The Constitutional Court defends the interests of banks

Baku / 22.09.18 / Turan: On Friday, the plenum of the Constitutional Court ruled in favor of banks on loans issued in foreign currency. The press service of the Constitutional Court reports that the Baku Court of Appeal appealed to this body with a request to interpret the Article 422 of the Civil Code on loans in foreign currency. This article deals with the issues of modification or termination of the contract in connection with a significant change in the situation.

In particular, the Court of Appeal asked to clarify the question: "Is it possible to consider the devaluation of the national currency as a significant change in the situation with regard to credit debts?

An interpretation was also requested about whether a significant change in the situation could extend to credit relations, and the regulation of liquidated contracts?

The decision of the Constitutional Court says that, in accordance with the meaning of Article 422 of the Civil Code, the change in the exchange rate of the monetary unit of Azerbaijan - manat in relation to foreign currencies "is not considered unexpected for the parties".

The Constitutional Court considers that the borrower, receiving a loan in foreign currency, assumes the risks, and therefore the change in the rate of the manat "cannot be regarded as a significant change in the situation." The decision of the plenum is final.

This is not the first decision of the Constitutional Court on the issue of the return of loans in foreign currency.

In May 2015, the Constitutional Court adopted a decision that loans received by individuals and legal entities before February 21 of that year in foreign currency should be repaid at the current rate.

Meanwhile, the issue of problem loans, aggravated after the devaluation of manat in 2015, does not lose relevance. According to the CBA as of February 1, 2018, the volume of overdue loan debts was AZN 1695.9 million. Compared to the beginning of the year, they grew by 69.2 million manats (4.25%).

The share of problem loans in the country's total loan portfolio is 14.5%. This indicator at the beginning of the year was 13.8%, and a year earlier - 9.8%. Experts believe that until the ways of solving the problem of overdue loans are found, their volume will grow.

"Manat has lost its value twice, and the Constitutional Court asserts that this is not a significant change in the situation.

Before the devaluation, all officials, including the head of the CBA Elman Rustam, stated that the manat would not depreciate. However, the Constitutional Court says that this was not a surprise.

According to official data, the volume of problem loans in Azerbaijan is 16% today, and according to estimates by international agencies - more than 30%.

In developed countries, if the volume of problem loans exceeds 3%, then immediately the search for a solution to the problem is conducted; and in our country the authorities behave like ostriches, hoping that the problem will be resolved by itself, "economist Natik Jafarli writes on his Facebook page.

According to the head of the Center for Economic and Social Development Vugar Bayramov, the number of bank borrowers in the country is 2.5 million people. This means that almost every family has a person who took a loan.

The reason for the growth of problem loans is not only in devaluation, but also in issuing them at high interest rates. So, until 2014 interest rates on loans reached 40-45% per annum. The banking sector turned into bubbles, which began to burst after devaluation.

The experts offered the authorities a tripartite mechanism for resolving the problem, which implies dividing the amount repaid on loans equally among the three subjects - the borrower, the bank and the state. However, the authorities did not agree to this. -03D06-