OREANDA-NEWS. November 06, 2008. Аfter the National Bank of Azerbaijan (NBA) cut discount rates from 15% to 12% the country’s largest banks started cutting interest rates on loans, reported the press-centre of IBA.

Chairman of the International Bank of Azerbaijan (IBA) Jahangir Hajiyev said NBA’s decision will bring its fruits in five or six months.

“Particularly the IBA when preparing budget 2009 will take into account this moment and reconsider the interest rates policy. Probably the IBA would reduce interest rates,” J.Hajiyev said.

He also noted that current rates of the IBA are sufficiently competitive at financial market.
“Average rate on loans makes 17-18%. Depending on loan term it could reach 16%. At the same time credit amount will not be reduced as the credit portfolio itself. IBA extended and will extend loans,” J.Hajiyev said.
 
The National Bank of Azerbaijan has launched the process of its rate cutting September 14, 2008. In compliance with the NB Board’s decision the NB rate was cut from 15% to 12% per annum. The NB links its decision with intention to introduce new tools for a possibility of flexible liquidity regulation when strengthening sustainability of financial and banking systems and creation of new finances.

Cutting of rates by 3% has occurred in Azerbaijan for the first time since 2007.

Active increasing of the NB rate started in 2007.

The NB rate of 9.5% kept since July 2006, but since April 2007 grew up to 12%, and since June up to 13%. Since April 10, 2008 it grew up to 14% and since June 9, 2008 up to 15%.

It was 9% from October 2005 to June 2006, 8% for Jun-Sept period of 2005, 7.5% in May 2005, 7% for 2002 – April 2005, 10% in 2000-01.

During the year Azerbaijan’s strategic currency reserves topped US17 bn, overall foreign assets exceeded \\$9 bn of its liabilities that allowed strengthening more country’s position in role of the lender in financial relations with world economy.

Azerbaijan’s strategic currency reserves ensure growth of international liquidity of the country and these reserves are 1.7-fold more than overall foreign debt of the country.

“The measures will allow strengthening more stability of domestic banking sector for foreign economic crisis,” the NB said.

In connection with global financial crisis (credit crunch) leading countries’ central banks have started following coordinated policy.

Federal Reserve System of the United States, Bank of England, European Central Bank, and central banks of Canada, Switzerland and Sweden have announced accorded cutting of their rates.

FRS cut rate by 0.5% to 1.5%. ECB also cut its bank rate by 0.5% to 3.75%, Bank of England by the same 0.5% to 4.5%.