Baku, Azerbaijan, July 13
By Anvar Mammadov – Trend:
At present, the Azerbaijani population still trusts the country’s banking sector, Zakir Nuriyev, head of the Azerbaijan Banks Association (ABA) said in an interview with Trend.
He added that the statistical data on the banking sector testifies to it.
"I can not fully agree with the opinion that the population has lost confidence in banks,” he said. “The statistics shows that the assets of the Azerbaijani banking sector make up 30 billion manat, while the liquidity of the sector exceeds regulatory requirements set by the Financial Market Supervisory Authority (FIMSA). At present, the deposit portfolio of the country's banks is 7 billion manat.”
“The volume of the deposit portfolio has decreased, but it can be explained,” he said. “Taking into account that more than 85 percent of deposits are placed in dollars, and the population can not receive the same income as before (currently, the interest rate on dollar deposits varies from 0.5 percent to 3 percent compared to 15 percent before the change in the exchange rate of the manat), it is logical that people are looking for other instruments for making a profit.”
“On the other hand, during a period of high profitability, the population kept its savings on a bank account, it is logical that depositors began to spend the money they saved earlier as a result of the switch to a lower profitability, "Nuriyev said.
He said that if the population lost confidence in the sector, it would face a sharp reduction in assets, a serious outflow of deposits and a waiver of banking services.
"But today all settlements of Azerbaijani citizens are conducted through the country’s banking system,” Nuriyev said. “Everyone has a credit or debit card today. All utility bill and mobile payments are made through banks.”
“The banks are not actively lending today, but I reiterate that it is more connected with a decrease in demand by the economy,” he said. “After the restoration of demand, banks will again be able to direct their funds to lending to the country’s economy because it is unprofitable for the banks to store these liquid assets. They must invest them in the economy to make a profit."
As for the high dollarization of the deposit base, Nuriyev added that at present, the main task of banks is to stimulate the population to keep deposits in manats.
He added that after a while, the confidence in the manat will be restored again.
"The dollarization process was expected to occur and it occurred,” he said. “Today more than 85 percent of bank deposits are placed in dollars, but it can be explained by economic processes. The reduction of dollarization is an economic process and it depends not only on banks. During this period, the function of banks is to stimulate the population to keep deposits in manats, which banks do, as interest rates on manat deposits are at least 15 percent, whereas interest rates on dollar deposits are rather lower.”
“As for the fight against dollarization, the FIMSA has already imposed a ban on the issuance of foreign currency loans to the individuals who do not have income in foreign currency,” Nuriyev said. “It is also forbidden to issue loans to the individuals who do not have sufficient funds for loan servicing. In a while and along with the implementation of other economic reforms, people's confidence in manat will be restored.”