BAKU, Azerbaijan, Jan. 2
By Sadraddin Aghjayev - Trend:
Trend presents a review of the most important events in the Azerbaijani financial sector for 2021.
Despite the great deterioration of the situation in the world, the balance of payments of Azerbaijan kept equilibrium in 2021.
Capital adequacy, which greatly exceeded the regulatory requirements of the banking sector in early 2021 was sufficient to cover losses from insolvent creditors.
So, local banks increased the share capital for a total of 116.7 million manat ($68.6 million) by December 2020.
The liquid assets of the banking sector amounted to nine billion manat ($5.3 billion) in early 2021 while the urgent liquidity ratio in the banking system was 59 percent, which exceeds the standard of 30 percent by twofold.
Azerbaijan was able to maintain macroeconomic stability, including balance in the foreign exchange market. The dollarization rate is being decreased.
Moreover, the upward trend in the world oil prices has a positive effect on the stability of the foreign exchange market. The balance of payments and expectations are being improved.
The head of the CBA stated that Azerbaijan has enough resources to maintain the balance of the foreign exchange market and the current macroeconomic stability.
The policy of monetary and financial stability for 2021 was created amid great uncertainty of economic activity in the world.
The risks are mainly related to the epidemiological situation. They retain the potential to influence the external and internal atmosphere.
On the other hand, the financial sector faces great challenges due to the adaptation of the Azerbaijani economy to the low oil revenues in the long term, the large-scale restoration work in the Azerbaijani lands liberated from the Armenian occupation, as well as the rapid implementation of a new development strategy aimed at doubling the country's GDP during the next 10 years.
In this context, maintaining the stability of the macroeconomic and financial sector in 2021 has become the basis of macroeconomic and macroprudential policy.
The CBA supported the restoration of the economic growth by ensuring macroeconomic and financial stability.
Moreover, the monetary policy continued to play an important role in ensuring the necessary conditions for sustainable economic growth, focusing on price stability in 2021 and further years.
The efforts were made to increase the stability of the financial sector, develop financial intermediation and financial markets.
Chairman of the Central Bank of Azerbaijan Elman Rustamov stressed as of 2020 that the country's financial sector is more stable than predicted.
Securities Market
The Central Bank of Azerbaijan (CBA) is considering the issue of more effective improvement of legislation in the field of the securities market.
The main goal of the CBA is to create conditions for Azerbaijani banks to become players in the capital market without intermediary services because banks are active participants in the securities market.
The development of the corporate securities market is of particular priority and a lot of work is being conducted in this spheres.
The full transparency of investment companies that are listed on the stock exchange is required to achieve these goals.
Moreover, the project for the development of the capital market envisages four main strategic goals, namely, creation of an innovative legal framework; the modern market infrastructure, support for the market and improvement of the regulatory framework.
The result of the set goals will be the achieved improvement of the legislation on the securities market, REPO and the derivatives market. The relations with external depositories and an upgraded operating system will be created.
The CBA is carrying out the relevant work in all these spheres and positive results have already been achieved in several spheres.
Moreover, the CBA continues to carry out the state registration of securities and the state register of issue and prospectus of securities within the regulation and control in the field of the capital market.
As the requirements for registration of securities cover various legislative acts, it is often observed that documents which are submitted by issuers to the CBA for the purpose of state registration of shares and corporate bonds are not drawn up in full compliance with the requirements of the legislation.
This delays the registration process during consideration of applications and decreases the operational flexibility of issuers wishing to receive financing from the capital market.
In this regard, the CBA has prepared the instructions for issuers. The procedures for issuing shares and bonds were set out in a single document. The documents necessary for state registration and withdrawal of securities from circulation, as well as the requirements established upon the law during their preparation were described in the instructions.
Insurance sector
A single mobile application for various types of insurance will be developed in Azerbaijan.
With the help of this application, it will be possible to purchase and renew insurance services.
Moreover, the CBA will be able to track complaints and insured cases of citizens, as well as appoint independent experts in insurance companies. Users of the applications will be able to review the history of insured cases and track the process of resolving the issue.
All independent experts will be appointed randomly and will be included in the CBA register.
The Central Bank of Azerbaijan, which is the regulator of the Azerbaijani insurance market, continues to effectively contribute to the development of the insurance sector.
An agreement was signed between the CBA and the World Bank to receive technical support in connection with the plans to regulate insurance.
The CBA, if necessary, will expand cooperation with other international institutions for the more transparent, efficient and expanded coverage of the insurance sector.
Moreover, mass events and projects related to the communication strategy on enlightenment in the field of insurance were launched in Azerbaijan.
Baku and Moscow have established cooperation in the information exchange, preparation of legislative and regulatory legal acts which are applied in the field of insurance, financial and credit operations and taxation, training of professional personnel, exchange of educational programs and methodological materials, as well as the process of organizing the business meetings, conferences and seminars related to the insurance business.
The CBA has established cooperation with international structures and regulatory bodies of other countries in relevant spheres to develop the insurance sector.
Currently, the CBA and the World Bank, the supervisory and regulatory structures of the leading member-states of the International Association of Insurance Supervisors, the Turkish Insurance Institute exchange technical assistance and mutual experience in the field of risk control in the insurance sector, expansion of human resources and protection of the rights of insurance consumers.
A memorandum of cooperation was signed between the CBA and the Turkish Agency for Regulation and Supervision of Insurance and Special Payments in 2021, which is the supervisory and regulatory structure of this country in the field of insurance.
This document determines the spheres of cooperation between the two structures in the field of regulation and control in the insurance sector, consumer protection in the insurance market and the development of human resources.
CASHLESS PAYMENTS
The Central Bank of Azerbaijan (CBA) is taking measures to ensure a higher level of development of non-cash payments. The CBA has a national payment strategy for 2022-2024. This document contains all measures for the development of non-cash payments in the country.
The CBA will take various measures to achieve a higher level of development of non-cash payments, to ensure the inclusiveness and accessibility.
Non-cash payments in Azerbaijan increased by more than eight percent from January through October 2021. Fast-paced digital technology has proven to be effective during the COVID-19 pandemic. During this period, banking grew by 23 percent and mobile banking - by 30 percent. E-commerce also grew by 17 percent during 2020.
The new stage of digitalization has increased financial resources. Fintech companies’ activity has become more transparent.
The CBA has implemented a number of programs to carry out non-cash payments of citizens easily.
Digitalization continues to be a trend today.
Domestic payments increased by 70 percent. E-commerce grew by 64 percent, or by 5.5 billion manat ($3.2 billion). This strategy for the development of non-cash payments will continue until 2026. The new strategic approach will create an additional incentive for the development of non-cash payments.
According to the forecasts of the Azerbaijan Banks Association, the share of non-cash payments in the total turnover of the country until 2025 will reach 25 percent.
Along with the CBA, the association implements global projects to create the cashless infrastructure of banking structures, as well as other financial institutions.
The created ecosystem of Azerbaijan is dynamically developing, and the program for 2018-2020 has been successfully implemented. The new packages of legal acts, technologies and innovations in the financial sector are being created.
The turnover increased from 2 billion manat ($1.2 billion) to 10 billion manat ($5.9 billion) due to an increase in the use of POS terminals by five times while the share of e-commerce increased from 15 percent to 30 percent.
This twofold increase means a 10-fold increase in e-commerce over the past four years. When the COVID-19 pandemic began, contactless payments have become preferable for most users.
The increase in the number of payment cards had a positive effect on the volumes of non-cash payments.
Thus, the volume of non-cash transactions in the country increased by 67 percent compared to the nine months of 2020.
The volume of non-cash payments via cards reached 7.2 billion manat ($4.2 billion) from January through September 2021. Around 3.9 billion manat ($2.3 billion) accounts for the non-cash payments in e-commerce.
The non-cash payments worth 2.8 billion manat ($1.6 billion) were carried out through POS-terminals while payments worth 455 million manat ($267 million) were carried out through ATMs.
MOBILE APPLICATIONS OF AZERBAIJAN BANKS
The creation of convenient and secure mobile banking (mobile applications of banks) is one of the priority spheres for the Azerbaijani banks.
The local banks have begun to create a convenient platform over the past few years that can meet the functional needs of customers.
According to the Russian experts, the development of chatbots and voice assistants will gain momentum along with the development of technologies while voice user interfaces are natural for users as it is easier for them to say than to type something.
The chatbots and voice assistants give an answer instantly when it is required and solve the client's problem if the request was correctly recognized.
As part of the development strategy of VTB Bank Azerbaijan, by the end of 2022, it is planned to increase the share of online cash loans for individuals to 85 percent, and credit cards to 90 percent of the total portfolio.
VTB Bank Azerbaijan launched the digital bank DIRECT based on Facebook Messenger in 2019, which is available for both individuals and legal entities (Business DIRECT) and in August 2020 DIRECT chat-bank for individuals became available on the basis of WhatsApp. With the help of the service, customers can pay bills, transfer money from a VTB card to a card of another bank within the country, apply for a loan, deposit or issue a card.
There is an opportunity to receive account statements, transfer money from card to card, top up accounts (including the opportunity to generate QR to top up the balance), apply for a loan online, pay for utilities, use the mobile communication services and more than 160 types of services through DIRECT.
Azerbaijan’s Unibank will expand online services. Unibank actively continues to work on improving its mobile applications, as well as digitalizing banking products.
The bank plans to expand its portfolio of instruments in applications with various insurance services, as well as expand remote (online) banking services, and introduce other innovative solutions.
Many Azerbaijani banks are working to improve their mobile applications, expand online services, mobile services and bank products, as well as develop cashless payments and expand their contribution to the country's e-commerce.
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