Azerbaijani banks must be protected from their owners – presidential aide

There are serious problems with corporate governance in the banking sector of Azerbaijan, Natiq Amirov, Azerbaijani presidential aide on economic reforms, said March 11.

He made the remarks during the roundtable on AmCham Support to Economic Reforms in Azerbaijan.

“Some owners of banks regard them as stores and instruct them whom to issue loans,” he said. “We must protect banks, primarily from their owners.”

He said that banks should determine their credit policy right.

“During today’s event, it was offered to increase the upper ceiling on insured deposits to 18 percent [as of today, this figure is 12 percent on manat deposits, 3 percent – on deposits in foreign currency],” Amirov said. “But what will the bank do with the means attracted under such interest and where will it place them? Can we develop entrepreneurship at the expense of loans issued under 30 percent interest?”

“Bank should direct the borrowed funds to development of the real sector,” he said. “It all depends on efficiency of such loan. Today, there are serious problems with repayment of loans, which is mostly due to wrong credit policy of banks.”

The presidential aide went on to add that interest rates on loans and deposits have to be optimized.

“If banks attract funds under 18 percent interest per annum, they will simply turn into a piggy bank,” Amirov said. “In order to manage these funds, banks will have to issue risky loans. This will lead to loan defaults.”

He went on to add that these issues are now being seriously discussed with both bankers and foreign experts.

“There are a few options,” Amirov said. “I guess we will choose one of them, which will help restore the manat liquidity in the country.”

Source: Trend