Expert: Negative Outlook for Banking System to Affect Activities Dependent on Foreign Banks

The change in outlook for the Azerbaijani banking system from "stable" to "negative" by the international rating agency Moody's may make it difficult for the bank to achieve credit facilities abroad. Then it will affect the situation in the banking sector. So say experts, who believe that their forecasts for the banking system of Azerbaijan will be reconsidered also by other rating agencies.

The expert of the Public Association Assistance to Economic Initiatives Samir Aliyev told Turan, that Moody's decision was not a surprise, as since the beginning of the year, the international rating agencies noted the likelihood of that for individual core banks. The reason for this was the decline in oil revenues, deterioration of bank assets, bank failure and deterioration of their foreign exchange exposure.

The expert noted that downgrade of credit rating for individual banks might follow further. This in turn will affect the cost of resources involved from abroad to the credit market. Expectations of lower credit resources may not come true.

As of May 1 of this year Azerbaijani banks attracted from abroad syndicated and commercial loans totaling the equivalent of 7.1 billion manats.

Recall that the outlook of Moody's is for the coming year or 1.5 years in the expectation that by the end of this year, the share of problem loans in the total loan portfolio will increase from 11.4% in 2014, at least to 15% by the end of this year.

The agency experts believe that due to the revaluation of assets in foreign currency following the devaluation, the capital adequacy of banks in the country may be reduced by 2% (by March 31, the Central Bank estimated the capital adequacy as 17.3% with a minimum requirement of 12%). -----08B