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Azerbaijan to apply debt/income ratio index in bank lending

25 December 2013 16:23 (UTC +04:00)

In the condition of stable macroeconomic, optimal balance will be provided between growth targets of assets and sustainability targets in the banks. Quality parameters of growth will be followed and sectoral diversification will be conformed to the development trajectory of economy. Preventive regulation of risks on consumption loans will be a significant priority. Generally, providence of optimal role of credit activity of the banks in the economic cycle will be assessed. For preventing high leveraging on consumption loans, new regulation requirements will be defined for protection of balance between payment ability of the population and consumer lending. In the lending, debt/income ratio index will be applied and CBA will define maximum limit for this index.

Along with this, banks will apply policy frame on “responsible lending”. Within this policy, the requirements from banks on observing relevant behaviour principles against consumers, introduction products meeting consumers’ incomes, giving correct and detailed information to the customers about the prices of products will be become strict.

Necessary measures will be taken on factors influencing bse price of the financial resources for continuation of reduction in interest rates. To continue promotion of competitiveness in the banking system, increase of efficiency of operation management in banks, development of other segments of the financial markets, increase of resources of population and entities directed to banking sector, the measures wil be continues.

The statement also says that CBA also continued measures for protection of confidence to banking system, minimizing risks in the system and tightening management potential, increase of sustainability of sector. CBA’s decision on increase of minimum capital of the banks to AZN 50 mln, accelerated capitalization processes in the system. During passed 16 months, total capital rose 57% or AZN 1.2 bln, number of private banks with the capital of over AZN 100 mln increased to 8 from 3. Currently, the capital of banks with over 95% of assets and personal savings exceed AZN 50 mln. Along with this, the banks with 5% of assets need additional time for execution of the requirement. Taking this into account, CBA has granted a delay to the banks until January 1, 2015.

Adaptation to Basel III standards has created risk buffers. Capital adequate index of the sector makes 17.6% against 12% and exceed the requirement on international standards by twice. Liquidity of the system is high, bank liabilities and fulfilment of accounting are carried out incessantly. According to outcomes of 11 months, instant liquidity in the banking sector, exceeds minimum requirement by twice. Currently, share of overdue credits of population and real sector makes 5.3% and half of these are covered with the stocks formed by banks. YTM of assets on banking sector is 2%, capital YTM – 15%.

During 11 months, assets of banking system rose 22%, provision of crediting – 25%. Credits directed to the regions soared 31%, to private sector – 25%. Share of long-term credits in the loan portfolio reached 79%. Consumer lending rose 37%.

At the same time, interest rates reduce. Interests on deposits and credits in manat dropped 1 percentage point. Except discount rate, reduction of interest rates by the Deposit Insurance Fund to 10% also influenced the interest rates. Personal savings rose 25.5% to AZN 6.4 bln, which 70% is insured. Currently, there are 3 mln depositors in the country. Returning of savings from Soviet period continued. As at December, 2013, AZN 600 mln on 1,621,700 deposit accounts has been repaid.