Closure of 45% of the banks of the Republic of Azerbaijan in the last 9 years

According to the report of the international group Tasnim news agency, the Central Bank of the Republic of Azerbaijan allowed canceled Gonai Bank.

In the official statement, the reason for this decision is that the total capital of the bank is less than the minimum amount defined for banks. Central Bank requested the court to liquidate that institution due to bankruptcy. With this, the number of active banks in this country has decreased to 24.

Before the devaluation, in 2014, 44 banks were operating in Azerbaijan. That means, in the last 9 years, 20 banks have gone bankrupt in this country. That is, 45 percent of Azerbaijan’s banks were closed.

According to the announcement of the Central Bank of Azerbaijan, the cancellation of the banking license of “Gonai Bank” does not pose any threat to the financial stability of the banking sector. However, it should not be forgotten that the closure of any bank in a country weakens citizens’ trust in the banking system.

On the other hand, it cannot be said that trust in the banking sector in Azerbaijan is high. It should not be forgotten that the deposits of people and businesses are of vital importance for the banks of Azerbaijan, because the funds of the banks in this country are mainly formed by the cost of deposits. depends Currently, the share of deposits in the formation of bank resources is higher than 80%. In this context, independent experts also think that the central bank should close weak banks and try to make them healthy.

Why banks Are small banks weakening in Azerbaijan?

One ​​of the factors aggravating the situation of small banks in Azerbaijan is the high concentration in the banking sector of this country. However, social payment cards and public sector salaries in this country belong to only two banks.

These are the International State Bank of Azerbaijan and Capital Bank, which are owned by members of the president’s family. . Since these two banks provide banking services, they receive millions of manats from government institutions every year. banks receive, these banks also get an advantage in selling loans to them.

Thus, now almost 80% of the assets, credit portfolio and profits of the country’s banking system belong to the government and Pasha Holding » is.

Since the main income is divided between these banks, the transferred banks can have a smaller share of the market.

In The “Financial Stability” report published by the Central Bank of Azerbaijan in March also states that the first three banks in terms of profit in Azerbaijan accounted for 78% of the total profit. These three banks are State International Bank of Azerbaijan, Capital Bank and Pasha Bank belonging to Pasha Holding. Therefore, due to the inappropriate development of the business environment in Azerbaijan and the entrepreneurship of the officials, small banks have less room to maneuver. This leads to the weakening of their financial indicators.

It was said that the central bank has justified the cancellation of the license of “Gonai Bank” by the lack of the bank’s total capital. According to official information, the total capital of “Gonai Bank” until the end of the first quarter of 2023 was 68 million manats.

With this index, “Gonai Bank” ranks among the 25 banks of Azerbaijan. took the twenty-third place. Therefore, there are two banks in the country whose capital is less than “Gonai Bank”. These include “BTB Bank” (50.9 million manats) and the Baku branch of “National Bank of Iran” (37.9 million manats).

How are deposits protected in Azerbaijan?

The suspension of “Gonai Bank” increases the concern of people who have deposits in Azerbaijani banks. The statement of the central bank states that until the end of the first quarter of 2023, the insured (compensated) deposits of the said bank are 38.5 million manats, and the deposits of 99.9% of bank depositors are compensated.

These numbers are a It shows another interesting point. At the end of the first quarter, the total volume of individual deposits in “Gonai Bank” was 73.5 million manats. Therefore, 48% of the bank’s deposit portfolio (35 million manats) belongs to only 0.1% of its customers. How high is an income in Azerbaijan?

So how are deposits in Azerbaijan banks protected?

Protection of bank deposits in Azerbaijan by the “Deposit Insurance” law » is set. This law says that the government insures deposits up to 100 thousand manats. In other words, if the deposit amount of citizens in the bank is less than 100 thousand manats, even if the bank is closed, those funds can be recovered. Therefore, the government of Azerbaijan only protects deposits of more than 100 thousand manats.

Deposits kept in foreign currency also include such protection. At this time, the share of foreign currency deposits of customers in the bank is considered insured up to 100 thousand manats.

But in addition to the limit of the amount, the law also provides for the interest of those deposits. Therefore, protected deposits should be up to 100,000 manats and a maximum of 12% per year. If an annual interest of more than 12% is calculated for a bank deposit, that deposit is not considered insured. For deposits made in foreign currency, the interest rate is less than 2.5%.

This law protects the funds in bank accounts that are used by natural persons who engage in entrepreneurial activities in connection with this activity. They pay, opens. But currently, the limit on the protected amount is not 100 thousand manats, but 20 thousand manats. , but the risk factors associated with bank funds of legal entities and companies are more. After all, the law of Azerbaijan on deposit insurance does not provide for the protection of funds of legal entities.

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