Page 17 - bne IntelliNews weekly newspaper June 23

Eurasia
June 23, 2017 www.intellinews.com I Page 17
Azerbaijani regulator advises DemirBank, Bank of Baku to halt taking deposits
bne IntelliNews
Azerbaijan’s banking regulator has advised DemirBank and Bank of Baku to stop accepting new deposits from June 22, sources in Baku told bne IntelliNews.
The move was apparently prompted by the banks’ negative capitalisations and came after the Azerbaijani government criticised the financial regulator for its belated reaction to non-performing banks.
Azerbaijan's banking regulator was set up in
early 2016, amidst a series of banking defaults,
to relieve the central bank of some of the responsibilities of overseeing the growing banking sector and allow it to instead focus on monetary policy. Since then, the regulator has revoked the licences of 11 of the country’s 44 banks.
However, in recent weeks, the biggest bank in the country, International Bank of Azerbaijan (IBA), has defaulted on its foreign obligations, and seven medium-sized banks – DemirBank, Muganbank, Unibank, Xalq Bank, Bank Respublika, VTB Bank Azerbaijan and Bank of Baku – appear to be experiencing problems. On June 14, Moody’s Investors Service downgraded the Baseline Credit Assessments (BCAs) and
long-term local- and foreign-currency deposit ratings of Xalq Bank, Bank Respublika, Bank of Baku and VTB Bank Azerbaijan. The outlooks
on the long-term local- and foreign-currency deposit ratings of all four banks remain negative.
Azerbaijan’s banking woes began in 2015
when a sudden depreciation of the Azerbaijani manat following years of exchange rate stability endangered the country’s ability to service foreign debts. Many Azerbaijani banks had, until that point, borrowed externally in foreign currency and granted loans in manat. As clients within Azerbaijan began defaulting on debt in increasing numbers, banks found themselves unable to service their obligations.
The country's banking sector is believed to be experiencing a full-fledged crisis prompted not only by poor asset quality and losses, but also by the ongoing economic recession in the country and poor prospects for further business generation. Sources in Baku told bne IntelliNews that Muganbank could be the next lender to default.
On June 21, Zakir Nuriyev, the head of the Azerbaijani Banking Association, said that 10 banks did not meet minimum capital requirements.
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