Can Financial Markets Supervision Authority Take Away Bank Assets?

The Financial Markets Supervisory Authority (FIMSA) has developed draft amendments to the legislation and introduced a new legal framework for discussions of the Parliamentary Committee on Economic Policy, Industry and Entrepreneurship.

The bill violates the Constitution of Azerbaijan, granting a body of juridical law rights with unprecedented wide powers, financial circles believe. For example, decisions of FIMSA are not subject to judicial review, which in itself is nonsense. It is noteworthy that all this is happening against the backdrop of the forecasts of the international rating agency Fitch on the elimination of a large number of commercial banks this year.

The draft of the mentioned changes was not published. “For this reason, it is necessary to judge and comment on what is happening and on the basis of information available in the media,” a member of the Bar Association of Azerbaijan, author of the book Banking Law, Akram Hasanov, responded to the editorial office's request. “No one disputes the fact that changes are needed. As I understand it, we are talking only about the changes that were on the agenda of the parliamentary committee's discussions. First of all, these projects need to be presented to the public, as many moments puzzle and cause significant doubts,” he said.

- What are the doubts about the bill?

- Let's say, how to understand that the decisions of FIMSA in relation to recovery or liquidation of banks, etc. cannot be canceled by the court? According to the Constitution of Azerbaijan, any person, and a bank is a legal entity, has the right to apply to the court. This means that you can cancel any decision in court. To deprive such a right is nonsense and a contradiction of the Constitution.

- What will be the result of the wide discretionary powers that FIMSA is seeking today?

- There is a constitutional law “On normative legal acts”. Under this law, broad discretionary powers are considered a breeding ground for corruption and abuse. We see how a legal entity of public law is trying to expand its powers and brings it to the point of absurdity. It is as if I can give or take away a license, or improve it, and in general I want to have full authority, taking decisions that are not subject to cancellation in court. I hope that in this form the country's parliament will not pass the law.

- FIMSA proposes to resolve disputes immediately in the Court of Appeal, bypassing the courts of first instance.

- This is illegal, since the judicial system consists of three instances. But most importantly, it is proposed to introduce the concept of “intermediate” banks. To put it simply, if the situation of any bank worsens, FIMSA can take away its assets and create a new bank on this basis with subsequent transfer of the ownership. It plainly means seizure of the crediting and financial agency from its legitimate owners. But we are talking about the right of ownership, and it is unclear how the rights of shareholders will be guaranteed. How will the rights of creditors be protected? This point is not stipulated. The creditor cannot have his money returned and cannot challenge the decision in court.

Today, such issues are resolved in the process of liquidation of banks with all the consequences. But how the creditors will deal with the new scenario proposed by FIMSA is unknown. According to the expert, the weak protection of creditors is fraught with the loss of confidence in the banking system, but not of customers, but directly of the participants in the financial market. Therefore, such scrupulous points are subject to comprehensive consideration, taking into account the interests and rights of all.   -0-