Azerbaijan, Baku, July 13 /Trend, I.Khalilova/
The Central Bank of Azerbaijan (CBA) is preparing to introduce several innovations to improve the banking supervision system.
"During the global financial crisis and the post-crisis period, improvement of banking supervision has been the object of much discussion in the international arena, a source at the Central Bank of the country told Trend on Wednesday. - These processes are very attentively monitored by the Central Bank of Azerbaijan, and innovations are envisaged to be made in the improvement of the banking supervision system".
The innovations are expected in three directions - in strengthening supervision on risks, improving corporate governance and risk management in banks, and implementation of counter-cyclical supervision.
In order to provide capital management, liquidity and credit risks at a safe level, the CBA this year will once again restore the norm of "leverage", but in a more rigid form. The norm of "leverage" will limit the strong growth of banks.
The CBA decided to apply the new leverage regulations of eight percent in late 2010. According to it, the banks must bring a balanced capital in accordance with the assets and off-balance sheet assets. This measure is used to prevent rapid growth of banks.
A similar practice was used earlier in Azerbaijan's banking sector with a coefficient of six percent, but was suspended in 2003.
The Central Bank of Azerbaijan (CBA) plans to introduce a mechanism of compensation to bank managers in 2011 - the first in the world within the measures to improve the quality of bank management. Measures to improve the quality of bank management include issues of corporate management and risk management. On risk management the CBA has more detailed and qualitative rules. The rules for the development of corporate management in banks were adopted in 2004, after adopting the law On Banks. Under the new rules, banks will be putting more qualitative and detailed requirements on risk management
One of the innovations in this direction will be the adoption of rules on compensation to bank managers. This will change the philosophy of bank management and bank managers' conduct. Consultations with banks on issuance of bonuses to bank managers have already started.