Trio of institutional development of Azerbaijani banking system

Trio of institutional development of Azerbaijani banking system

Azerbaijan, Baku, Oct. 24 / Trend /

Trend Agency analytic centre head Ellada Khankishiyeva

The main trend in the institutional development of the Azerbaijani banking system in the near future is functioning of the universal banks, offering an ever-expanding range of products and services.

Thus, the Central Bank of Azerbaijan (CBA) will focus on the institutional development of the banking sector in 2012, Director General of the CBA Rashad Orujov told journalists.

Orujov identified three main directions of institutional development for the next year - improving corporate governance, risk management, introducing information technologies in banks.

A characteristic feature of the 2006-2011 institutional development of the banking sector was the presence of a sustained trend to change in ownership structure: in the specified period the number of banks with foreign capital has increased from 20 to 22, including from 5 to 7 banks -with foreign capital of more than 50 percent. As a result, the Azerbaijani banking sector formed a competitive environment for banking business.

Foreign banks by opening its offices brought new technologies, new products, new ideas and new professionals needed in the Azerbaijani market.

There was privatized one of the two state banks in Azerbaijan - Capital Bank, the International Bank is the next, as a result of which Azerbaijan's banking market will be fully provided for the free movement of international capital.

The institutional development of the Azerbaijani banking sector was also characterized by optimization of the branch network of banks, closure of unprofitable branches and transition to modern management techniques. So, the number of branches of Azerbaijani banks increased from 420 to 650 units from 2006 to 2011. A structure of banks operating abroad increased from 4 to 8 units.

The banking services in retail and corporate segments of the banking market qualitatively improved, which is reflected in the wider range of banking services, improved quality and introduction of modern strategies on the banking services sales.

The application of information technology in the modern banking system is one of the main elements of the development strategy, determining the quality of bank services, level of management and reliability of the financial institutions.

Thus, a trio of institutional development of the Azerbaijani banking sector defined by the CBA - improving corporate governance, risk management, introduction of information technology in banks, strengthening the banks' role in Azerbaijan's socio-economic development, interplay of these major components, their correspondence with each other will determine the positive development trend and stability of banks.

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