Azerbaijan needs bank consortium to deal with NPLs - FIMSA
Baku, Azerbaijan, Nov. 24
By Azad Hasanli – Trend:
Banks in Azerbaijan should create a consortium and the state should provide tax benefits to solve the issue of non-performing loans (NPLs) in the country, Nurlan Babayev, head of Legal and Methodology Department of the Financial Market Supervisory Authority of Azerbaijan (FIMSA), said Nov. 24 at the 2nd banking forum in Baku.
Babayev noted that NPLs turned into the biggest problem of Azerbaijan’s banking sector.
“At present, according to our calculations, the volume of NPLs has reached 2 billion manats,” he said. “However, troubled assets cause damage not only because a bank cannot return them, but also because a bank is obliged to create reserves for troubled assets. In other words, the total burden on banks, caused by the growth of troubled assets, may reach about 4 billion manats. These funds could have been used to develop the real sector, and this would have helped create new jobs.”
Babayev added that solving this problem requires not only changes in legislation, but also institutional reforms.
“Throughout the world, tax incentives are often introduced to solve the problem of troubled asses,” he said.
To solve the problem, the FIMSA created a special working group, he noted.
“We have studied the international experience,” Babayev said. “There are various ways of solving the problem - the so-called London Approach, the Istanbul Approach, the Azerbaijani government may be attracted to solve the problem, or a bank consortium may be established, which will deal with restructuring assets.”
“We are trying to find an acceptable model for Azerbaijan,” he added. “Most importantly, the participation of the state and the banking sector should be equal. For example, the banking sector should create a consortium and criteria for restructuring loans, and the state should introduce tax benefits and modernize the regulatory framework.”
(1.7002 manats = 1 USD on Nov. 24)