Central Bank of Azerbaijan Moves to Strict Measures

Central Bank of Azerbaijan Moves to Strict Methods

Central Bank of Azerbaijan (CBA) applies harden requirement in banking sector after bankruptcy of Royal Bank, one of top banks in Azerbaijan.  CBA increased up amount of minimum volume of total capital for to AZN 50 million ($ 64,1 million) from AZN 10 million ($  12,4 million) . The new standard on the minimum volume of total capital comes into force from 01 January 2014, the Central Bank.

“This decision will not result on any positive changes in Azerbaijan bank sector”-Vugar Bayramov, chairman of Center for Economic and Social Development (CESD), said to journalists: “First, there is such experience in foreign practice to increase minimal requirements 5 times. Central Banks have should gradually increased such requirements. 5 times increasing in minimum volume of total capital is somehow psychological pressure to local banks, as well. Second, CB decision is made because of confusion after bankruptcy of Royal Bank, one of top banks in Azerbaijan. CB targets to improve credibility in local banking sector by increasing of minimal requirements. Credibility, however, cannot be improved by such administrative methods since no promotional measures are taken place.”

Vugar Bayramov added that amount of minimum volume of total capital was not problem in banking sector anyhow.  At least because, bankrupted Royal Bank have not faced any minimum volume of total capital problems.

Comments
One Response to “Central Bank of Azerbaijan Moves to Strict Measures”
  1. Sannur Aliyev says:

    I agree with the idea stated above that minimum capital requirements of local banks should be increased gradually.

    However, we must consider other positive side effects of this decision which are:
    – This is the one method of increasing a liquidity in capital market and provide enough investment for entrepreneurs.
    – Having more actives on their balances, the banks will be willing to sell their money with less interest rates.

    Best regards,

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