BAKU, Azerbaijan, July 16. Trend International Information Agency presents an overview of the main events in the financial sector of Azerbaijan for the first half of 2023.
Banking sector
One of the important events was the discussion of the draft law on amendments to the law "On the Central Bank" in the Milli Majlis (Parliament) of Azerbaijan, which proposed granting the Central Bank the right to conclude agreements and contracts. Thus, the Central Bank will be able to negotiate and conclude cooperation agreements with central banks of other countries, international financial and credit organizations and institutions, as well as conclude clearing and other agreements.
This year, the financial central banks of Azerbaijan and Tajikistan signed a memorandum of understanding. The purpose of the memorandum is to organize research trips for cooperation in the banking sector, exchange of experience and information, discuss topical issues, conduct trainings, internship programs and seminars, and provide technical advice.
Also, the Association of Banks of Azerbaijan (ABA) and the Association of Banks of Hungary signed a memorandum of cooperation this year.
The memorandum provides for the promotion of cooperation between the parties, the organization of events, including joint educational and training programs, the exchange of information between member banks of both organizations, the development of correspondent relations and the implementation of other activities related to the banking and financial sector.
In addition, a memorandum was signed between the ABA and the Union of Participating Banks of Türkiye. The document is aimed at organizing joint events, as well as the development of the financial sector.
ABA and the International Finance Corporation signed a cooperation agreement. The document covers cooperation in the field of environmental, social and corporate governance, and is also designed to ensure financial stability in Azerbaijan.
Speaking about the discount rate, the Board of the Central Bank of Azerbaijan (CBA) decided to raise the discount rate from 8 percent to 8.25 percent in December 2022. The upper limit of the interest rate corridor remained at 9.25 percent, while the lower limit was raised by 1.25 percent to 6.25 percent. At the first meeting of the CBA Board this year, it was decided to raise the discount rate by 0.25 percentage points – from 8.25 to 8.5 percent. The upper limit of the percentage corridor was raised to 9.5 percent, while the lower limit to 6.75 percent.
The Central Bank decided to leave the discount rate unchanged at 9 percent, the upper and lower limits of the interest rate corridor also remained unchanged at 10 percent and 7.5 percent, respectively, at the last meeting in the first half of this year.
The CBA may take a pause in tightening monetary policy at least until September of this year. In addition, the Board of the CBA approved new norms of mandatory reserves for banks at the beginning of the year.
The following mandatory reserve norms will be applied: mandatory reserves for banks for deposits in national currency of individuals and private entrepreneurs are set at 5 percent, for deposits of individuals and private entrepreneurs in foreign currency - 6 percent, for deposits of legal entities in national currency totaling up to 1 billion manat ($588.2 million) - 5 percent, for deposits of legal entities in national currency totaling more than 1 billion manat ($588.2 million) - 10 percent, on deposits of legal entities in foreign currency in the amount equivalent to up to 750 million manat ($441.1 million) - 6 percent, on deposits of legal entities in foreign currency in the amount equivalent to more than 750 million manat ($441.1 million) - 12 percent, on deposits attracted in precious metals - at the level of 5 percent.
Moreover, a new function has been introduced on the CBA electronic services portal, which allows citizens to receive information about their credit history from a Centralized Credit Registry System.
The CBA is developing a strategy for the development of the financial sector, which reflects priority issues in the direction of solving the problems of the financial sector.
In the first half of this year, the European Bank for Reconstruction and Development (EBRD) expressed interest in exploring new infrastructure projects in Azerbaijan that meet the eligibility criteria in terms of the bank's policies and standards.
"These criteria cover a wide range of issues, from environmental aspects, sustainability aspects to procurement and finance issues. The list is extensive, and each project requires careful evaluation. Therefore, after receiving such a request from the government, we will evaluate all possibilities on an individual basis, in coordination with other international financial institutions and subject to safe access to the project site (because of the mining of Azerbaijani territories by illegal Armenian armed formations continues to this day)," Head of the EBRD representative office in Azerbaijan Kamola Makhmudova said.
The EBRD also plans to sign investment contracts with three Azerbaijani banks in 2023.
The Central Bank of Azerbaijan and the European Bank for Reconstruction and Development discussed the creation of a local credit agency in the first half of the year.
Meanwhile, the Black Sea Trade and Development Bank (BSTDB) is developing a portfolio of new projects in Azerbaijan. Moreover, the BSTDB is negotiating with a number of financial institutions in Azerbaijan and hopes to expand the network of partner banks in the future.
One of the significant events in the banking sector was the launch of money transfers without commission from Türkiye to Azerbaijan. The Turan application, for the first time outside Türkiye, has started its activity in Azerbaijan. In addition, the Turkish "Turan Teknoloji Anonim Şirketi" (Turan) financial company will arrange money transfers by bank cards without commission from Azerbaijan to Türkiye.
In addition, new digital solutions in the field of money transfers are being developed in Azerbaijan.
The Asian Development Bank (ADB) has started preparing a new country partnership strategy with Azerbaijan for 2024-2028.
Moreover, Visa and the CBA are discussing the integration of the digital manat into the Visa network. The parties are engaged in an open and constructive dialogue to find suitable formats of interaction and cooperation, and the issues of conditional integration of the digital manat into the Visa network are currently under discussion.
This year, the Islamic Investment and Export Credit Insurance Corporation (ICIEC), a member of the Islamic Development Bank (IsDB) group, accepted Azerbaijan as its 49th member state.
"Azerbaijan's membership opens the door for its private and public sectors to take advantage of the risk reduction and credit enhancement solutions offered by ICIEC to expand their exports and facilitate the inflow of foreign direct investment. Similarly, it allows exporters, banks and investors from other member states, as well as other states, to cover the political and commercial risks associated with their operations in Azerbaijan," CEO of ICIEC Oussama Kaissi said.
In conclusion, the Central Bank of Azerbaijan (CBA) canceled the license of Gunay Bank OJSC.
The CBA canceled the license of Gгnay Bank OJSC due to the fact that the total capital of the bank is less than the established requirement - 50 million manat ($29.4 million), and the adequacy ratio of the total capital is less than 3 percent.
Insurance sector
The decision of the Board of the Central Bank of Azerbaijan (CBA) on determining the amounts of one-time cash payments paid by insurers wishing to operate under the "Green Card" insurance system and insurance premiums that will be applied by insurers entitled to operate under this system has come into force since January 1 of this year.
In accordance with the decision, the amount of a one-time payment under the "Green Card" is set at 10,000 manat ($5,882).
Insurance premiums under "Green Card" agreements for vehicles registered in Azerbaijan and going to Türkiye and Iran amount from 12 ($7) to 440 manat ($258.8); those going to Belarus, Moldova, Russia and Ukraine - from 10 ($5.8) to 400 manat ($235.2); to other countries - from 30 ($17.6) to 1,200 manat ($705.8).
Insurance premiums for vehicles registered in Georgia and Kazakhstan and traveling to Türkiye, Iran, Belarus, Moldova, Russia and Ukraine are determined in the amount of 15 ($8.8) to 1,630 manat ($958.8); for vehicles registered in Georgia and Kazakhstan and traveling to other countries - from 30 ($17.6) to 2,389 manat ($1,405).
In addition, it became known that the Compulsory Insurance Bureau of Azerbaijan has reached an agreement with the International Council of Bureaus on the sale of "Green Cards" by local insurance companies to drivers of vehicles registered in Georgia and Kazakhstan.
Moreover, it is planned to introduce an analogue of the bank deposit insurance mechanism for investment companies in Azerbaijan.
Financial sector
This year, the Central Bank of Azerbaijan (CBA) adopted a "Cybersecurity Strategy in financial markets".
The strategy of the CBA is aimed at creating a sustainable cybersecurity environment in financial markets, which includes the following:
- strengthening the regulatory structure and supervision of information security and cybersecurity in financial markets;
- strengthening the culture of cyber risk management in financial markets;
- formation of the information technology management structure in order to strengthen the level of cybersecurity in financial markets;
- strengthening cyber resilience in financial markets;
- formation of a culture of information security and cybersecurity in financial markets.
Moreover, the Azerbaijani manat remained stable against the US dollar in the first half of the year.
According to the report of the Asian Development Bank (ADB), Azerbaijan is expected to maintain the peg of the national currency to the dollar until at least 2026. The report emphasizes that this will be due to a significant decrease in pressure on the manat.
