Market participant: Time has come for consolidation of smaller banks in Azerbaijan
Azerbaijan, Baku, June 6 / Trend N.Ismayilova /
Some 15-20 banks are sufficient for the Azerbaijani economy, Jahangir Hajiyev, Chairman of the International Bank of Azerbaijan (IBA), the only state-owned bank in the country, said.
"Today, 15-20 banks are enough for Azerbaijan. Small banks are encouraged to consolidate, which would strengthen their position in the market," Hajiyev said.
He said the situation in the country's banking market has changed and the IBA does not play such a backbone role any more. The unification of the smaller banks would be a positive step for the market.
Earlier, it was stated that 15-20 banks are enough to meet the demands of Azerbaijan's economy.
Thus a principal task in 2010 of the Central Bank was to work out a strategy of consolidation and optimization of the banking system.
The banking system has a successful experience of consolidating banks with the participation of the European Bank for Reconstruction and Development (EBRD). The present UniBank was formed as a result of a 2002 merger between two commercial banks, MBank and Promtexbank. In the process the EBRD acquired a 15 percent stake. Subsequently, the Bank of Baku merged with IlkBank in 2005.
The CBA announced its revitalization in early 2010 during the process of bank consolidation. These events were established while putting forth basic policies for monetary and financial stability in 2011.
Although today the banks that do not meet minimum CBA requirements for capitalization have an insignificant market share, the Central Bank, having considered the question of bank mergers in the agenda or in the future, may consider the issue of removing banks that do not meet requirements.
With the enforcement of the new law "On Non-Bank Credit Institutions" these banks may change ownership to non-bank credit organizations (NBCOs). In general, banks that do not agree with consolidation to extend capital will be asked to transform into NBCOs, the CBA First Deputy Chairman Alim Guliyev said earlier.
Today, there are 44 banks in Azerbaijan.
To date, IBA has a dominant position in the banking sector, as evidenced by its market share in total banking system assets, investments and deposit base credit (42 percent, 43 percent and 36 percent, respectively, in 2010). IBA is of strategic importance, since it historically played an important role in the implementation of public investment and economic policy, acting as an agent for the government to finance large-scale national projects for Azerbaijan.