Banking Sector - Shudder from Expectations

Baku / 17.04.17 / Turan: The banking system of Azerbaijan continues to shake: branches of credit organizations are being closed, and the management of these structures is changing in full or partially. All these "upgrades" and "optimizations" are accompanied by a reduction in staff. According to media leaks, serious shocks have occurred at Access Bank with 100% foreign capital, owned by six international financial institutions.

As a result of liquidation of 13 regional and city branches of the bank, 700 employees have been sacked, which makes up almost 40% of the entire staff of the organization.

Basically, they are operators and credit specialists. But that is not all. Salaries of other employees are reduced by 20-30%. Further dismissals and cuts in salaries are not ruled out, which may force some experienced employees to leave ‘on their own’. All this points to serious problems experienced by Access Bank.

By the way, a similar step was recently taken by VTB Bank (Azerbaijan), which liquidated the activity of six of its branches in Baku.

Meanwhile, the liquidation process of United Credit Bank, which was declared bankrupt by the decision of Baku Administrative Economic Court No. 1 last year, is continuing. The entire staff of the bank has been fired.

Recall that over the past couple of years in Azerbaijan, more than 10 large and small banks were closed, as a result of which 4,200 financiers, economists, managers and IT specialists were left without jobs. Judging by the difficult financial situation of banks, mass sackings in this sphere will continue, as the CBA and the Financial Markets Supervisory Authority of Azerbaijan (FIMSA) have hinted at. Besides that, the IMF strongly recommends that our government improve this field with ‘surgical’ methods.

The situation in the banking system is clearly illustrated by the following figure: the total losses of the country's banking sector as of January 1, 2017 amounted to 1 billion 667.6 million manat. However, according to a number of independent experts, this figure is far from final, as many banks usually embellish their real indicators and distort financial reports. Consequently, the volume of losses of banks may be greater.

As the expert of the Center for Assistance to Economic Initiatives Samir Aliyev points out, a powerful outflow of capital, combined with a solid volume of outstanding loans, has actually paralyzed the activities of banks. Serious problems include a lack of liquidity, a reduction in corporate lending growth and a drop in retail lending, deterioration in the loan and deposit portfolios, and a growing share of problem loans. In this situation, the way out is the restructuring of the banking sector and the revocation of licenses from organizations with large financial problems. In the process of clearing the banking system the CBA should support ‘good’ banks by refinancing loans.

According to the expert, in order to support the country's banking sector, the government should seriously take on major non-payers and force them to return the loans they have taken.

It is also important to create a state commission consisting of professionals who would monitor all banks and identify the cases described above. The task is to remove unscrupulous players from the market, but it is possible that other processes will occur under the guise of accomplishing this task. In the next three years, it is unlikely that something will significantly change in this area, because the process of sanitation needs to be completed first. -0-