When there is no transparency

Withdrawal of the license of the ten banks within several months raises a number of questions from the public. First question is how could they function for about 20 years or more, if they had no adequate to meet potential losses, and if they could not work in a prudential manner approved by the legislation? Secondly, why the banks return on deposits in foreign currency at the exchange rate of the Central Bank, but require the return of loans, including consumer, according to an arbitrary rate set by the leadership of private credit institutions themselves? What's going through commercial banks on the basis of two devaluations, the growth of foreign currency deposits and debts? Turan correspondent asked Akram Hasanov for clarification from the expert on banking issues and financial law. Judging by the dominant liquidation trends and the facts arising during it, the management and banking supervision is not effective, he said.

"Most of the activities of commercial banks do not have even a hint on transparency, and it is a point of intersection of all the problems of the financial and credit system. We regularly monitor their financial reports on the basis of which we make conclusions about the following candidates for elimination. The fact is that most organizations do not comply with the rules of transparency, and even today,  speaking about the liquidation of four banks in July, there is no public information on the amount of deposits in them, but different aggregate amounts  are called – from  110 to 140 million. Moreover, we cannot declare the exact amount of compensation to be paid by the appropriate line of the State Deposit Insurance Fund.  Hiding public reporting says about the problems, and therefore it is easy to calculate, which banks will be closed in the near future. The process of bank liquidation proceeds due to over-inflated market. So, withdrawal of  licenses  of troubled organizations will cotinue. Truth says that it is necessary to remove the causes of the disease, rather than its consequences, so as not to bring to a metastasis," the expert believes.

According to him, the cause of the problem assets growth is two-fold devaluation and overall economic uncertainty, but the risks have become a catalyst for strengthening the unbridled appetites and illegal activities of the leadership of  private banks. There are cases when the attracted deposits  are issued at low interest rates to  "their" clients and their businesses. These debts are now at the heart of some problem assets   of the  commercial banks to be liquidated. The problem  of debts in the credit portfolios  are loans issued to their own business, and   from the very outset d they did not even though to return them. All these years, the banks attracted deposits from the public, companies, business at low interest rates, while the rates of granted loans were very high.

"As a result,  the  House to control financial markets  called "an inability to work in the prudential manner." In  other words this means that credit institutions cannot fulfill the obligations to depositors in case of bad loans and its own funds. Is it bankruptcy? Yes, but, in fact, the failure is inability of managers, although  withdrawal of licenses will not be a disaster for them. As a result of liquidation of banks, taking deposits at interest rates exceeding   the insurance limit of the State Fund (ADIF), investors will suffer - the same Parabank raised funds at high interest rates that do not fall under the concept of an insured event. But on March 1, the maximum interest rate on insured deposits in foreign currency was only 3% - that is, deposits in foreign currency, placed in ADIF member banks at an interest rate higher than 3% per annum (which is up to 70% of total) are not considered insured, and the compensation for them will not be made. Now the foundation  had to do only one thing-  to appoint a competent financial and credit structure to compensate for the lost funds to the population, it will need to attract a loan from the Central Bank in the amount of at least 100 - 110 million manat," said the expert. --17D-