Shareholders Who Have Received Income Over 15 Years Should Invest in Capitalization of Their Banks - Rufat Aslanli

The decline in oil prices and in the country's income, and devaluation processes have created a new macroeconomic situation, the head of the Board of Directors of the Financial Markets Supervision House, Rufat Aslanli said during the Banking Forum in Baku.

Aslanli noted that the devaluation was the cause of the high level of dollarization, and for the first time, the volume of dollar deposits was 83%, and is now established at the level of 80% of all deposits.

“Because of the devaluation, the servicing of loans in foreign currencies, which make up half of the bank loans of the population and businesses, has risen in price twofold. As a result, the volume of non-business assets in banks increased. In the balance sheets of banks a large deficit formed and currency devaluation caused the transformation of the currency shortage into bank losses,” he said.

He stated that the strategic aim is to develop the banking sector with sufficient capital, liquidity, high resistance to external and internal risks, and acceptable conditions, with the provision of services to all stakeholders.

Aslanli noted that due to the analysis of the banking sector an action plan has been prepared, and in particular this applies to excluding problematic institutions from the system.

“In this sense, with respect to systemically important banks, we have applied the principle of small losses. That is, comparing the costs for rehabilitation or removal from the system, we have used an option, which requires low costs, which is what happened with Bank Standard, which served about 10,000 individuals and almost the same number of legal entities,” said Aslanli .

In addition, the head of FMSH noted that at the present time, intensive negotiations are conducted with the owners of the shares of banks that are not systemically important, but have problems with the availability of capital.

“Our only condition is that the shareholders, who have owned businesses bringing them income for 10-15 years, should further capitalize this business at such a difficult time. Currently, in several banks the capitalization process is completed, and in others a commitment has been given to complete this process by the end of the year,” Aslanli said.     -----71D