Weekly economic review (Nov. 21-25)
AmCham offers solution to stabilize Azerbaijani banking sector
American Chamber of Commerce in Azerbaijan (AmCham) has recommended to Azerbaijan’s banking sector to switch to the Basel II standards.
This is reflected in the AmCham White Paper publication named Observations and Recommendations for Improving Azerbaijan’s Business Climate, which was presented to the Administration of the President of Azerbaijan.
“Transition to Basel II standards will take more than three years, which is why now is the best time to create a roadmap and to start discussing the problems and possible risks in connection with this transition,” reads the document.
The AmCham members noted that Azerbaijani banks will see three main changes – new calculation of capital requirements, new standards in risk management and enhanced requirements to filing reports.
“The new standards require assigning of a separate rating to an issued loan and its risk assessment. Such approach needs complicated information infrastructure, assignment of a rating to stable and sustainable clients, as well as changes of the business processes with the related persons,” the document states.
The changes will also touch on other spheres, such as troubled loans’ management, creation of reserves and assessment of a client’s value, according to the document.
All these changes will touch not only risk management but also all of banks’ activities, according to the White Paper.
The chamber members believe introduction of Basel II principles will neutrally influence the capitalization of the banking sector.
Meanwhile, the new standards will help improve the banks’ stability, contract expenses and reduce the risk of the whole sector, providing the right tools for liquidity and capital management.
The White Paper reflects the collective opinion of the AmCham members on the changes which ensure stability of the business environment and the state.
AmCham has been working in Azerbaijan since 1996 and currently consists of 270 companies representing more than 80 percent of foreign investments in the country.