Consolidation of banks in Azerbaijan questionable - expert

The capitalization of the banking sector in recent years is gaining momentum mainly due to the update by the Central Bank of the regulatory requirements for minimum capital of the banks.

This is evident from the statistics of the supervisory authority. So with the announcement and the entry into force of regulations on the minimum level of aggregate capital of AZN 10 million, the number of banks with capital above this mark grew from 8 to 37. By the time only 6 banks in the capital did not meet the requirements.

In August 2012 Central Bank once again updated the regulations to increase charter capital five times to 50 million manat, which should come into force in January this year. Apparently the supervisor was pushed to this decision by the lingering desire of the banks to capitalization. So in 2010, the increase in total capital amounted to only 8.5 %, while growth in 2007 was at 67 %. In 2011, the total capital of the banking sector went into negative. In 2012 and 2013 the growth of aggregate bank capital amounted to 36 and 33 percent, reaching 3.43 billion manat. However, in the end Central Bank maintained the financial stability by delaying the entry into force of the new regulatory requirements for the year.

Commenting for Turan the feasibility of this solution, an expert economist Samir Aliyev noted that today total capital of only about 25 of the 43 banks operating in Azerbaijan meets the regulatory requirements of 50 million manat. So Central Bank arranged the postponement, based on the situation, especially since the upgrade in the standard by CBA came from the desire to consolidate the banking community as much as possible. The supervisory authority does this solely in the evolutionary way. He confirmed the fact that up to now there are banks in Azerbaijan, the total capital which is not more than 5 million manat. Not unimportant is the fact that almost all the banks are somehow tied to certain officials and oligarchic groups, which casts doubt on the possibility of their consolidation.

According to experts, the total capital of about 10 banks will still be below 50 million manat by the end of the year. -15B -