Standard & Poor's assesses Azerbaijani Central Bank’s policy during crisis as balanced
Azerbaijan, Baku, Feb. 16 / Trend A. Akhundov /
Standard & Poor's assesses the Central Bank of Azerbaijan's (CBA) policy in the crisis on global financial markets as balanced and prudent.
"The Azerbaijani banking system overcame a crisis quite quietly," analyst Viktor Nikolsky told Trend today. "As opposed to Russia, Kazakhstan and Ukraine, where even very large banks found themselves in default on their obligations, there was no bankruptcy in
Azerbaijan. However, some banks resorted to Central Bank assistance in terms of liquidity in 2008-2009. If it were not for the CBA, there would be defaults."
He said the bank interfered by increasing the maximum amount of insurance coverage on deposits up to 30,000 manat, and thus, helped to avoid panic among depositors.
"There were outflows of deposits, but there was no panic," he said.
"For example, there were some banks in Russia with up to 30 percent of the outflow for two months. Not every bank can stand it. Azerbaijani banks did not face this situation."
He said as opposed to many other CIS countries, especially Kazakhstan, the share of foreign borrowing in capital markets was relatively low in Azerbaijan.
"The banks failed to enter the international capital market," he said.
"The markets closed for many countries in 2008 and 2009. But the crisis did not affect the Azerbaijani banks.The CBA's balanced policy must be stressed. It introduced coefficients for reservation, that is, to limit external loans."
Thus, the net volume of liquidity "injections" in the economy reached $2 billion. Roughly $1 billion was actually spent, but, nevertheless, this allowed the Azerbaijani banking system to resist and avoid negative trends, he said.
The Central Bank started in a timely manner to limit the attraction of foreign loans by local banks and introduced regulations on compulsory reserve norms. Foreign borrowings at the beginning of the global financial crisis amounted to 20-22 percent of their total liabilities.
They paid off $2 billion of the loans over two years.
Azerbaijani banks also began increasing their drawn funds after the global financial markets were restored.
The volume of borrowings reached $1.686.6 billion for 2010. About $909.9 million and $726 million were returned. The private banking sector's external debt decreased over three years.
The official exchange rate is 0.7861 AZN/USD on Feb. 16.