The process of restructuring Azerbaijan’s banking sector, which started in January 2016 with an aim to revitalize the country’s banking system, is almost complete.
President of the Central Bank of Azerbaijan (CBA) Elman Rustamov announced about this while talking to reporters on February 26, adding that the licenses of six banks have been revoked so far.
“Weak banks were eliminated, as a result of which the banking sector sustainability strengthened even more,” he said.
Since early 2016, the CBA has terminated the licenses of Texnikabank, Caucasus Development Bank, Atrabank, Gandja Bank, Bank of Azerbaijan, United Credit Bank and NBCBank. Later, the license of NBCBank was restored.
The consolidation will allow stable banks, which have deliberately decided to merge, to increase their share in the market and to gain more revenues, experts say. This strategy would be more correct if targets growth of profit and market share.
The International Finance Corporation and the European Bank for Reconstruction and Development support the consolidation of the country’s banks, regarding it as a way leading to financial recovery of the banks.
In late January 2016, AGBank and DemirBank signed a protocol of intent about merging. However, Demirbank’s shareholders refused from merging, referring to the unreasonableness of such an action. Thus, in February, AGBank and Bank Standard decided to merge, and signed a relevant protocol of intention.
Caucasus Development Bank also plans to discuss its merger with other banks on March 20.
Rustamov went on to add that the CBA will continue assisting the banks to improve their liquidity after the establishment of the Financial Market Supervisory Body.
“I think the CBA will keep this function. The establishment of the Financial Market Supervisory Body will not keep the CBA apart from ensuring financial stability in the country,” he noted.
Touching upon the possibility of third devaluation in Azerbaijan, Rustamov said there is no ground for it.
“Although the oil prices are low, they are stable,” he said. “Recently, the amendments to Azerbaijan’s state budget have been approved in which the real oil price was set.”
Rustamov believes that the stabilization of the foreign trade balance will lead to stabilization of the currency market.
“Optimization of the import is observed. There are primary customs statistics, and we will carefully study the statistics for January and February,” he added. “In general, Azerbaijan’s foreign trade balance is also being stabilized. It gives us an opportunity to restore stability in the foreign exchange market and to maintain the stable exchange rate of manat in the floating mode.”
Azerbaijan’s national currency, the manat was devalued twice last year – in February by 34 percent and in December by 48 percent.