Commerzbank: Cash turnover limit in Azerbaijan will contribute to growth of banking sector
Azerbaijan, Baku, April 13 / Trend A.Hasanov /
Large volume of cash circulation in the economy of Azerbaijan is one of the reasons for the small volume of the country's banking sector, the head of the Commerzbank in Baku, Johann Engbrecht, believes.
"If to transfer 70 percent of the cash in circulation into the banking system, it will contribute to the growth of banks. Country's economy is growing more rapidly than the banking sector. Banks do not keep up with the pace of economic growth, and one of the reasons for it is a lot of cash in circulation," said Engbrecht.
He said that the second reason for the small volume of the banking sector of Azerbaijan is a large number of banks on the market. There are 44 banks in Azerbaijan today.
"The Central Bank of Azerbaijan can play a big role to encourage banks to merge and integrate. Consolidation of banks can be encouraged by raising the minimum capital requirements from the current 10 million to 30 - 40 million manat, which would change the situation on the market, but other methods can also be used," said Engbrecht.
He noted that if small banks merge into larger banks, it will be ideal for the banking sector of Azerbaijan.
Currently, the central bank is preparing a strategy to consolidate and streamline the banking system.
Practice of the national banking system already has a successful practice of consolidation of banks with participation of the European Bank for Reconstruction and Development (EBRD). The present UniBank was formed through the merger in 2002 of two commercial banks - MBank and Promtexbank, where the EBRD bought a 15 percent stake. Following this, in 2005 Bank of Baku merged with IlkBank.
The Central Bank announced the activation of process of consolidation of banks already in 2010, and these activities formed the basis of policies of monetary and financial stability in 2011 and for the current year.
Although today the banks that do not meet the minimum requirements for the capitalization of the Central Bank, have a small share of the market, the central bank included in the agenda the question of banks' mergers, or in the future removal from the system of banks that do not meet the requirements may be considered.
In connection with the entry into force of the law "On non-bank credit organizations" this category of banks may be offered to change form of ownership to non-bank credit organizations (NBCO). In general, banks that will not agree with consolidation to merge capital, will be offered to transform into NBCO, First Deputy Chairman of the Central Bank Alim Guliyev told Trend earlier.