Azerbaijan, Baku, Dec 30/ Trend , N. Ismayilova/ Banks in Azerbaijan will face new risks arising from the impact of the global financial crisis and domestic economic slowdown, according to the report of the IMF mission who visited Azerbaijan from Dec. 10 to 17.
Strong supervisory vigilance by the ANB is therefore critical. Reported capital adequacy and liquidity ratios of the banks remain satisfactory and on average well above minimum requirements.
The 2009 budget provision to inject additional capital into IBA will further strengthen capital adequacy in the system. Banks' profitability has remained strong in 2008, but asset quality is deteriorating, and some banks will likely face difficulties to rollover foreign loans that are due in 2009.
With the quality of some assets in banks' portfolios worsening, the NBA will need to ensure that banks provision adequately for rising non-performing loans. Moreover, should real estate prices deteriorate, it is important that banks increase provisioning for the declining value of collateral, unless additional assets are pledged to back up loans.
Over the last couple of years, the NBA has been reinforcing its supervision capacity and has tightened prudential regulations in the face of rapidly increasing risk-taking by banks.
The recent understanding it has reached with some banks on monitorable plans to reduce excessive credit risk is a welcome development, the report said.
In addition, the ANB has established high-frequency monitoring of liquidity conditions and is well informed on the upcoming maturities of banks foreign loans for the whole of 2009.
The mission considers that, if needed, the authorities are prepared to provide assistance to solvent banks that may face temporary liquidity crunches, including through the ANB lender-of-last-resort facility.
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