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Azerbaijan-based banks may raise deposit interest rates

28 October 2008 09:00 (UTC +04:00)

The banks have started to feel hunger for cash after access to foreign funds become uneasy.
The foreign liabilities of commercial banks based in Azerbaijan have increased sharply over the past two years.
Their foreign payables rose 2.5 times in 2006, 3.2 times in 2007 and 1.6 times in 2008.
In total, the bankâ€™s borrowing from the foreign sources have rose by more than 10-fold since early 2006.
The foreign debts rose in value terms to AZN 1.6 billion from AZN 158.2 million and the bankâ€™s financial dependence on foreign funds increased.
Because of difference in interest rates in the domestic and foreign markets, the banks used to seek funds from foreign banks, including international financial institutions or by selling bonds in foreign markets.
After the financial crisis began, banking systems of most countries, especially the emerging economies experienced serious problems both borrowing foreign funds and repaying foreign debts.
So, Azeri banks will also be faced the same challenges. When banks strive to increase or level out their resources, they must raise domestic borrowing. For this purpose, they need to offer more favorable terms by increasing interest rates on deposits and corporate bonds.