BAKU, Azerbaijan, October 29.The rise in overdue consumer loans in Azerbaijan isn’t systematic in nature, the governor of the Central Bank of Azerbaijan (CBA)Taleh Kazimov said, 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.
According to him, although some increases in overdue consumer loans have been observed, this growth does not pose a systemic risk to the banking sector.
"Currently, there is a growth in overdue consumer loans, albeit in relatively small amounts. In fact, this isn’t systemic in nature. If you look at the financial statements of our banks, you will see that the coverage ratio for our provisions is quite high," Kazimov noted.
The CBA governor pointed out that the coverage level of provisions for consumer loans is more than double the value of the loans themselves.
"Take consumer loans, for example. In fact, the provision coverage ratio is more than twice the value of the loans. Therefore, for this system, it’s not a problem, it’s a critical situation," he emphasized.
Kazimov noted that it is normal for non-performing (problematic) loans to increase, in both absolute and relative terms, during certain periods.
"In certain periods, there has been pressure regarding non-performing loans, and an increase in their volume, both in absolute and relative terms, has been observed. An increase in non-performing loans is a normal occurrence. I have issued loans myself," the CBA governor added.
He remarked that the new requirements introduced in the lending regulations are not aimed at limiting the volume of loans, but rather at ensuring a more effective distribution of risks and a more accurate assessment of credit risks.
"While there is a lot of talk about restrictions, in reality, there are none. The new regulations are designed to facilitate a more effective distribution of risks and to foster better relationships with counterparties. Individuals who obtained consumer loans in the past will still be able to do so; there are no restrictions here," said Kazimov.
According to him, the primary objective of the new requirements is to improve the assessment of credit risks.
"We are introducing certain requirements, most of which are intended to ensure a more accurate assessment of credit risks. There are some new elements in the updated lending regulations; these are not restrictions, but rather requirements designed to enable a more precise evaluation of risks," the CBA governor pointed out.
Kazimov also emphasized that the complete absence of non-performing loans should not necessarily be viewed as an indicator of a healthy loan portfolio.
"Just because a loan portfolio contains no problem loans, it doesn’t mean that the portfolio is free of issues in other areas. Sometimes, someone might claim, 'There are no problem loans in my portfolio.' Anyone with an understanding of regulatory standards would immediately ask: 'What has expanded within this portfolio or behind these figures?' Because there are no problem-free loans," he explained.
The CBA governor highlighted that, for the regulator, the key issue is not the complete absence of non-performing loans, but rather the level at which they exist within the portfolio.
"For us, as the regulator, the primary concern is the extent of these issues. The current situation is acceptable to us; we consider our indicators to be low and satisfactory. We begin to grow concerned when problem loans reach the 4–5% range. At present, however, we aren’t concerned, as we haven’t reached that level," added Kazimov.
