BAKU, Azerbaijan, February 9. The Central Bank of Azerbaijan (CBA) plans to conduct a comprehensive assessment of the quality of the bank's loan portfolio, Trend reports, referring to the International Monetary Fund (IMF).
According to the information, the report was prepared based on the results of consultations under Article IV of the Agreement "On the Establishment of the IMF," held by the head of the Fund's mission in Azerbaijan, Anna Bordon in November 2023 in Baku.
"Following the IMF's proposal, the Central Bank decided to perform a complete credit quality evaluation, taking note of discrepancies in loan loss provisions under prudential and IFRS standards. The CBA is also actively monitoring consumer lending and other lending segments, and it is dedicated to boosting supervision by formulating a strategy to transition to risk-based and consolidated supervision. Recognizing the importance of further development of the financial sector, the authorities are compiling a comprehensive study of its role in the country's economy," the report says.
Meanwhile, as early as 2022, the IMF underlined the dangers associated with unsecured corporate loans, high levels of restructured loans, and rapid expansion in consumer borrowing, underscoring the importance of managing them. To address possible risks connected with the fast expansion of consumer lending, the Central Bank implemented appropriate regulatory measures, including enhanced risk weights for consumer loans.
According to the Fund's researchers, the number of problem loans in Azerbaijan is quite low, notwithstanding the presence of restructured loans. They emphasize that continual monitoring of restructured loans is critical for reducing potential hazards.
To note, 23 banks are operating in Azerbaijan. The loan portfolio of banks and non-bank credit organizations (NBCOs) grew by 18.8 percent to 23.9 billion manat ($14 billion) in 2023. The volume of overdue loans at the end of December is 437.8 million manat ($257.4 million) (a decline of 26.3 percent in the reporting period), or 1.8 percent of all loans (2.9 percent at the end of 2022).
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