International financial institutions and foreign banks are interested in the Azerbaijani banking market and their interest is only increasing. The Central Bank of Azerbaijan (CBA) continues to receive appeals from companies that want to invest in the banking system.
The CBA is interested in "brand" banks entering the domestic banking market and has always supported foreign banks joining the local market. Azerbaijan has no restrictions on the participation of foreign capital in the banking sector.
In general, the participation of banks with foreign capital in the banking sector contributes to the increase in competitiveness, the use of new technologies and the improvement of using corporate governance standards, which ultimately improve the quality of rendered services and to give reliable banking products.
Twenty-three of 44 banks operating in Azerbaijan have foreign capital.
Foreign capital in seven banks ranges from 50 to 100 percent. There
are two branches of foreign banks in the country. There are five
representative offices of foreign banks in Azerbaijan. Commerzbank, Citi
bank, Societe Generale are among them. It will be possible to
transform these offices into subsidiary banking institutions in the future.
The CBA is considering the Turkish ?? Bankas?'s proposal to acquire an existing bank in Azerbaijan or create a new bank.
Instability in the global economy and the crisis have further increased investors' interest in entering the markets of developing countries.
The competitiveness level of private banks attracts foreign players in the Azerbaijani banking sector. Liquidity in the Azerbaijani banking sector is estimated as the excess. It reaches or exceeds 100 percent in some banks. For example, in 2011 the growth of household deposits in Azerbaijani banks amounted to 21 percent, the loan portfolio - 19 percent, the share of liquid assets in total assets is 18 percent. Capital adequacy is 16 percent, while the share of overdue loans in total loan portfolio - 6.3 percent.
Scaling up the operations in the country's private sector has especially strengthened the country's commercial banks and allowed them to attract new customers, by improving their financial indices, including profitability and efficiency. Major challenge for today's Azerbaijani banks is to finance the modernization of the country's economy. The banks must be modernized. They should increase a sufficient amount of assets and improve corporate governance. In 2012, the radical modernization of the supervisory framework and regulation of the banking system based on the latest international standards and experience will be the CBA's main priority.
The prospects of the Azerbaijani banking system does not cause doubts among the experts and analysts of international rating agencies. International rating agency Moody's appreciates the increase in the share of the Azerbaijani private banking sector in the country's credit market. According to the analysts of the international rating agency Standard & Poor's, a situation that has arisen in the Azerbaijani banking sector today, is quite stable. The banking sector has no problems with liquidity.
Azerbaijan's sovereign rating has been recently raised from "BB +" to "BBB-". The country moved into a different category - investment. Once the rating has investment grade, many investors who are guided by this rating, in accordance with its investment strategies can go to the markets of these countries.
The matter rests in the fact that in the near future the world leading banks' interest in the banking market of the country will increase. Today, Azerbaijan is known in the world not only as the possessor of rich reserves of hydrocarbons but as a transit country for the supplies to the world markets. It plays an important role in ensuring Europe's energy security. But the country also has prospects to become a country known worldwide for the services. The market of banking services may become one of them. The possibility of establishing one of the regional financial center, a regional center for Islamic banking in Baku is being discussed.
Leyla Abdullayeva /Trend/