"The reduction of banks is a global process, serving to optimize the banking sector. The main goal of the bank reduction policy implemented by the Central Bank is to optimize Azerbaijan's banking system and eliminate existing problems in customer–bank relations".
Financial expert Emin Gariblili stated this in his statement to Modern.az.
The expert noted that currently, an increase in the number of problematic loans is observed in Azerbaijan, which actualizes the renewal process in the banking sector.
According to him, among the main reasons affecting the activities of closed banks are the high number of problematic loans, limited financial capabilities, and other economic factors.
E. Gariblili recalled that after gaining independence, the number of banks in the country continued to increase:
“However, a high quantitative indicator of banks did not mean that their activities were satisfactory. It is very important to use indicators correctly when granting loans. The bank must know the customer and evaluate them correctly. Indicators are dynamic in nature. They can be compared, in a certain sense, to a virus–antivirus sequence. Therefore, indicators must be constantly improved so that the bank correctly identifies the customer and does not lend to individuals who will not be able to fulfill their credit obligations.”
The expert stated that currently, the number of existing banks in Azerbaijan can be considered satisfactory for a population of 10 million.
According to him, the main issue is not so much the number of banks, but the correct establishment of their operating principles.
E. Gariblili added that it is impossible to stop the process of bank reduction or merger:
“This is a global process taking place worldwide. In the future, banks may merge or transform into non-bank credit organizations. At the same time, new banks and holdings may emerge, and new financial institutions may be formed through foreign investments.”
According to the expert, consumer loans constitute a large part of problematic loans in Azerbaijan:
“The high interest rates on consumer loans compared to neighboring countries are also related to this. The number of borrowers is high. This, in turn, is linked to the financial situation of the population. People take out loans due to financial difficulties, and subsequently, problematic loans arise.”
The financial expert also touched upon the issue of the activities of non-bank credit organizations. According to him, the activities of these institutions are fully compliant with legislation, and an increase or decrease in their number is not considered contrary to the law:
“However, in the reality of Azerbaijan, banks operate more population- and socially-oriented and have a more favorable mechanism for supporting the economy. In non-bank credit organizations, the interest rates on loans provided are higher compared to banks,” E. Gariblili noted.
It should be noted that today Bank “BTB” OJSC ceased its operations as a bank and will operate as an NBCO under ABB. With this, the number of operating banks in Azerbaijan has decreased to 21.
