Date of negotiations on banks’ consolidation set in Azerbaijan

Business Materials 10 May 2012 18:38 (UTC +04:00)

Azerbaijan, Baku, May 10 / Trend A. Akhundov /

The Azerbaijani Central Bank (CBA) will begin the concrete negotiations on consolidation in the banking sector after summer, CBA chairman Elman Rustamov told Trend today.

"We have been working on this issue for a long time," he said. "We discuss this issue with the banking sector. We determine a group of interests together with the banks, which want to unite with each other. The work is underway. We are still at the design stage, together with the banks. After summer, we will start the concrete negotiations. This is a very complicated process. We believe that this must be done on the basis of the partnership between the state and the private banking sector, rather than administrative measures. I think we will find mutual understanding."

He said that the important factor is the international financial institutions' great interest.

"The International Finance Corporation and European Bank for Reconstruction and Development (EBRD) show great interest in this project," he said. "These organizations may participate in this process - individually or collectively."

He said that the central bank is interested in consolidating the country's banking system
"We, as a country, are interested in this, as the union of a group of relatively weak banks will consolidate the capital, increase resources, ensure a transition to a qualitatively different level of a customer base, used technologies, corporate governance," Rustamov said.

The CBA developed a strategy of consolidation and optimization of the banking sector. It involves a reduction the number of banks in Azerbaijan from 44 to 20 in the long term prospect, an article published in the international journal The business year said.

The banking system has a successful practice of the banks' consolidation with the EBRD. Current UniBank was formed through the merger of two commercial banks - MBank and Promtexbank in 2002, where the EBRD acquired a 15 percent stake. Following this, "Bank of Baku" and IlkBank merged in 2005.

The CBA stressed the revitalization of consolidation process of banks in 2010. These activities were among main directions of the policy of monetary and financial stability for 2011.

Although today the banks that do not meet the CBA minimum requirements in terms of capitalization have a small share on the market, the central bank included the issue of bank merger in the agenda. The issue of removing the banks from the banking system which does not meet the requirements may be considered in the future.

It may be proposed for these banks to change the form of ownership to non-bank credit organizations in connection with the law on "Non-bank credit institutions" which entered into force. In general, the banks that will not consolidate to consolidate the capital, will be propsoed to transform into non-bank credit organizations, first deputy chairman of the Central Bank Alim Guliyev said earlier.