Azerbaijan defines requirements for restructured banks

Business Materials 3 September 2014 15:11 (UTC +04:00)

Baku, Azerbaijan, Sept. 3

By Zulfiyya Kurbanova - Trend:

The Central Bank of Azerbaijan (CBA) has identified the requirements for the banks in the process of reorganization.

CBA Board approved the rules of "reorganization of the banks" published in the register of legal acts of the Ministry of Justice.

From the date of entry of this document into force rules of "reorganization of the bank through the consolidation or merging" are eliminated.

The new rules have been adopted for the successful implementation of the restructuring of banks that fail to meet the new requirements of the CBA for the minimum size of the total capital, as well as to ensure the safety of funds of creditors and depositors, CBA explains.

The requirement of the Central Bank for the minimum total capital of banks is defined at the level of 50 million AZN for the end of 2014.

When the CBA announced its decision to raise the requirements for total capital from 10 to 50 million AZN on July 25, 2012, only 10 banks exceeded this threshold, which account for 87 percent of the assets of the entire banking sector.

The number of banks with capital exceeding 10 million AZN [the applicable regulatory requirements of the Central Bank], totaled 42 in January-July this year, which is a one unit increase compared with the end of June 2013, CBA reports. The share of this category of banks in the total capital of all banks in the country was 99.7 percent by the end of the reporting period.

One bank has its capital ranging from 5 million to 10 million AZN, another one from 3.5 million AZN to 5 million AZN. The share of these categories of banks in the total capital of all banks in the country amounted to 0.2 and 0.1 percent respectively by the end of the reporting period.

According to the rules, the reorganization of banks may begin with the permission of the Central Bank, and only after that a general meeting of shareholders can be held for making a decision.

Resolution on the reorganization may be issued to banks in the presence of aggregate capital complying with the minimum requirements of the CBA, and non-bank credit organizations with the appropriate minimum capital requirements.

There are 44 banks and 157 non-bank credit institutions in Azerbaijan as of July 1, 2014.

The history of the banking sector of Azerbaijan has already had successful experience in consolidation. Thus, in the first years of transition to a market economy the country had more than 250 banks with a very low capital, and the subsequent consolidation has led to a sevenfold reduction in the number of banks, and as a result strong banks remained on the market. Some 22 Azerbaijani banks today have foreign capital.