...

WB: Azerbaijani banks need to increase capitalization

Business Materials 10 September 2018 20:57 (UTC +04:00)

Baku, Azerbaijan, Sept. 10

By Anvar Mammadov - Trend:

Increasing the capital of banks is one of the first conditions for the growth of the sector and the economy of Azerbaijan as a whole, WB leading expert in finance and private sector in the South Caucasus, Angela Prigozhina, told Trend Sept. 10.

She said that another important condition is the work with toxic assets, which should become a priority for banks, their clients and for the government, since a significant portion of problem loans in the International Bank of Azerbaijan was repaid by the government.

“It is necessary to continue structural reforms, adopting new laws and regulations to bring the legal framework in line with international standards and introduce modern regulatory and supervisory practices, improve the practice of banks’ work, as well as strengthen the powers and increase efficiency of the financial regulator,” she said. “This is necessary for the increase in the capitalization and stability of the banking sector, strengthening of the financial security system and increase of the investors’ confidence.”

In general, Azerbaijan’s financial sector is gradually stabilizing, but it still has a number of structural problems that hamper the attraction of investors, she noted.

“These problems reduce investor confidence, prevent banks from building up their loan portfolio and reducing risks,” she added. “This is while the sector still has a relatively high level of toxic assets, as well as large amounts of foreign currency liabilities. Some banks are in the process of further capitalization, others need to complete the formation of reserves on problem loans and reach a breakeven level. The current level of capitalization of the banking sector is insufficient for the rapid building up of loans without increasing risks and debts, and the entry of new investors into the market is constrained by a number of factors.”

The expert said that the growth of the banking sector also depends on the prospects for economic growth, and especially the growth of small and medium-sized enterprises.

“Therefore, reforms in business sphere, diversification of the economy and exports, attracting foreign investments positively affect the dynamics of growth in bank lending as well, which is necessary to increase the profitability and capitalization of banks,” Prigozhina noted.

Presently, 30 banks operate in Azerbaijan.

---

Follow the author on Twitter: @Anvar_Mammadov

Tags:
Latest

Latest