Banking debts must obtain profile collector

The current crisis is considered "financial", that is the crisis in the system of money circulation. Its main component is a "lack of liquidity amongst banks. Simply to say, there is no money. And where did they go?  
First of all, this was caused by the fact that the banks issued too many bad hopeless loans - those that the debtors can not repay. Indeed, over recent years, the loans have been very accessible.
In the global financial system, "Credit for 1 day! Credit for 1 minute!" became the motto before the crisis. But now the lenders have begun correcting the mess that they themselves and welded shut, writing off billions of hopeless loans. Effective work with problem debt is the key to improving the financial situation at these or other banks.

As Azerbaijan was less affected by global financial crisis, one managed to maintain the level of bad assets in the country at a sufficiently low level, IFC project manager Garth Bedford said. According to Bedford, today, the main problem of the banking sector is the inefficient management of bad assets. IFC intends to support the Azerbaijani banks in the implementation of best practices in solving problems with bad loans.

According to him, today, there are three basic ways to remove bad assets from the balance sheet - a private placement, the method of auction and a limited auction. As securitization in Azerbaijan is a new concept, the removal of bad assets through placing the securities has not been applied yet.

The most commonly used method in Azerbaijan is a method of the private placement, which is fast, but not always effective, because the banks do not always sell assets at sufficiently high prices.

According to the expert of IFC, no company is able to provide such services for buying and selling bad assets.

In world practice, collection agencies are established to resolve such problems - independent organizations professionally involved in repayment of overdue debts. Signing an agreement with a creditor, such organizations may collect information about the debtor, in particular, about their welfare and whereabouts, including from official sources, contact them by phone, email, meet personally. Collector is entitled to formulate and implement schemes in favor of the creditor and the agreement on the settlement, debt restructuring.

Establishing such agencies became relevant for Azerbaijan. In Russia, Kazakhstan and Ukraine, the collection agencies have been dealing with the hopeless loans since 2008. Moreover, these organizations specialize in working with problematic debts of not only banks, but also insurance companies, credit unions, municipal enterprises, small and medium businesses and have the financial capacity to purchase debt portfolios of banks with large amounts.

Control is toughened

Today through preventive measures, analysis of banks' assets, stress-tests, the Central Bank of Azerbaijan keeps the situation under control. In 2010, the Central Bank of Azerbaijan (CBA) would further strengthen its activity in reducing problem assets, including overdue loans, CBA Managing Board First Deputy Chairman Alim Guliyev said. "The CBA has undertaken actions to improve the quality of problem assets, and the bank's preventive measures were aimed at suspending credit growth, assets and improve risk management system," Guliyev said. The CBA also conducts analysis of problem assets. "The priority of the CBA actions today is to preserve the country's financial stability in 2010, which requires strengthening actions for solving the problem with problem assets," Guliyev said.

In connection with the crisis situation, Azerbaijani banks have losses that are now estimated by banks, and to restore them, each bank has formed its own program of capitalization. The shareholders of banks are in charge of increasing the capital in view of future risks of loss. In addition, depending on the structure of loan portfolio, each of them has a different amount of losses, and the banks create reserves adequate to deteriorated credit portfolios.

Based on standard credit, the reservation makes up two percent of their amount, but depending on the degree of risk, the reserves may reach even 100 percent. Today, for non-standard loans, the banks have created reserves up to 80 percent, and reservation for overdue loans is nearly 70 percent, that is, even in the worst situation, Azerbaijani banks retain the requirement for capital adequacy, Guliyev said.

Although the norm of capital adequacy set by the Central Bank is 12 percent, and by the principles of Basel - eight percent, the country's banking sector has reached it to 19 percent.
At present, the share of overdue loans of the banking sector in the country, taking into account the compensation of the created reserves, varies in the range of 3.6-4 percent, and excluding reserves, the figure reaches 8-9 percent. In world practice, if the share of bad loans exceeds 10 percent, it is considered risky.

The deterioration of bank loan is under control, CBA President Elman Rustamov said.

"The deterioration of bank loan portfolios is an expected result on the backdrop of the global financial crisis, as there are some difficulties in the business, particularly in the area of trade," he said. "However, stress-tests held in banks show that the situation will remain under control, and we will preserve the stability of the banking sector in the country in 2010."

He said this is confirmed by the high level of capitalization and liquidity of the banking sector.

As part of CBA's anti-crisis measures, the country's banking sector was provided with direct and indirect liquidity worth about $2billion in 2009. The banking system assets increased by 13.5 percent to $ 11.66517 billion manats in 2009.


The International auditing company PriceWaterhouseCoopers (PWC) recommended the Azerbaijani banks to conduct a detailed analysis of overdue loans in its payments balance, PWC Representative Vugar Aliyev said at the workshop "Sale of problematic assets to encourage the issuance of new loans" held by the IFC in Central Bank of Azerbaijan (CBA).

"The CBA has applied international financial reporting standards, in connection with which roused a need to indicate the problematic loan in reporting in details," Aliyev said. "Detailed analysis of these loans allows to calculate the probability of their return in time."
According to him, it will help the bank in a timely manner, if necessary, to sell their troubled assets. "The longer the asset will remain in balance, the lower the price of its sale will be, so the banks need time to do the calculations for each overdue loan," he said.

If the loan exceeds the limit by 60 days or shorter period, it could be sold  for 55 percent of the cost, and if for 150 days and above - then below 23 percent, he added.

"The bank must establish the necessary e-data base of credit operations for a timely response," he added.

Subscribe to Trend in Google News! Subscribe
Georgia reports 9,696 coronavirus cases, 5,408 recoveries, 28 deaths
Georgia reports 9,696 coronavirus cases, 5,408 recoveries, 28 deaths
Georgia’s coal imports from Kazakhstan triple
Georgia’s coal imports from Kazakhstan triple
Presidential administration of Georgia submits candidates for election commission to parliament
Presidential administration of Georgia submits candidates for election commission to parliament
Loading Bars
Weekly review of main events in Azerbaijan’s ICT sector
Iran discloses volume of electricity generated by Gilan Combined Cycle Power Plant
Weekly review of Azerbaijani precious metals market
Azerbaijan commissions new military facilities (PHOTO/VIDEO)
Tickets are available for two bus trips to Azerbaijan’s liberated Aghdam city
Tank and artillery shells found in Azerbaijan’s Samur-Absheron canal (PHOTO/VIDEO)
Bosphorus Strait temporarily closed in both directions
One person killed, two hurt in Budapest hospital fire -police
Intercity bus plunges into abyss in Turkey’s Istanbul city
An extra meal and snacks twice a day was all it took to improve falling nutrition levels in this tribal district
Almost all Kazakhstan remains in COVID-19 ‘red zone’
Nadal beats Mannarino in battle of left-handers to reach last eight
Azerbaijan holds training exercises in commando military unit (VIDEO)
Georgia reports 9,696 coronavirus cases, 5,408 recoveries, 28 deaths
Training session for reservists continues in Azerbaijan (VIDEO)
Iranian currency rates for January 23
Arab League delays annual summit as COVID-19 bites again
Turkey plans to hold next meeting within "3 + 3" format - Erdogan
New Zealand PM Jacinda Ardern cancels her wedding amid new Omicron restrictions
S.Korea says Iran to regain UN vote after delinquent dues paid with frozen funds
Electricity generation of Iran’s Bandar Abbas TPP surges
Uz-Kor Gas Chemical opens tender for purchase spare parts for analyzers and gas detectors
SCO to consider draft program proposed by Uzbekistan
Iran-Russia annual trade to increase to $10 b from $4 b
Kazakhstan confirms 14,012 new COVID-19 cases in 24 hr
French EU lawmaker Collard joins far-right presidential candidate Zemmour
Pfizer, Moderna boosters up to 90% effective against Omicron: CDC
Turkey’s Turkovac to be tested as booster for Pfizer-BioNTech jab
Guinea junta establishes council to lead transition to elections
Visit aims to rebuild trust with Lebanon: Kuwait foreign minister
UK records 76,807 new COVID cases, 297 deaths
EU Commissioner for Energy to visit Azerbaijan
Pfizer CEO sees annual COVID vaccine rather than frequent boosters
US Dept of State plans to begin evacuation of US embassy staff from Kiev on Jan 24
Blast hits western Afghan city of Herat, killing at least six
Georgia’s coal imports from Kazakhstan triple
Presidential administration of Georgia submits candidates for election commission to parliament
Remittances to Uzbekistan in 2021 totaled USD 8 bln
Iran seeks long-term, all-out ties with Turkey - Raeisi
Massive California wildfire triggers evacuations, closes highway
Italy's Berlusconi decides against running for president
Azerbaijan, Iran talk military cooperation
Azerbaijani chess player continues to lead in Tata Steel Masters tournament
Serviceman of Azerbaijan Army dies in non-combat conditions
Number of Turkish jobseekers in Uzbekistan revealed for 2021
UAE stops all private drone activities, light sports aircrafts
Airbus cancels $6bn contract with Qatar Airways
German conservatives elect right-winger Merz as new party leader
Non-hydro renewables overtake hydro for first time in Turkey
Record-breaking indicators in non-oil sector - what is secret to success of Azerbaijan's economic strategy?
Iran shares data on exports from Aras Free Trade Zone
Kazakhstan names damage caused to business as result of large-scale rallies
Georgia publishes COVID-19 data for January 22
Iran’s Bahar Azadi gold coin price dips
India now allows 6 people to register on one number for Covid vaccination
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 1,614 more COVID-19 cases, 610 recoveries
Azerbaijan changes rules for quarantine control of Covid-19
India's Karnataka approves design & launch of nano-satellite by govt school students at Rs 1.9 Cr
‘One Modi cannot change a country, need more icons like him’: Himanta Biswa Sarma
Seizing of illegally stored weapons from citizens continues in Kazakhstan - interior minister
Azerbaijani border serviceman commits suicide in military hospital
Iran unveils details of agricultural export
Kazakh Armed Forces performing tasks to ensure public order in regions with “red” level of terrorist threat
Tokyo hits record 10,000 COVID cases, Japan over 50,000 for first time
Number of COVID-19 infections in Russia surpasses 11 mln since pandemic began
Kazakhstan developing measures to reform Samruk-Kazyna Fund's activities
PMO records surge in load/unload operations at Iranian ports
S&P predicts gas production growth in Azerbaijan through 2025
Turkmen medical enterprise discloses production data
Azerbaijan to hold auction for Ferrum Kapital CJSC's bonds
Kazakh president talks need to continue work to reveal all circumstances of recent riots
Kazakh oil and gas company to purchase helium via tender
Iran reveals COVID-19 data for January 22
Oil price spikes likely in 2022 amid inventory tightness midyear
7 killed, 16 injured in massive fire in central Mumbai high-rise
Oil demand to be robust in coming years despite net-zero strategies
India reports 3,37,704 new Covid cases, 488 deaths in 24 hours
Number of COVID-19 infections in Russia surpasses 11 mln since pandemic began
OPEC+ focus to switch away from propping up prices
Iran shares data on buy/sell operations at its Mercantile Exchange
Most people feel I-T exemption limit could be raised from Rs 2.5 lakh: India's KPMG
Turkmenistan’s Balkandokma complex doubles cotton yarn sales
Uzbekistan reveals data on agricultural, forestry and fisheries production
Tax benefits to increase disposable income likely in India's Union Budget
Uzbekistan approves procedure for rational use of land resources
S&P discloses inflation forecast for Azerbaijan through 2025
S&P Global Ratings announces forecast for Azerbaijan's budget surplus
Magnitude 6.2 earthquake strikes Unalaska, Alaska
NIOC agrees with Russian companies to develop Iran's oil, gas fields
SOCAR dismisses information about purchasing bitumen plant in Armenia
Kazakh company eyes to import leather products from Uzbekistan
S&P comments on possible swap line between Central Banks of Azerbaijan and Turkey
Oil production in Azerbaijan to moderately rebound - S&P
Georgia discloses its main cement sources of import
Turkmenistan lays out plans for hydrogen energy development
US lawmakers seek litigation at WTO against India on wheat subsidy
Iran, Azerbaijan continue construction of Khudafarin and Giz Galasi hydro junctions (PHOTO)
Climate policy of Uzbekistan: Implementation of measures to prevent climate change and adaptation in most vulnerable sectors of economy
S&P Global Ratings approves Azerbaijan's credit rating at 'BB+/B'
All news