Tag Archives: central bank

More Azerbaijani banks rely on state support to survive

MAY 30 2017 (The Bulletin) — Five more Azerbaijani banks are currently failing to meet their capitalisation requirements, Rufat Aslani, head of the Financial Markets Supervisory Authority told media, suggesting more weakness in the sector.

In May, Azerbaijan’s biggest bank, the International Bank of Azerbaijan, which is 80% owned by the government and has a market share of around 60%, said that it needed to restructure its debt to stave off bankruptcy.

Now, after a series of small banks merged or went bankrupt in 2016, it has emerged that five mid-sized banks are still under the special supervision of Azerbaijan’s Financial Market Supervisory Authority.

“Today, under our supervision, there are five banks, capitalisation programs of which should be completed by mid-2017,” media quoted Mr Aslani as saying at a banking conference in Baku.

Mr Aslani did not name the banks but the Business New Europe magazine named three of them as Unibank, AtaBank and DemirBank — all mid-sized banks. None of the banks responded to requests for comment. The EBRD owns a 25% stake in DemirBank and Dutch development finance company FMO owns a 10% stake.

The Central Bank has imposed increased capitalisation rules to strengthen the sector. A recession in Russia and a collapse in oil prices since 2014 have halved the value of the Azerbaijani manat and heavily dented the banking sector.

Analysts had warned that Azerbaijani banks have been too relaxed about lending.

The currency devaluation and poor economic conditions have triggered a surge in bad debt which Moody’s, the rating agency, said stood at 30% of the banking sector’s loan portfolio.

ENDS

(News report from Issue No. 331, published on June 5 2017)

Uzbekistan’s long-serving Central Bank chief dies

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MAY 28 2017 (The Conway Bulletin) — Uzbekistan’s Central Bank chief, Fayzulla Mullajanov, died on May 24. He was 67-years-old and was perhaps the world’s longest serving Central Bank chief, officially holding the position since independence from the Soviet Union in 1991.

According to media reports, Mullajanov had been suffering from a kidney disease for sometime. In 2013 Ferghana News even reported that Mullajanov had fallen into a coma. This was denied but it is doubtful that Mullajanov has exerted much influence over Uzbekistan’s monetary policy in the last few years — either because he hasn’t been well enough or he simply hasn’t been empowered.

Appointed by Islam Karimov to head the Central Bank, Mullajanov was your archetypal Soviet-style official, prepared to put on a brave face and carry through decisions made by others.

He didn’t make monetary policy but he was expected to sell it.

This was clear from a US embassy report from May 2009 published, later, by Wikileaks.

In the cable, the US ambassador to Uzbekistan at the time, Richard Norland, recounted a series of meetings he had with senior Uzbek officials during a trip to Tashkent by deputy assistant US trade representative Claudio Lilienfeld. Mullajanov featured in the dispatch but only towards the bottom.

“After listening to a half hour recitation of Uzbekistan’s economic success and successes in the banking sector, Lilienfeld remarked that a major disincentive for US businesses to invest in Uzbekistan is the difficulty with capital convertibility,” Norland wrote.

“Expressing surprise that convertibility could be an issue, Mullajanov responded that conversion is done by the commercial banks. He assured us that he would personally look into any convertibility problems if they are brought to his attention in writing.”

Nothing more was said of Mullajanov in the memo, but Norland’s exasperation towards the Uzbek Central Banker was tangible. Mullajanov had been rolled out to sell Uzbekistan as a serious economy to the visiting US delegation. The reality was, as everybody knew, Karimov called the shots.

Uzbekistan’s monetary policy is dominated by its currency and this is set by central government. Mullajanov, who had only ever worked at the Uzbek Central Bank, was the face of this policy but not the architect.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Head of Uzbek Central Bank dies

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MAY 24 2017 (The Conway Bulletin) — The head of Uzbekistan’s Central Bank, Fayzulla Mullajanov died aged 67 from complications linked to kidney disease, media reported. Mullajanov had been head of the Central Bank for 14 years and retained his position when Shavkat Mirziyoyev took over as president after Islam Karimov died in September 2016. In reality, the Uzbek Central Bank has little independence from central government.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Georgia’s Central Bank raises rates

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MAY 2 2017 (The Conway Bulletin) — Georgia’s Central Bank raised interest rates to 7% from 6.75%, its highest rate since June 2016, because of supply-side price pressure. One of the Central Bank’s key remits is to keep inflation at 4% and it said that one- off price rises, such as an increase in excise duties, were pushing up prices. It also said, though, that it didn’t expect any more interest rate rises this year. Annualised inflation in March was 5.4%.

ENDS

(News report from Issue No. 327, published on May 5 2017)

Panic fuelling monetary crisis, says Tajik CBank

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APRIL 13 2017 (The Conway Bulletin) — Tajikistan’s Central Bank said that panic speculation was driving up the cash exchange rate against the official rate to dangerous levels. The Reuters news agency said that the official somoni rate was 8.49 somomi/$1 compared to 8.9/$1 at cash exchanges. Tajikistan’s banking system has been teetering on the verge of collapse, only propped up by the government.

ENDS

(News report from Issue No. 325, published on April 17 2017)

Comment: The green shoots of a recovery are visible

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APRIL 6 2017 (The Conway Bulletin) — In Edinburgh, where The Conway Bulletin has its editorial HQ, the green shoots of a timid spring are finally beginning to breakthrough after a long, grey winter.

And it’s the same scenario for the economies of Central Asia and the South Caucasus. A deep, bleak winter has enveloped them since mid-2014 but now, finally, data suggests a revival is on the horizon.

In this week’s newspaper, we report that both the Kyrgyz and Armenian Central Banks have kept their key interest rates steady. This, in itself, is a victory. Armenia has been furiously cutting its rates from a high of 10.5% in 2015 to 6% to try to stimulate growth and beat deflation. Now it says this policy has gone far enough and that inflation of around 4% is predicted this year.

In Kyrgyzstan, the economic news is even more upbeat. In its statement explaining just why it had kept interest rates steady, the Central Bank said that it was no longer having to intervene in the money market to keep the som currency from sliding. It also said that the economy had grown by 5.4% in January and February compared to the same period in 2016.

Armenia and Kyrgyzstan are two of the smaller economies in the region but the larger economies are also reporting positive news.

In Georgia, the statistics agency said that the economy had grown by 4.8% in the first two months of the year, pushed up by a growth in exports and an all- important rise in remittances. Georgia may also be benefiting from several local factors. Improved relations with Russia have given exports a major boost, especially wine, and the scrapping of visa regulations for Iranians has encouraged a large rise in tourists and business trips.

For the region’s two major economies the data has been less flattering, although there are still signs of improvements. In Azerbaijan, there is disagreement between economists on whether its economy will grow or not after it shrank by 3.8% in 2016. It’s dependent on oil, and prices are currently hovering around $50/barrel, above the anticipated $40/barrel.

In Kazakhstan, the Central Bank last month cut its interest rate and gave its most upbeat assessment of the economy, pointing out that inflation was under control and growth was expected.

And if you’re still not convinced about those green shoots of economic recovery, and that’s understandable as, just like a Scottish spring, they are fragile, take a look at the Azerbaijani manat and the Kazakh tenge. They are both up against the US dollar by more than 5% this year.

By James Kilner, Editor, The Conway Bulletin

ENDS

(News report from Issue No. 323, published on April 6 2017)

Kyrgyz economy is improving, says C.Bank

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MARCH 27 2017 (The Conway Bulletin) — Kyrgyzstan’s Central Bank kept its key interest rate steady at 5%, half the level it was 12 months ago, citing an improvement in the economy and a slowdown in inflation. Importantly it said that the economy had grown in the first two months of the year and that the som currency had stabilised without the Central Bank’s interference. Currencies and economies in the Central Asia/South Caucasus region have been hit hard since 2014 by a recession in Russia and fall in oil prices.

ENDS

(News report from Issue No. 323, published on April 6 2017)

Kazakh Central Bank says to buy KKB bad debt

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ALMATY, MARCH 15 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank confirmed that it would buy up 2.4 trillion tenge ($7.5b) of bad debt owned by Kazkommertsbank, effectively subsidising its purchase by Halyk Bank.

Halyk Bank, owned by the daughter and son-in-law of Kazakh president Nursultan Nazarbayev, agreed to buy Kazkommertsbank earlier this year for an undisclosed amount in a deal that will give it a 38% market share and Kazakhstan’s elite control of the banking sector.

The 2.4 trillion tenge bad debt held by Kazkommertsbank is a legacy of its purchase of BTA Bank from the government. The government had

bought it in 2008/9 when it was about to collapse during the Global Financial Crisis.

Separately, deputy Central Bank chairman Oleg Smolyakov said it would take two to three months for Halyk Bank to carry out its due diligence of Kazkommertsbank before the takeover could be completed.

ENDS

(News report from Issue No. 321, published on March 20 2017)

Currencies: Azerbaijani manat

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MARCH 20 2017 (The Conway Bulletin) — The Azerbaijani manat continued its strong return to form, pushing up to 1.7286/$1 by March 17, its strongest level against the US dollar since the beginning of November 2016.

At its weakest point, the manat had been valued at 1.9517/$1 in February, meaning that it has strengthened by nearly 11.5%.

The European Bank for Reconstruction and Development (EBRD) has said that this manat strength is probably due to a transfer of 7.5b manat ($4.3b) from the SOFAZ, the state oil fund, to the Central Bank to boost the economy. The Azerbaijani economy has been looking fragile, because of the depressed price of oil, and it has needed the cash injection.

The Kazakh tenge and the Georgian lari also rose marginally in value throughout the week, although the Kyrgyz som and the Tajik somoni fell in value. The Kyrgyz som is surfing near its lowest point since mid-September 2016.

ENDS

(News report from Issue No. 321, published on March 20 2017)

Kazakh C.Bank loans Delta $31m

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MARCH 7 2017 (The Conway Bulletin) — As part of its well-publicised plan to help its struggling banking sector, the Kazakh Central Bank said that it had loaned Delta Bank, one of the smaller banks in Kazakhstan, 9.8b tenge ($31m), media reported. The loan, made on March 3, was linked to a missed coupon repayment that Delta Bank had needed to pay. This was connected to pension obligations.

ENDS

(News report from Issue No. 320, published on March 13 2017)