Banking sector in Azerbaijan; from bankruptcy to regression?

Banking sector in Azerbaijan; from bankruptcy to regression?

“There is not any case in the foreign experience that a minimum requirement for authorized capital is increased by five times”, said in an interview with “Echo” the chairman of the Center for Economic and Social Development Vugar Bayramov . In this regard, in his opinion, this is a serious administrative decision, despite the fact that it will enter into force on January 1, 2014. It is reminded here that 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.

Central Bank’s decision will reduce number of banks in Azerbaijan:  “Some banks have to declare bankruptcy or go for consolidation.” Bayramov does not predict bank failures in 2012. “But in 2013 we should expect major changes in the banking sector in the country.”

In general, the reduction in the number of banks in Azerbaijan is a positive factor, said Bayramov. “44 Bank for Azerbaijan can be considered too much. However, there is no generally accepted standard for the number of banks. But in Kazakhstan, there are 44 banks, while its economy is 3 times more of the Azerbaijani and the population in Kazakhstan two times higher than in Azerbaijan. ”

But experts say not so desirable reduction in the number of banks through administrative intervention. “In fact, there is no practice of combination of banks in Azerbaijan. Thus, Azeri banks likelihood prefer bankruptcy rather than combination. With approximately 10 banks in Azerbaijan did not meet the new demand. “On the one hand, bank bailouts could lead to a drop in the quota of confidence in the banking sector as a whole – warns Bayramov. – On the other hand, in his view, citizens may encounter problems at the time of their contributions. ”

It is reminded here that Central Bank has named the reasons for liquidating a license issued to Royalbank for banking activity. “The license was liquidated because the bank did not comply with the minimum level of requirements and the adequacy of the total capital,” the central bank said today. “It did not fulfill the obligations to creditors and the written instructions of the Central Bank. It did not operate properly.”

The deposit insurance fund makes certain actions to start the procedures for paying the compensation on insured deposits to depositors of the bank, the report said. RoyalBank was a commercial bank operating in Azerbaijan. It had 32 branches in Baku and regions of the country. The bank had Royal Card processing center.


One Response to “Banking sector in Azerbaijan; from bankruptcy to regression?”
  1. Zainab Sabbag says:

    It’s certainly plausible that the minimum requirement decision will reduce number of banks, as the article states. To me and other business owners, the remaining banks will become all more important in Azerbaijan. Fortunately, there is a leader who has emerged. Mr. Jahangir Hajiyev, Chairman of the International Bank of Azerbaijan (IBA) is improving investment and opportunity. He is bringing capital, jobs, and a better economy from the United States and EU nations. This is good for Azeris. Pro-capitalist, reform and growth. This is what makes life better for everyone. Jahangir Hajiyev is a good leader. I encourage businesses to do business with the IBA and Mr. Hajiyev.

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