Fitch: Azerbaijan’s banking sector liquidity stabilizes

The liquidity of the Azerbaijan’s banking sector has stabilized, said Dmitry Vasiliev, Fitch Ratings director for financial institutions.

Vasiliev made the remarks at the 5th Azerbaijan Annual Event in Baku on Apr. 13.

“Currently, the situation regarding liquidity doesn’t pose a great risk,” said Vasiliev. “Following the outflow of deposits from the banking sector observed in January and February 2016, liquidity is at an acceptable level today, and the further outflow of deposits is not expected.”

He went on to add that the quality of assets will continue to deteriorate, because there is a large number of loans in foreign currency in Azerbaijan, therefore, debt servicing ability of the country’s borrowers deteriorated due to the devaluation of national currency.

“Capitalization of banks also weakened due to the devaluation, and banks now suffer losses,” said Vasiliev. “However, thanks to the bank’s support, one shouldn’t expect any shocks for the sector.”

“We believe that it’s necessary to continue diversification of the economy, structural reforms in the banking and corporate sector,” he said. “It is necessary to reduce the state’s role and share in the economy. Improvement of corporate governance would certainly enhance the situation in the sector.”

Source: Trend