BAKU, Azerbaijan, October 29. Governor of the Central Bank of Azerbaijan (CBA) Taleh Kazimov has rejected claims that prudential requirements for lending to the real sector, particularly small and medium-sized enterprises (SMEs), agriculture and export-oriented businesses, are too strict, Trend’s correspondent reports from the event.
He made the remarks at a press conference on Thursday following a meeting on the parameters of the interest rate corridor.
“Our prudential requirements for financing the real sector are not strict; on the contrary, they are lenient. Compared with international practice, our requirements are relatively lenient, particularly regarding lending to businesses, including SMEs, agricultural producers and export-oriented companies. Foreign experts sometimes criticize us for this,” he said.
The CBA governor noted that if a specific prudential requirement is allegedly preventing banks from financing the real sector, that provision should be identified in the relevant regulations.
“If we have strict limits or requirements, let us identify the specific provision in our regulations. Let us show that this is precisely why loans are not being issued. If that is indeed the reason, I am ready to accept it. But there is no such provision,” Kazimov emphasized.
He said that assessments of prudential rules in the banking sector should also take into account comparisons with international practice.
“If we look carefully at the roadmap adopted in July, we will see that it introduced not only tighter requirements but also relaxations. In particular, certain tighter requirements for consumer lending were introduced not to reduce lending, but to encourage lending with lower risk,” the CBA governor said.
According to Kazimov, the main reason for tightening consumer lending requirements is to prevent excessive household indebtedness.
“We have always considered strict requirements for consumer lending desirable. The main reason is to prevent excessive borrowing by households. Despite the strict requirements, consumer lending has grown by 15–20% in recent years. If we ease these restrictions and requirements, consumer lending will increase even further. Can you imagine how high household indebtedness could become? It could reach an uncontrollable level. That is why we regulate it,” he added.
The CBA governor urged experts and market participants to study the existing regulations carefully and compare them with international practices before commenting on their strictness.
“My appeal to experts is this: first, let us read the regulations carefully and, where possible, compare them with international practice. Only then should we comment on whether they are strict, lenient or something else,” Kazimov said.
