The Central Bank of the Republic of Azerbaijan
Azerbaijani oil / Industry / Agriculture / Banking
Banking system in Azerbaijan
Banking system is considered an important element of financial system of Azerbaijan. Today banks leave behind other financial mediators for volume of their assets and capital, as well regional coverage.
An advanced two-stepped banking system, which is based on market principles, (the National Bank of the Republic of Azerbaijan in the first step, in the second one commercial banks and other non-bank credit organizations) functions in the republic. In the first stage of reforms, measures of restructuring and recovery of state banks were taken, institutional formation of private banking system ensured. In this phase low requirements concerning capital, very liberal terms for entering the system were determined and soft regulating instruments were applied to regulate the bank activity. As a result of these processes banking system started to be enlarged in institutional manner and number of private banks increased rapidly.
Measures of intensive recovery of private banks implemented since 2000 in the next stage of bank reforms contributed to consolidation of durability of banking system and improvement of the financial mediation function.
Regular growth of demand of private banks to minimal capital by National Bank and propaganda of consolidation process strengthened capital base of private banking system, ensured enlargement of banking system.
Since 2002 important stage of restructuring of banking system started to be carried out. Taking into consideration entry of big oil revenues in the country, as a logical result of successful oil strategy, and in this base, as the banks were ready to an effective transfer of their financial resources to the strategic goals, development strategy was made for 2002-2005.
Major goals of strategy were effective and safe transformation of oil revenues to non-oil sector, to increase chances of access of population and regions to bank services and in this base to develop financial mediation function of banking system for poverty reduction, strengthen durability and reliability of banking system, ensure free and healthy competition atmosphere in bank services market. Finance-bank sector plays exceptional role in formation of economy diversified in base of great economic power and financial resources of the country and directing resources to capitalization of non-oil sector.
To get strategic targets determined certain duties have been set such as improvement and adaptation to international standards of legislation base of banking, increasing reliability and health of banking system, enlarging possibilities of access to bank services, lifting the level of transparency in banking system and strengthening the market discipline, organizing an effective bank control.
Radical reforms and institutional development in all directions of the banking system have brought to deep quantity and quality changes in the sector. The total result of reforms is formation of the banking system fully conforming to the international standards in financial stability parameters, risk management practice and services spectra.
To stimulate depositing in the sector and increase population’s confidence in the sector, the deposit insurance system was created in 2007, the sum of deposits protected by the Deposits Insurance Fund reached 30000 AZN rising 6 times.
As result of the successful development and modernization strategy, as well pre-crisis preventive management and ‘financial immunization’ measures, the bank-finance sector kept the balance in the fight against global crisis, protection of financial stability was assured. Thus, the banking system in Azerbaijan met the global crisis with high capitalization level and liquidity indices. Unlike many countries, Azerbaijan’s banking sector did not undergo any failure and special tension, protecting its parameters and stability.
To enhance the access of population in regions to the finance banking services, Azerpocht LLC, which covers over 1200 regional mail branches and sections, was reconstructed and licensed to provide financial services.
Banks offer wide range of services and retail bank services rapidly develop. Bank products are offered to customers via the latest technologic means as internet-bank, mobile-bank, automated bank corners.
The radical network of bank system and accesses to financial services are intensively enlarged, banks begin actively operating in the international financial market. As of April 1, 2010, the number of structures of banks operating abroad reached 9. 3 representations of influential financial institutions of the world were opened in the country, which will bring to application of the most advanced banking technologies in Azerbaijan.
By April 1, 2010, 47 banks, 631 bank branches function in Azerbaijan. 1 of banks was founded with participation of state capital, 23 of foreign capital.
To the same date, 98 non-bank credit organizations operate in the republic along with banks.
Growth of real money incomes of population, development of trust in bank system, improving the legal bases of protection of interests of creditors and depositors, in particular launch of ‘Deposits Insurance Fund’ were the criteria characterizing rapid growth of deposits of population.
As of April 1, 2010, bank deposits of population is 2,4 bn AZN. 33,3% of which is long-term deposits (higher than a year).
Along with population, bank deposits of corporative customers increase dynamically. By April 1, 2010, bank deposits of corporative customers is 2,1 bn AZN.
Dynamic development of volume of special and involved funds of the banks has created effective conditions for enlargement of active operations. As of April 1, 2010, the volume of bank assets is 12 bn AZN.
Crediting plays special role in structure of bank assets. As of April 1, 2010, bank credits to customers is 8,5 bn AZN, which makes 70,5% of bank assets. Special weight of private sector in structure of credit investments is higher than 82% (7 bn AZN).