Does Azerbaijan need new bank support mechanism?
More than 10 banks have closed in Azerbaijan over the past two years.
Earlier, the Financial Market Supervisory Authority (FIMSA) stressed that preventive measures were not carried out due to a limited regulatory framework and the banks were not recovered, which resulted to their closure.
Of course, FIMSA carries out various measures for the recovery of banks, amends the legislation to expand its capabilities in this direction. According to the FIMSA experts, over the past period, individual plans were prepared for each bank to prevent the worsening of the situation. However, it was impossible to fully protect the financial sector and banks. Thus, another bank - DemirBank left the market last month.
Russia's experience is noteworthy in this regard. The Banking Sector Consolidation Fund has been operating there since 2017. Being on the one hand an investment fund, this structure is engaged in preventing bankruptcy of banks. The fund manager can manage the mutual investment funds, dealer activity and securities management activity.
"In case of establishing the Banking Sector Consolidation Fund in Azerbaijan, this structure could become an effective tool for supporting and improving the banks," Jalal Naghiyev, advisor to the chairman of the Nikoil Bank's board, told Trend.
Azerbaijan Investment Company, operating in the country, which buys a share in the companies, helps them to improve the level of corporate governance, draw up a business plan, and then withdraws from the company's capital.
Naghiyev said that by analogy with the investment company, the Banking Sector Consolidation Fund may form new management in banks, help create a new business plan and develop the company, rather than resell the collateral property of banks.
"On the one hand, this will help to avoid 'idle time' in enterprises passing to the balance of banks because of the debts of owners, maintain economic development and preserve jobs," he said. "On the other hand, banks are freed from bad assets because the Banking Sector Consolidation Fund buys them and the bank gets liquidity."
The expert added that representatives of the banking sector and the government represented by FIMSA can manage the Banking Sector Consolidation Fund.
"The Banking Sector Consolidation Fund's initial capital could be formed through the banks' contributions, while the amount of contributions would be set depending on the volume of assets," he said.
"At the same time, the Banking Sector Consolidation Fund could invest 20 percent of its assets in high-risk assets, while 80 percent in low-risk assets," the expert added.
North-South Transport Corridor is shared priority for India and Azerbaijan, says Ambassador
Developing the International North-South Transport Corridor (INSTC) has been a shared priority for both India and Azerbaijan, Indian Ambassador Sanjay Rana told Trend in an interview.
The ambassador said the Corridor will address the lack of physical connectivity between the respective regions.
"For India the INSTC will provide the shortest and cheapest route to reach Azerbaijan, Russia, Turkey and CIS countries. India has been working with Iran to develop the Chabahar port as a modern port, which started working since November 2017. Azerbaijan has launched the new Baku-Tbilisi-Kars (BTK) railway, which is a great development as it multiplies the options for transportation," the ambassador said.
He stressed that these developments would have a multiplier impact on regional trade in coming years.
"Already the previous predications regarding the traffic volumes look modest and once the missing railway link in Iran is functional, the growth of cargo flowing between our regions would be well above the expectations," the ambassador said.
The International North-South Transport Corridor is meant to connect Northern Europe with Southeast Asia. It will serve as a link connecting the railways of Azerbaijan, Iran and Russia. At the initial stage, it is planned to transport 5 million tons of cargo per year through the corridor and over 10 million tons of cargo in the future.