Poll: Azerbaijani Central Bank’s decision directed to remove threat to banks’ stability

Azerbaijan, Baku, Feb. 18 / Trend L. Abdullayeva /

Azerbaijani banks supported the requirement of the Azerbaijani Central Bank (CBA) to stop rendering banking services in mobile services. Poll results conducted by Trend among Azerbaijani banks showed this evidence.

The CBA sent a letter to the commercial banks on Feb. 5, 2013 with the requirement to stop the activity of these points within three working days or it will resort to sanctions according to the law on 'Banks'.

The International Bank of Azerbaijan (IBA) considers the CBA decision as removing threats to the stability of the banks.

According to spokesman for the IBA Rauf Agayev, the number of appeals over loans to the banks significantly increased. According to the statistics indices, the growth rate of loans in 2012 is far ahead of that of 2011. The growth is also observed in consumer credit which is associated with the simplification of loan issuance procedures by banks.

"Of course, this has a positive impact on the country's economy," he said. "Money circulation increases with the consumption volume growth. Consequently, the gross domestic product of the country also increases. Retail lending has become the most attractive sector for banks because of the very high yield and great market opportunities of consumer credit."
However there is reverse side of the medal.

In the case of impossibility in paying off the loan, the borrower and the guarantor face such a situation when the bank must pay off the loan. For this purpose as is known, the reserve funds generated have been created in the banks to cover credit risk. The more risky credit policy conducted by the bank, the greater insurance reserve it must create, by using funds from its own profit. There are many cases where the bank is unprofitable.

"So, after the CBA last decision, the control over the issuance of consumer credit will be tough," the IBA representative said. "This measure is enforced. Moreover, delivering loans at mobile points is considered as a non-prudential practice, the rapid growth of issuing unsecured loans in the future could be a threat to the stability of the country's banking system."

He said that the development of the European debt crisis has become possible because of the simultaneous effect of a number of complex factors. The ease of access to loans which led to the issuance of a significant number with high risk is among them.

"Banks are trying to attract the attention of borrowers by significant advertising campaigns and various preferences and discounts," Agayev said. "They offer loans to the population regardless of the place of work and existing loans in other banks, and formalise them by using only ID. Afterwards, as people say, they are urgently looking for the borrower who has failed to pay up on time."

Today, any self-respecting bank seeks to complicate the conditions for obtaining consumer loans (cash loans without collateral and sureties, cash loans with no income verification, etc.), and introduces modern scoring systems to eliminate insolvent borrowers still under loan application.

"Some banks avoid long term financing of economic projects," he said. "The reason is that they are unable to participate in such projects due to lack of their own resources. Therefore, these banks are not only interested, but have to provide people with household loans in small and large amounts."

According to Parabank marketing specialist Tural Hasanov, the CBA requirement is very relevant now, despite a belated reaction to the violation of Azerbaijani legislation by some banks.

The activity of branches, subsidiaries and representative offices of any bank in Azerbaijan must be based on the following definitions in the law on 'Banks' dated January 16, 2004 in terms of rendering the services.

"We see clearly defined, permitted activity of a 'Representative office of the bank' in the law," Hasanov said. "It is being violated at the moment by some banks in Azerbaijan, rendering unauthorised services in their mobile representative offices. Therefore, I consider the CBA requirement as lawful, justified and well-regulated by Azerbaijani legislation."

While operating in the Azerbaijani territory for 21 years, Parabank did not render any services at mobile points prohibited by the Azerbaijani legislation. At present, Parabank has no mobile points, Hasanov said.

Bank Standard also welcomes and supports the CBA initiative, directed to intensify the verification of borrowers, as well as the quality of service being rendered to them by banks.
Director of the Retail Business Department at Bank Standard Elchin Abdullayev said that several banks have been recently conducting a rather aggressive credit policy. They often do this at rates much higher than credit rates in the market. Delivering loans at high rates and areas with unsuitable places for this activity increases the risk of the whole banking sector in Azerbaijan, as the banks often do not have the opportunity to thoroughly check the creditworthiness of the borrower.

"According to this impossibility, the rates at which the loans are delivered to the citizens can reach very high amount," he said. "As a result, the risks in the banking sector start to increase."

Moreover, the banking activity requires certain standards of business in the first place to ensure the quality of services rendered to customers.

"We are sure that it is necessary to conduct banking activity within the CBA requirements for potential customers of the banks to fully get necessary information about loans, rates and to assess their ability to repay these loans," Abdullayev said. "All market participants, rather than a few aggressive players delivering loans at very high rates will benefit from this."

Following the CBA requirements sent to all banks, DemirBank has withdrawn its staff from points of sale. "Customers wishing to pay for purchases using credit contact the nearest branch of DemirBank and get a loan during one day if they correspond to the bank's requirements."

Before the CBA last requirement, DemirBank staff informed then about credit products which can be used by customers when buying certain goods at the points of sale and potential customers may give information about themselves.

"Further procedures and lending were implemented at the bank branches,"Abdullayev said. "According to the law on 'Banks', DemirBank renders banking services only at branches."

According to Unibank, the bank withdrew staff from the mobile points of sale in connection with the expiration of contracts with trade networks.

A survey is underway.

Subscribe to Trend in Google News! Subscribe
Weekly actual topics in Azerbaijan (April 16-20)
Weekly actual topics in Azerbaijan (April 16-20)
Weekly tenders in the region (April 16-20)
Weekly tenders in the region (April 16-20)
Last week’s laws, orders and decrees in Azerbaijan (April 16-20)
Last week’s laws, orders and decrees in Azerbaijan (April 16-20)
Loading Bars
Azerbaijani Finance Ministry to put medium-term gov't bonds up for auction
Azerbaijan reveals state budget revenues for 9M2021
Azerbaijan's consolidated budget revenues increase
Expenditures of Azerbaijan's state budget for 9M2021 revealed
U.S. drops tariff threat in digital tax transition deal with European countries
Sputnik V contributes to one bln coronavirus vaccinations in India
Israel to readmit COVID-vaccinated foreign tourists next month
Oil prices drop; Brent on track for first weekly dip in seven
Higher oil, natural gas prices to see some demand destruction
IsDB Institute Wins Again ‘Best Islamic Research Firm’ Award
1,742 more COVID-19 cases reported in Kazakhstan
Biden says does not want cold war with China
Chamber of Commerce head talks Iran's trade, tourism ties with Oman (Exclusive)
NATO ministers agree on defense plan, investment in innovation
Biden climate envoy Kerry to visit Saudi Arabia next week
Israel adds 5 cases of COVID-19 Delta variant "AY4.2"
Prop gun misfire kills woman on set of Alec Baldwin movie
EU leaders call for stepping up work on mutual recognition of vaccine certificates
Toronto says police not vaccinated by Nov 30 will be put on unpaid leave
British Queen cancels trip to spend night in hospital
World's biggest triceratops sells for $7.7 million in Paris
UK records more than 50,000 new coronavirus cases
Syria executes 24 people over deadly forest fires
Azerbaijan climbs to 26th place in UEFA coefficients table
Russia, China are friends in each other’s interests, not against others — Putin
Chronicles of Victory: First VP Mehriban Aliyeva interviewed by Trend News Agency on October 22, 2020
Chronicles of Victory: October 22, 2020
French PM pledges cash to help drivers cope with rising energy prices
Qarabag FC wins another victory at UEFA Conference League
Putin makes statement on Karabakh
Uzbek Central Bank: Food prices have risen by 14.4%
Georgian Parliament Speaker to meet Moldovan counterpart in Greece
Brussels' utopian green energy fantasies spark energy crisis in Europe — Hungarian PM
EU prioritizes digital sector development in Azerbaijan
Russia planning several new business visits to Azerbaijan by year-end - official
Russian company to implement micro-mobile transport project in Baku
First Vice-President Mehriban Aliyeva makes Instagram post on visit to Zangilan (VIDEO)
Azerbaijan Investment Holding, Kazakhstan National Welfare Fund sign memorandum of co-op
SOFAZ’s revenues from profitable oil and gas sale up
Executive Power of Azerbaijan’s Tovuz district opens tender for road repairs
Kazakhstan, Russia discuss gas supply issues
Russian company may set up 'smart' bus stops in Azerbaijan's liberated lands
Azerbaijan publishes updated list of servicemen martyred during second Karabakh war
IBF VP talks growing interest of investors in Azerbaijan's liberated lands (VIDEO)
SOFAZ sees increase in budget revenues
Uzbekistan's GDP growth in 9M2021 sparks promising forecast
Azerbaijan developing preliminary conceptual design of railway route to liberated Kalbajar (PHOTO)
Goldman Sachs, Freshfields working on possible Porsche IPO
Kazakhstan to liquidate emergency wells in several regions
Large-amount loans issued in Iran's services sector
Azerbaijan, Russia talk cooperation opportunities in insurance sector
Azerbaijan records surplus in state budget
Azerbaijan's Sumgayit Technologies Park, Alat FEZ sign MoU on strategic co-op
Azerbaijan shares data on number of vaccinated citizens
Head of EU delegation talks financial aid to Azerbaijan, following end of Karabakh war
U.S. weekly jobless claims drop to 19-month low
Uzbek Central Bank publishes data on country's gold, currency reserves
Trade turnover between Turkmenistan, Uzbekistan grows sharply
FIMI buys Ashot Ashkelon stake from Elbit Systems for $88m
Azerbaijan confirms 2,005 more COVID-19 cases, 1,011 recoveries
Uzbek Central Bank reveals data on total liabilities of banks
Iran sees decrease in load/unload operations in Astara port
Kremlin hopes for EU certification of Russia's vaccine
Bahar Azadi gold coin price begins to rise in Iran
India enters 100-crore vaccine club to fight Covid, PM Modi says nation scripts history
Hungarian University Forum and alumni meeting in Baku
Central Bank of Iran shares data on loans issued for trade sector
Turkmenistan doubles greenhouse tomato exports to Russia
Turkey's position on opening Zangezur corridor - unchanged – President Erdogan
Iran reveals COVID-19 data for October 21
Georgia shares data on its top goods exported to Russia
Iran sees increase of cargo loading/unloading at its Charak port
Turkish President to attend opening of Azerbaijan’s Fuzuli International Airport
India offered humanitarian assistance to Afghans, Taliban say after 2nd meeting
'Turkic World' project aims to meet information demand - Turkish official
South Pars field revenues account for over half of Iran's state budget
Turkmenistan looks to launch new project jointly with UNDP, WB
Central Bank of Iran announces amount of loans issued in housing, construction sector
Turkmenistan interested in political stability, security in Afghanistan – Deputy FM
Iran’s CBI reveals amount of loans issued for industrial and mining sectors
India achieves the major milestone of ‘one billion’ vaccinations
Volume of loaded/unloaded cargo in Iran’s Fereidoonkenar port down
Ruling parties of Azerbaijan, Turkey to hold meeting
Iran records increase in exports to Uzbekistan
Iranian president to visit Ardabil Province on border with Azerbaijan
Uzbekistan reveals total assets for banks with/without state share
Every martyr will live forever in hearts of Azerbaijani people - President Ilham Aliyev
SOCAR discloses oil transportation volume via Baku-Supsa
Our people did not bow down during occupation, did not forget about their native lands - Azerbaijani president
Georgia-Russia trade turnover increases in 9M2021
Azerbaijan's military units in Kalbajar, Lachin undergo inspection amid coming winter (PHOTO/VIDEO)
Georgia shares data on COVID-19 cases for October 21
SOCAR’s capital investment plan fulfilled by over 63%
SOCAR reveals volume of electricity production, consumption
Iranian currency rates for October 21
Tesla's German plant hits snag as public consultation repeated
Iranian startup companies receive more loans from local banks
Activities in Iran’s Genaveh port increase
Egypt economy forecast to grow 5.1% in year to June, 5.5% in 2022/23
Pfizer vaccine very effective against Delta variant in adolescents in Israel
All news