Tag Archives: banking

Azerbaijan revokes another banking licence

FEB. 2 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank revoked the licence of Texnikabank, one of the country’s largest lenders, and handed back a licence to NBCBank after it said it was looking at a possible merger with a bigger rival.

The moves are part of a wider plan by the Azerbaijani Central Bank to tighten and strengthen Azerbaijan’s commercial banking sector.

The Central Bank said Texnikabank, one of Azerbaijan’s 10 largest banks by assets, did not comply with the minimum capital requirement of 50m manat ($31.3) and the capital adequacy ratio. Texnikabank became the seventh bank in Azerbaijan to lose its licence in the past few weeks.

It later handed NBCBank back its licence after it said that it had entered into negotiations with KredoBank and ParaBank about a possible merger.

Another commercial bank, Caucasus Development Bank, said it intends to merge with Gunay Bank and Atrabank.

Azerbaijan is trying to deal with the fallout from a sharp drop in the price of oil, its main export. This has hit its economy and its currency, the manat, putting increasing pressure on the banking sector.

There are currently 37 commercial banks operating in Azerbaijan.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)

Business comment: Central Bank intrigue in Kazakhstan

FEB. 5 2016 (The Conway Bulletin) — In Kazakhstan, the Central Bank resumed its work as the country’s financial regulator after a three-month hiatus, increasing interest rates by 1 percentage point to 17%.

Daniyar Akishev, the Central Banker, is at the helm again, it seems. He even ordered a handful of interventions in the currency market in January, something he had ruled out since his appointment last November.

Now, Kazakhstan watchers expect monetary policy to become more stable and predictable in the coming months. The next policy meeting will be held in six weeks, one week before a parliamentary election on March 20.

Still, many don’t see Mr Akishev’s position as an independent one. He is a seasoned Central Bank employee, but it is clear that he is not as free as many Western Central Bankers are.

A recent symbolic move could corroborate this view. This week, Kazakhstan’s President Nursultan Nazarbayev signed a decree that makes the Central Banker’s signature on the back of banknotes redundant.

Only eagles, monuments and the President’s handprint will continue to feature in Kazakhstan’s colourful currency.

The Central Banker’s signature is a convention that most countries in the world adopt.

Kazakhstan will now join a handful of countries that don’t feature their Central Banker’s signature on banknotes. This group includes China, Japan and Uzbekistan.

This might be, essentially, a final step by the Kazakh government to strip the Central Bank of the independence it gained under former governor Grigory Marchenko who left in 2013.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)

Azerbaijan Central Bank closes banks which fail capital stress test

JAN. 27 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank stripped six banks of their licences because they failed to meet newly imposed minimum capital requirements, a strong signal that the authorities want to weed out weaker banks to try to fend off a deepening financial crisis.

The six banks — Ganja Bank, Bank of Azerbaijan, United Credit Bank, NBC Bank, Caucasian Development Bank and Atrabank — all lost their licences in the past 10 days. This leaves just over 30 banks operating in Azerbaijan.

“Banks that don’t meet requirements and have major shortcomings can’t operate in Azerbaijan,” President Ilham Aliyev said in a televised statement, hinting at more closures.

In mid-2012, Azerbaijan’s Central Bank increased by five times the minimum capital requirements for commercial banks from 10m manat to 50m manat (then around $64m, now $31.3m). The deadline for all banks in the country to comply with the new requirements was first set for 2013 and then delayed to end-2015.

For banks, one way to avoid closure and improve financial health is to unite. AGBank and DemirBank signed a protocol to merge last week and Pasha Bank, Kapital Bank and Atabank are in talks to create a single lender, according to Bloomberg.

Last week, ratings agency Moody’s downgraded several of the biggest banks in Azerbaijan, a direct consequence of the negative impact of the manat depreciation. Three of Azerbaijan’s top-10 banks, Xalq Bank, Bank of Baku and Unibank, were among the lenders on Moody’s radar.

With the Azerbaijani manat falling by 35% since Dec. 21, this is a particularly tough time for Azerbaijan’s banking sector and for ordinary people. The IMF has also flown into Baku to potentially offer a loan.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Business comment: Tough times for banks

JAN. 29 2016 (The Conway Bulletin) — Government policies towards the banking sector are key to survival during tough economic times.

In this new downturn, which has already lasted longer than the 2008/9 Financial Crisis, commodity prices have collapsed, hitting oil- exporting countries.

Kazakhstan and Azerbaijan have been among the hardest-hit economies in the South Caucasus and Central Asia.

In mid-2014, Kazakhstan planned to restructure its banking sector by imposing greater capital requirements. The Central Bank wanted the country’s banks to

increase their capital from 10b to 100b tenge ($54m to $543m at the time).

But in August 2015 the Central Bank abandoned the tenge peg to the US dollar, allowing it to fall sharply.

This relieved pressure on its currency but knocked plans to increase capital requirements for banks.

Bank deposits in Kazakhstan are now insured by the government. If the Central Bank had pushed forward with its new capitalisation plan after ditching the tenge-US dollar peg it would have meant that smaller banks would have had to close. The government would then have been under pressure to repay customers who had lost savings. Kazakh officials dodged this by scrapping the plan.

Azerbaijan, by contrast, has pushed ahead with increasing capital requirements at banks despite a 35% fall in its currency over the past month. This has forced small banks to close and larger banks to merge.

All this before introducing universal insurance on deposits. Until now, only savers with up to 30,000 manat ($18,400) were insured.

Time will tell which of the two strategies pays off.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Kazakh bank unveils strategy

JAN. 26 2016 (The Conway Bulletin) — Kazkommertsbank, one of Kazakhstan’s largest lenders, said in a statement that it is working with international consultants on developing a new business strategy to improve the quality of its assets after a merger last year with the debt-ridden BTA Bank. Earlier this month, ratings agency Fitch downgraded Kazkommertsbank’s long-term credit to CCC from B- because of the fall in the value of the tenge.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Azerbaijan’s Central Bank to compensate savers

JAN. 28 2016 (The Conway Bulletin) – Azerbaijan’s Central Bank said it would compensate customers of banks who lost savings in banks which have been stripped of their licences over the past couple of weeks. Legally, the Central Bank is only obliged to compensate up to 30,000 manat ($18,400). Around 6,600 customers will be eligible for the refund.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Business comment: Wealth fund critics come out

JAN. 22 2016 (The Conway Bulletin) — At the end of December, Berik Otemurat, a senior official at Kazakhstan’s Central Bank, picked up the phone and called several newspapers to speak out against the way the sovereign wealth fund was being managed.

He was promptly sacked after his quotes started populating articles. He had said that Kazakhstan’s sovereign wealth fund to be doomed.

Mr Otemurat’s argument was that the sovereign wealth fund was risk averse and that it was pilfering away its cash on low yield investments making low returns.

Low oil prices and the economic slump would combine, he said, to wipe away the fund’s reserves in 6 to 7 years.

Timur Kulibayev, President Nursultan Nazarbayev’s son-in-law and powerful businessman, spoke out against Kazakh money managers to but he’s not in any real danger of losing his job.

He has criticised for months the behaviour of the Central Bank and, effectively, said their management of the economic crisis has been poor.

Mr Kulibayev repeated his criticism last week. His bottom line was: “The government cannot continue spending its reserves to prop up the tenge or the reserves will be extinguished in three years.”

Of course, Mr Kulibayev, the second-richest man in Kazakhstan, is in a much stronger position than Mr Otemurat, so his words will not make him a pariah of the elite. This parallel goes to show that there are only few people who can speak out against Kazakhstan’s economic policy and face no consequences.

The managers of the sovereign wealth fund have said they will change their policy this year. Let’s see if they can stop the drain.

ENDS

(News report from Issue No. 264, published on Jan. 22 2016)

Armenia’s bank wants IPO

JAN. 22 2016 (The Conway Bulletin) – Armenia’s biggest bank Ameriabank said that it would seek an IPO in London within the next couple of years after the European Bank for Reconstruction and Development (EBRD) bought a stake in it. If Ameriabank did list in London it would be the first Armenian company to list on a Western stock market.

ENDS

(News report from Issue No. 264, published on Jan. 22 2016)

Fitch downgrades Kazakh kommertsbank

JAN. 19 2016 (The Conway Bulletin) — Ratings agency Fitch downgraded Kazkommertsbank’s long-term credit to CCC from B- because of a fall in the value of the tenge. Fitch said: “The downgrade reflects a significant increase in the volume of problem (mostly foreign currency-denominated) exposures, primarily as a result of the tenge’s devaluation.”

ENDS

(News report from Issue No. 264, published on Jan. 22 2016)

2nd Mortgage protest takes place in Kazakhstan

JAN. 20 2016 (The Conway Bulletin) – Around 100 women covered in grey sheets marched in protest to Kazkommertsbank and Bank Center Credit to complain about how they treat mortgage holders, their second protest this month. The protesters said that they have struggled to pay their debts since the the tenge lost 50% of its value during a devaluation in August. The authorities in Kazakhstan fear economic problems will trigger social discontent.

ENDS

(News report from Issue No. 264, published on Jan. 22 2016)