Is the liquidation of Muganbank a political decision or an economic one?

Baku/19.10.23/Turan: The Central Bank of Azerbaijan (CBA) has revoked the license of Muganbank, as confirmed by the regulatory authority. All managerial responsibilities of Muganbank, including those of its General Shareholders' Meeting, have been transferred to an interim administrator.

Muganbank's share in the country's banking assets stands at 1.4%, its portion in the loan portfolio at 2%, and its contribution to the sector's liabilities at 1.3%. The cancellation of its license, as stated in the report, does not pose a threat to the financial stability or the overall well-being of the banking sector.

Local media has recently spotlighted banks associated with Ramiz Mehdiyev, the former head of the presidential administration, and some reports suggest that the decision regarding Muganbank may be linked to these circumstances. According to local sources, OJSC Muganbank was primarily owned by family members of the former head of the presidential administration, including Elmir Magbet oglu Mehdiyev (67.74%), Vafa Ahmed gyzy Veliev (10.65%), and Farida Jahandar kyzy Mehdiyev (10.03%). However, most of the bank's shares eventually shifted to Samir and Munir Valiev, sons of the former deputy and University Odlar Yurdu rector, Ahmed Veliyev. Veliyev's share in the bank increased from 10.65% to 88.33%, while Mehdiyev's share decreased from 89.35% to 11.67%.

Economist Elchin Rashidov has commented on these developments, characterizing the CBA's statement about Muganbank's license revocation not posing a threat to financial stability as a form of "PR." Rashidov asserted that while Muganbank may not have been a systemically important bank, its liquidation does impact stability. He pointed out that the ongoing trend of bank liquidations reflects the troubling state of Azerbaijan's banking sector.

Rashidov further opined that the country's banking sector was originally more of an "official sector" than a genuine banking sector. Accessing this sphere typically required official connections, and the primary clients of these banks were often the same officials whose sectors of the economy they protected, along with their inner circles.