Baku, Azerbaijan, Sept. 11
By Anvar Mammadov – Trend:
Azerbaijan needs to further improve the legislation regarding deposit insurance, the World Bank’s (WB) leading expert in finance and private sector in the South Caucasus, Angela Prigozhina believes.
The expert said the World Bank is actively working with all participants of the Financial Stability Council, including the ministries of Economy and Finance, the Ministry of Justice, the Financial Markets Supervision Chamber, the Deposit Insurance Fund and market participants within the framework of the second stage of the project of modernization of the financial sector of Azerbaijan.
At the same time, Prigozhina noted that special efforts are aimed at the development of the Financial Markets Supervision Chamber and the Deposit Insurance Fund in order to transfer knowledge and to strengthen skills in the field of regulation and supervision of financial institutions in accordance with modern standards, as well as making decisions under crisis conditions and withdrawal of banks from the market in order to protect the interests of depositors and users of financial services.
"It is for the implementation of these tasks that the project is divided into 5 main areas, which should complement and strengthen the effectiveness of reforms,” the expert said.
“For example, stabilization of the financial sector is impossible without strengthening the work of the financial regulator, introduction of new practices and principles of supervision, adoption of increased requirements for capital, corporate governance, reporting and risk management in banks, application of new principles of work with the troubled banks in order to identify problems at early stages and to apply corrective actions,” the expert said.
"To do this, we need to have a special Law on the regulation of the financial services market and to make changes to the Law on banks for the purpose of adoption of international standards of banking practice and supervision," Prigozhina told Trend Sept. 11.
If, according to the expert, a troubled bank can not overcome the problems, its withdrawal from the market will require a wide range of tools for the actions to be initiated by the regulator in order to minimize the losses for depositors and taxpayers.
"To do this, in April 2017, the changes have already been made to the Law on banks, but they need to be supplemented by other changes, in particular the changes to be made in the Code of administrative offences and a number of other laws. If the bank is recommended for liquidation, the Deposit Insurance Fund must have financial resources to fulfill obligations to depositors and complete the process of liquidation of the bank with the maximum return of the spent money. The powers and tasks of the Fund should be clarified and brought into accordance with international practice. To do this, it is necessary to make changes to the law on the deposit guarantee system and regulatory documents of the Fund", said Prigozhina.
The second phase of the project on modernization of the financial sector of Azerbaijan has been implemented since 2017. The project is aimed at improving the stability of the financial sector, creating effective practices of provision of financial services and protecting the rights of consumers of these services.
The project also focuses on the development of a modern environment for quality supervision and the work with the troubled financial institutions.
The WB also helps to bring into line with international standards the regulatory framework for the remaining markets of financial services other than the stock market. The project is implemented jointly with the Swiss State Secretariat for Economic Affairs (SECO).
