Central bank sees no need to change leverage level
Azerbaijan, Baku, Dec. 25 / Trend I.Khalilova /
The Central Bank of Azerbaijan (CBA) does not find necessary introducing changes to the level of leverage (tool linking the growth of assets to capital growth) set in the banking system at a rate of eight percent, General Director of CBA Rashad Orujov informed Trend.
"So far we intend to maintain this level, since it is considered good. This tool allows to control stable growth on a good capital base, to grow on a healthy basis, to control the level of capital and to achieve a good correlation of assets and capital growth, what is very important. This is a very effective tool and it is bearing fruit as the growth of assets is well-capitalized," Orujov said.
The level of leverage in the third quarter exceeded the minimum rate, reaching 9.6 percent. In the second quarter the figure was 10.2 percent and in the first, 10.7 percent.
The CBA introduced the new leverage coefficient in February 2011.
With introduction of this standard, banks will have to comply with the ratio of the balance of capital with assets plus off-balance sheet assets.
Standard leverage is intended to limit the strong growth of the banks.
Similar practices in the banking sector of Azerbaijan have already been used, but the effect of this standard was suspended in 2003 by a factor of six percent.
Last year, the CBA restored leverage standard, but in a more rigid form. Calculation procedure included off-balance sheet assets along with balance sheet assets and the requirement has been increased from six to eight percent.
The main purpose of the CBA in introduction of leverage standard is to ensure the management of capital, liquidity and credit risks to a safe level. This will give added impetus to banks for capitalization.
During the first three quarters of 2012 banks exceeded the minimum standards on capital adequacy, established by the CBA at 12 per cent for total capital and six percent for Tier I capital, amounting by October 1, 2012 15.2 percent and 12 percent, respectively.
During January-September, the total capital of the banking system increased by 21.8 percent (411.2 million manat), amounting to 2297.3 million manat.
As of October 1 assets of the banking sector reached 15 998.9 million manat, increasing from the beginning of the year up to 2 052.1 million (14.7 percent), and during the year the increase was 18 percent.
There are 43 banks operating in Azerbaijan.
The official exchange rate for December 25 is 0,7848 AZN / USD.