FMSB drafts mechanism on support of banks

By Azernews 

By Nigar Abbasova

Azerbaijan’s banking sector, which was seriously affected by certain unfavorable factors, is now passing throw certain processes aimed at improvement of the situation.

Financial Market Supervisory Body has already prepared a mechanism on the support of important banks. Head of FMSB's Board of Directors Rufat Aslanli said the authority has also defined main criteria of important banks by using world experience as a basis.

He said that the process of the improvement of International Bank of Azerbaijan is currently underway.

 In July 2015, President Ilham Aliyev signed a decree on the measures for rehabilitation related to the preparations for privatizing the state-owned shares of the International Bank of Azerbaijan JSC.

IBA's distressed assets had been removed from its balance sheet and transferred to Agrocredit in 2015 to recover financial position of the bank. Bonds worth 3 billion manats ($1.8 billion) were issued under state guarantee to provide the bank with liquid funds.

As for Bank Standard, the government took certain steps to keep the bank in the system but the improvement of the situation appeared to be impossible, as expenses required for the improvement were twofold higher than closure of the bank.

Bank Standard earlier got support from the CBA and a recovery program was worked out for the bank to restore its financial sustainability. The controlling stake of Bank Standard was transferred to Azer Turk Bank for recovery. The measures, however, turned to be insufficient.

The insurance event in Bank Standard became the biggest ever occurred in the banking system of Azerbaijan.  The volume of compensations to be paid to the depositors of Bank Standard amounts to 460 million ($282 million).

Moreover, FMSB may soon unite bad assets of the banking sector. Aslanli said that the government is currently engaged in discussions on the institutionalization of bad assets management, while the relevant report was submitted to Presidential Administration.

He also mentioned that the Council of Financial Stability is working on this direction and the decision will be taken in a due course.

Experts believe that to improve the situation, it is reasonable to create a separate institution that will be able to buy bad assets of the banks operating in the country.  

President of the Azerbaijan Banks’ Association Zakir Nuriyev, earlier said that such agency may help decrease the volume of bad assets in the county’s banking sector and optimize management of these assets.