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Financial Market Supervisory Authority Of The Republic Of Azerbaijan

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05 september 2016, 04:57

Azerbaijan's banks adapting to life after oil bonanza


Azerbaijan's banks have largely adapted to the external shocks which led the central bank to float the manat currency and close weak lenders, but privatisation of the country's largest bank will not take place this year, the market regulator said.

"The adjustment of banks to new realities is now over, and we can talk about the beginning of improvements," Rufat Aslanli, head of the Financial Market Supervisory Authority, told Reuters.

The oil-producing former Soviet republic of 9 million was among the first and hardest hit by the plunge in global oil prices that began in mid-2014. Oil exports had accounted for 75 percent of budget revenues.

The central bank introduced a free float of the manat in December after having burned through more than half of its foreign reserves propping up the currency and despite a one-off devaluation 10 months earlier when the manat dropped by 33.5 percent against the dollar.

Aslanli said International Bank of Azerbaijan (IBA), Azerbaijan's largest lender by assets, was still being prepared for privatisation.

"The government has resolved the majority of IBA's problems, but the privatisation process takes some time, and privatisation this year is not realistic," he said.

Azeri President Ilham Aliyev last year ordered the clean up and sell-off of IBA, which holds 41 percent of Azeri banking assets, bowing to advice from the International Monetary Fund.

IBA's distressed assets had been removed from its balance sheet and their transfer to state-owned, non-banking credit organisation Agrocredit was underway, Aslanli said.

NEW REALITIES

The central bank lowered the minimum capital ratio to 10 percent from 12 percent this year to help local banks achieve regulatory compliance.

But some did not manage to overcome difficulties.

Ten commercial banks have lost their licences so far this year, while IBA and Standard Bank are under rehabilitation.

"All other banks meet capital requirements, and bank closures are not on the agenda," Aslanli said.
The number of banks in Azerbaijan has shrunk to 32 from 41 at the start of 2016.

Aslanli said that he also did not expect local banks to issue Eurobonds any time soon, given the high level of their dollarisation, currently at a peak of 80 percent.

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