands enough efforts by the banks, since there is a necessity for serious long-term investments, long-term development plans. He said every bank must assess its possibilities and prospects in terms of complying the requirements of the Central Bank.
"If the banks can see that they have enough prospects, opportunities and resources in order to remain on the market, work and meet these requirements, the CBA will have no questions with such banks. If banks see some shortages in their activities in this plan, they need to be consolidated in any form in order to remain on the market, it will be the decision of the banks themselves," Orujov said.
He said the plan for consolidation of banks is not to force the banks to combine or close them. This process can take place only on the basis of the decision of the shareholders of banks, as in the case of conversion to non-bank credit organization that will be possible after the relevant amendments to the Law on Banking Activities. Only decision of the Central Bank will not be enough for this, said Orujov.
The banking has a successful experience of consolidation of banks with the participation of the European Bank for Reconstruction and Development (EBRD). The present UniBank was formed as a result of merger of two commercial banks - MBank and Promtexbank in 2002, when the EBRD acquired 15-percent stake. After this, merger of Bank of Baku and IlkBank took place in 2005.