MOODY`S: AZERBAIJANI BANKS KEEN ON RISKS AND BYPASS CONCENTRATION LIMITS

    BAKU/20.08.10/TURAN: According to Moody"s Investor Service, the high level of credits to related persons in Azerbaijan"s banks could cause high concentration of credits, which is hardly manageable because of the conflict of interests. The agency said credits to related persons were 36% of the rated banks" aggregate portfolio in late 2009. So many credits to the `insiders` mean the banks are keen on risks, with low corporate governance standards and poor risk management. This makes the concentration limits indistinct to determine.
     The report"s author, Lev Dorf, believes the credit risk assessment standards have somehow been bypassed or the standards are not applied evenly and regularly.
     The appetite for risks especially increased in 2006-2008, when the private banks" loan portfolio rose by 500%. This caused decrease in the asset quality later.
     Tolerance to risks is observed now too. The ratio of the sum of the 20 largest credits to the basic capitals of the banks rated by Moody"s (except the International Bank of Azerbaijan (IBA) is 150%. The credits exceed the banks" capitals considerably. The situation is particularly horrible about IBA - the 20 largest credits exceed the basic capital more than 2.5 times.
     Moody"s rates five banks in Azerbaijan - IBA, Capital Bank, Bank Respublika, Tekhnika Bank, and Uni Bank.--10В--