CBA introduces new standard

Business Materials 1 June 2011 16:20 (UTC +04:00)

Azerbaijan, Baku, June 1 / Trend I.Khalilova /

The Central Bank of Azerbaijan (CBA) has introduced a "leverage" standard, CBA General Director Khagani Abdullayev told Trend.

The bank has decided to apply the new leverage regulations of eight percent in late 2010.

Banks will have to comply with the ratio of the balanced capital to assets plus off-balance assets.

The norm, he said, will limit strong bank growth.

"This is a very effective tool in terms of containing the growth of banks that are not secured by sufficient capital," CBA Credit Institutions Supervision Department Director Rashad Orujov told Trend earlier.

A similar practice was used earlier in Azerbaijan's banking sector with a coefficient of six percent, but was suspended in 2003.

The CBA re-introduced a standard of "leverage" in 2011, but in a more rigid form, as off-balance assets in addition to balance assets have been included in the procedure of calculation, and the demand increased from six to eight percent.

The main purpose of introducing the standard is to provide capital management, liquidity and credit risks at a safe level.

The capitalization of the banking sector rose by 1.7 percent in the first quarter of 2011 and by 0.7 percent in March to 2.205 billion manat.

According to statistic data of the CBA, the number of banks with capital exceeding 10 million manat, hit 41 in March, decreasing by one bank compared to late 2010, and increased by one bank compared to February 2011.

The two banks' capital is formed in the range from 5 to 10 million manat, one bank from 3.5 million to 5 million manat.

The total assets of Azerbaijani banks as of the end of the first quarter of 2011 amounted to 12.63 billion manat, which is 5 percent less compared to early 2011 and 4 percent as of late February.