Two more banks liquidated in Azerbaijan (UPDATE)

Two more banks liquidated in Azerbaijan (UPDATE)

Details added (first version posted on 13:26)

BAKU, Azerbaijan, May 12

By Eldar Janashvili - Trend:

The licenses of AG Bank OJSC and NBC Bank OJSC have been canceled since May 12, 2020 in accordance with the articles 16.1.6, 16.1.7 and 16.1.9 of the Azerbaijani law on Banks, Trend reports referring to the Central Bank of Azerbaijan (CBA).

Both banks filed for bankruptcy.

The assessments made by the CBA interim administrator at NBC Bank once again confirmed the unsatisfactory financial situation of this bank, the complete loss of capital and big problems with liquidity. It was also revealed that the bank was unable to fulfill its obligations on deposits and liquidity.

As a result of the risky and non-prudent credit policy pursued by NBC Bank except for mortgage loans issued through the Azerbaijan Mortgage and Credit Guarantee Fund, as of April 30, 2020, more than half (54 percent) of the bank’s loan portfolio is inoperative (73 million manat that’s $42 million).

After adjustments in the target reserves, the bank’s total capital amounted to negative 24 million manat ($14 million). In total, additional funds in the amount of 74 million manat ($43 million) are required to restore the position of capital. Moreover, the interim administrator revealed that the prudential and statistics reporting provided by the bank was constantly distorted.

The inspections conducted by the interim administrator at AG Bank OJSC, confirmed the unsatisfactory financial position of the bank, complete loss of its capital position. As of April 30, 2020, 51 percent the loan portfolio of the bank is inoperative. After the adjustments in target reserves, the total capital of the bank amounted to negative 167 million manat ($98 million).

To restore the position of capital, additional funds in the amount of 212 million manat ($124 million) were required. Taking into account the abovementioned statement, due to the complete loss of capital, inability to repay liabilities to creditors, as well as the fact that the banks do not carry out the current activity in a reliable and a prudential manner, the CBA board revoked the licenses of NBC Bank and AG Bank on May 12, 2020, and both banks filed a bankruptcy lawsuit.

The main goal of the steps taken by the government and the CBA is to improve the banking system as a whole and protect the interests of the people, especially their savings in the banks, prevent the threat of loss of their deposits and create the possibility of their free use.

The total amount of the deposits of the population in four liquidated banks is 686 million manat ($403 million), owned by 215,000 depositors. More than 99 percent of the total deposit portfolio in these banks accounted for the deposits and they are fully compensated.

While fulfilling the banks’ obligations, the liquidator will primarily begin to return the deposits. The funds from the sale of assets and sale of property will be used to fulfill other obligations of these banks (to business entities, as well as individuals not covered by the deposit insurance scheme) in the manner prescribed by the law.

In accordance with Articles 57.1 and 57.3 of the Azerbaijani law on Banks, interim administrators were appointed at AtaBank OJSC, AG Bank OJSC, NBC Bank OJSC and Amrahbank OJSC. All the powers of managing these banks, including the powers of the general meeting of the banks’ shareholders, have been transferred to these administrators.

The licenses issued by Amrahbank and AtaBank for banking activity were cancelled upon the decision of the CBA’s Board dated April 28, 2020.

Over the period since the moment of making these decisions, the CBA’s interim administrators in AG Bank OJSC and NBC Bank OJSC continued to implement the measures envisaged by the legislation and conducted the relevant assessments.

At the same time, in accordance with the requirements of the legislation, on the basis of the CBA’s statement upon a decision of the Baku Court of Appeal as of April 30, AtaBank OJSC and Amrahbank OJSC were declared bankrupt. The Azerbaijan Deposit Insurance Fund was chosen as the liquidator of these banks.

The process of transferring the banks to the liquidator has been launched since May 1 and presently, the process is under completion.

In accordance with the decision of the Trustee Board of the Deposit Insurance Fund, Kapital Bank OJSC was chosen as an agent bank for reimbursing the deposits in AtaBank and Amrahbank.

The deposits will be fully reimbursed in accordance with the Azerbaijani law on Full deposit insurance.

All liquidated banks are members of the Deposit Insurance Fund and compensations will be paid out of the funds received from the sale of banks’ assets closed by the Fund and the calendar fee paid by the banks operating without attracting any state funds.

To ensure transparency of the decisions taken by the CBA to improve the banking sector, large-scale communication activities are being carried out. The public is being informed and this process will continue.

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