OREANDA-NEWS. November 20, 2009. The global financial crisis is the basic trend currently defining the condition of national economies and their banking systems. The leading international financial institutions reckon Azerbaijan among the group of most stable countries resistant to the global turmoil. But each bank taken separately, has its own experience of surviving in the time of crisis and searches for an offbeat approach enabling to come out of currently difficult and controversial situation with credit and minimum costs. Moreover, despite the known difficulties, we should never stop at what has been accomplished and must move forward to gain ground while thinking about the future prospects of development after the crisis will be over. That is exactly the way Jahangir Hajiyev, Chairman of the International Bank of Azerbaijan (IBA), the vice-president of CIS Financial and Banking Council, is inclined to think, reported the press-centre of IBA.  
 
This is the difficult, but interesting time, indeed.
– The world is going through the extremely difficult times. What does this period of time signify to you?
- The times are really difficult, yet interesting and instructive. For most countries of the world, especially for those in transition, last year was the formidable challenge to the stability of their financial and banking systems. We have all witnessed how the financial crisis and the subsequent macroeconomic downturn have shaken the foundations of global economic system, which have earlier seemed to be secure. The entire configuration of global financial architecture, which has been taking its shape throughout the past few decades, is changing beneath our very eyes. It is becoming transformed, getting renewed, and have already become totally different, the fact that requires of us the readiness to operate in another, unusual economic environment.

Nevertheless, the crisis is also a favorable time to reconsider the existing stereotypes, to reorder the priorities, to search for new opportunities. Economic collapses always indicate the inevitability of changes. The need for innovative decisions, more perfect development strategies, and much higher level of interrelations. This is an indispensable condition of the full-fledged advancement to integration and progress. This is especially true regarding the countries with the economy in transition, and in particular for the Commonwealth of Independent States.

– How is the situation in the national banking systems of the Commonwealth of Independent States?
- It is quite natural that the cataclysms, which are shaking the international financial markets, have had a substantial impact on the CIS countries, exposing their weaknesses and illnesses. Having originated from the USA and Europe, the surging wave of crisis overwhelmed the national banking systems of these countries, especially those of Kazakhstan, Ukraine, and Russia. The review of "Standard & Poor's" published in May 2009, particularly attests to it, according to which in the context of difficult macroeconomic situation, the banks of these three countries are subject to the high credit and liquidity risks.

At the same time, it is also noted that it will take a long period of time before the existing problems can be resolved. Simultaneously, the crisis has demonstrated the similarity between the banking systems of post-Soviet countries. They took an active part in the process of economic globalization before they realized all the consequences of increasing global interdependence and proved to be unstable in the time of financial turmoil and political earthquakes. The level of risks in their banking systems is considered to be one of the highest in the world.

I think that difficulties faced by our economies cannot be explained by only the external negative influence. It would be oversimplification. Currency and monetary reserves accumulated by the CIS countries enabled them to take alleviating measures aimed at mitigating the impact, but did not eliminate the problems in their economies. The external shock has only revealed our own problems.

– What is the cause of heterogeneity in the banking systems of the CIS countries? What, in your view, are the prospects of their development in the short run?
- The marked contrast between the levels of development in the banking systems of CIS countries, to some extent, reflects the regional and national differences. Despite their huge potential for growth, the efficiency of processes that take place here over the last few years is different. It can, first of all, be explained by the existing macroeconomic situation, as well as the monetary policy that is currently being implemented, particularly with respect to the local banks. The global economic recession has only aggravated the errors and mistakes made in the domestic policy of many post-Soviet countries. There are such negative phenomena as high inflation, curtailment of underdeveloped internal credit market as it is, followed by the slump in demand, sag, exchange rate volatility, growth of unemployment, decline in living standard among the significant part of population, social stratification, and etc.

As for the banks, the rapid growth of assets and loan indebtedness, insufficient information transparency, low capitalization, high concentration of business and a number of other factors, make them more vulnerable to economic and political turmoil, and hamper the development of banking sector as a whole. The emerging situation forces us to jointly search for effective ways of solving problems arising in the banking sector, using accumulated positive experience, and strengthening business connections. Of course, the prospects of development in banking systems of CIS countries are different. The results of their reformation and integration to a considerable extent depend on our own actions, probably, not always identical, taking into account the specificity of economy in each country, particularly its investment and financial environment. I entirely support view on the necessity for taking advantage of this crisis in order to try to modify the national banking systems in CIS countries in conformity with the present-day realities and to achieve a qualitative shift in the mechanism of their financial interaction.

– What are the distinguishing features of economic development in Azerbaijan in the time of global recession?
- Azerbaijan, as well as the other countries with transition economy, and not only they, felt the impact of global financial crisis. However, due to the fact that the country has made a great progress over the period of sovereign development, we have proved to be rather better prepared for the current challenges. In confirmation of the above-said, I will cite only a few figures. For over the past five years the economy has grown by more than 2.6 times - this is the best result within the CIS. And even in the current year, against the backdrop of global economic recession, over the period of nine months, the GDP has increased by 6.1%. In terms of this indicator, we rank among the leaders in CIS.

According to "Economist Intelligence Unit", the authoritative British Research Centre, for the countries with transition economy, Azerbaijan has reached a sufficiently high rate of GDP per capita (with an allowance for PPP (purchasing power parity)) - 11.4 thousand US dollars, with a 2.5 times growth for over the past five years. In the years before the crisis, owing to the good economic strategy, first of all, in the energy sector, the country succeeded in accumulating considerable financial reserves. That is, in 2004-2008, the country's strategic gold and foreign currency reserves increased by more than 12 times. At present, they are about 19 billion US dollars, which is way above the amount of the external debt of the state. Other macroeconomic indicators are also consistently improving. In particular, over the period of nine months of the current year, the rate of inflation has scarcely exceeded 2%. It is the evidence of consumer prices' stability, and, of course, the minimal impact of crisis on the living standards of population.

– These successes are apparently attributable to the country's oil export, aren't they?
- Certainly. However, if you analyze our indicators in the context of current crisis and considering the fall in oil prices, you will see that the progress in domestic economy is connected not only with rich energy resources, but also with the radical reforms implemented for over the past years. Its diversification and modernization, creation of favorable investment climate, support for private enterprise, all this promotes further growth of non-oil GDP and investments, and steady increase in budget revenues.

The large-scale infrastructural and social projects are implemented by attracting both foreign and local investments. Of course, all this has a direct effect on the improvement of people's wellbeing. I mean, first of all, the fourfold reduction of poverty level in the country (down to 13.2%) for over the past five years. The problem of unemployment has almost been eliminated; the development of regions is more balanced. Nowadays, our country may be considered as self-sufficient, providing itself with financial, energy, food, and manpower resources. Owing to the achieved results and the timely taken preventive measures, Azerbaijan economy has worthily withstood the first and most shocking challenges of the global crisis. Such counteraction rode on many factors.

The stock market in Azerbaijan is only at the beginning of its development and has not yet been integrated into the international financial institutions. As for the restricted access to the external financial resources, it must be admitted that the domestic banking system has proved to be ready to such course of events. After all, we did not overuse the external borrowings in the past as well. Accounting for only a quarter of joint liabilities (2.5 billion US dollars), by the beginning of a current year they had already significantly decreased, and following the results of 8 months amounted to slightly more than 1.8 billion manats. The state investment strategy favors internal financial resources. Moreover, Azerbaijan itself gradually grows into the exporter of capital. In the current circumstances, the insignificant share of non-residents in the banking sector and in the capital market also became the positive factor.

– Probably, due to this fact, today the country has no problems with the outflow of capital from the economy and there are no associated risks?
- That's right. I would like to dwell at length on the exchange rate policy. In the time of crisis, its selection turned out to be a rather difficult problem. Unlike many countries, where the exchange rates have undergone notable changes, the rate of manat versus the leading world currencies is distinguished by its strength and stability. And, at the time of crisis, we, by contrast with the "parade of devaluations" in the CIS countries, have been able even to strengthen our national currency. Moreover, there is a significant surplus both in the country's state budget and on the current account of the balance of payments. I would also like to add that the positive changes observed for over the past months in terms of such indicators as business index, index of monetary conditions and base inflation, testify to the revival of demand and increase of liquidity in the economy. In other words, the country has painlessly adapted to the conditions of instability at the global financial markets. And as a telling illustration of "reformatory spirit" in our country that is stiffened by the policy carried out by Azerbaijan President Ilham Aliyev, I would like to draw attention to the following fact: in its report "Doing Business 2009", the World Bank ranked Azerbaijan as the world's leading country with regard to economic reforms. In the overall rating by countries with regard to the business climate acceptability, Azerbaijan has moved up by 64 positions and took 33rd place.
 
Anti-recessionary measures
– What was the role of government institutions in this regard?
- I unequivocally assert, and I'm sure that I express the general opinion, that: anti-recessionary program of our country's President Ilham Aliyev, the implementation of which had started in the second half of last year was of crucial importance. The program contains a variety of measures, among which the important place is assigned to the support for the national banking system. In particular, it was considered the possibility of providing additional resources from the government to the domestic commercial banks and depositing the certain amounts of Azerbaijan's monetary reserves kept abroad with the most reliable of those banks, provided that these funds would be directed exclusively into the real sector of economy.

The Central Bank of Azerbaijan (CBA) may undoubtedly be given credit for restraining the negative developments caused by the impact of global recession on our economy, for its thoroughly adjusted anti-recessionary policy, and for the important and effective monetary measures taken by it. During the enlarged meeting at the Cabinet of Ministers dedicated to the discussion of results of country's social and economic development within nine months of 2009, it was especially emphasized the prompt and absolutely adequate response of CBA to the challenges of global crisis. The similar appreciation contains in the recent reviews of "Standard & Poor`s" on Azerbaijan.

– Citation of all anti-recessionary measures will, probably, take a lot of time. And, what has been made directly for the banking system?
- The monetary policy was essentially liberalized; the flexibility in application of financial instruments was increased. The interest rate was repeatedly reduced (from 15% down to 2%). The cap and floor currently range from 1% to 7%. The reserve ratio on internal sources of financing have been reduced from 12% down to 0.5%, while on external ones - is cancelled at all. The fivefold increase in limit of guaranteed bank deposits within the framework of deposit insurance fund (since May 2009, up to 30 thousand manats) can be considered as a positive step in terms of increasing the confidence in banks among the population.

The banks and insurance organizations were exempted from tax on incomes allocated to the capital. The implementation of project aimed at improving the risk-management has started. The currently applied mortgage-lending model is more advanced as compared to the one that has been used before. And this is only a part of what has already been done. By the way, according to the research conducted by the Russian Institute of Post-crisis World, the overwhelming majority of experts have emphasized the leadership of Azerbaijan (alongside with Russia and Kazakhstan) in implementation of anti-recessionary measures. They made a special mention of the competent policy carried out by the country's leadership, and only its anti-recessionary program was recognized as being fully in line with the package of measures recommended by the expert community.

– And, what is the efficiency of these implemented anti-recessionary measures?
- I consider that the gained effect has exceeded expectations. As a result, the national economy has been supplied with liquidity amounting to almost 2 billion US dollars. The reduction of reserve requirements in the banking system alone has made it possible to capitalize over a third of this amount. Within the framework of anti-recessionary measures, some banks have received a direct financial support in the total amount of 130 million manats. It accounts for only 0.2% of GDP, that is much less than in the other countries, where this figure reaches up to 3-5%. The coordinated actions of the Cabinet of Ministers and the Central Bank of Azerbaijan, their prompt and effective measures enabled to protect the domestic economy from the impact of the first wave of global crisis - the strains on liquidity.

Thereby, we managed to avoid the system banking crisis, to ensure the normal functioning of country's payment system, and to prevent the panic among depositors. I do not doubt for a moment that the implementation of anti-recessionary program will help to cope with the negative impact of global crisis and will raise the national economy and its banking sector to a qualitatively much higher level. It must be admitted that Azerbaijan looks good enough in the world economic community. Thus, in terms of the index of global competitiveness for 2009-2010, published by the World Economic Forum at the beginning of September of current year, Azerbaijan took the highest place among the CIS countries - 51st, moving up by 18 points in comparison with the results for the previous year. In terms of the indicator of economic globalization, Azerbaijan took 76th position among 158 countries of the world included into the rating, and 5th among the CIS countries, leaving behind Ukraine, Russia, Belarus, and also the countries of Central Asia, except for Kazakhstan.

I think, there will also be interesting to consider the rating assessment of such factor as the political stability, achieved thanks to the diligent activity of President Ilham Aliyev. This factor plays a key role in economic growth of Azerbaijan and the dynamical development of its financial and banking sector. According to relevant index for 2009-2010, calculated by "The Economist Intelligence Unit", Azerbaijan takes 53rd place among 165 countries of the world (in 2007 - 82nd place), including the fifth among the countries with transition economy and the third among the countries of the former Soviet Union. In terms of this indicator we take much better position than such developed countries as the USA, France, Spain, and our regional neighbors - Georgia and Armenia, as well as the Baltic States and the countries of Central Asia (except for Kazakhstan), Russia, Ukraine, and Moldova. We also receive quite a high country ratings from the leading international agencies, such as: "Fitch Ratings", "Moody`s", and "Standard & Poor`s".
 
Stable bank in a stable system
– And, how do matters stand in financial and banking sector?
- The European Bank for Reconstruction and Development and the International Monetary Fund have come to conclusion that the financial system of Azerbaijan has not been significantly affected by the global liquidity crisis. Quite a fresh example characterizing the situation against the backdrop of instability at the financial markets: in terms of the above-mentioned Index of Global Competitiveness by countries for 2009-2010, with regard to the factor of progress in the financial market, Azerbaijan, in comparison with last year, has made a great leap from 92nd place up to 66th place, and in terms of the rating of world's banking systems has moved up by 10 positions and left behind such countries as the USA, the Great Britain, Russia, Ukraine, Kazakhstan, Latvia, Tajikistan, and Kirghizia.

In terms of the indicator of "Financial Sector Stability", relating to the banking sector, of the "Global Rating of Financial Health - 2009" from the "The Banker" journal, Azerbaijan has taken much higher place than many leading countries of the world - at 54th place among 184 countries. I consider the above international assessments as the argument base, which confirms the reformatory pragmatism characteristic for our economy and financial and banking system. At the same time, I am far from idealizing the processes that are going on here. We still have unresolved problems and bottlenecks. They are well known and are always in the center of attention. The Presidential Administration, the government, the economic ministries and departments, and the Central Bank are working permanently and tirelessly on elimination of these problems. And, I am convinced that the reforms along these lines be continued.

– How are things progressing in the International Bank of Azerbaijan? Are there any changes in its position within the country's banking sector?
- The International Bank of Azerbaijan can be ranked among the most successful domestic financial institutions. Having passed through all stages of formation of national economy, the bank is rightfully recognized as the backbone, the core of country's banking sector. Having gained a foothold as one of the largest and reliable brand financial holdings in the Caucasian region, IBA holds the dominant position in all segments of the country's financial and banking market. Its affiliated structures also dominate in such spheres as insurance and plastic cards processing. Over the long period of time, IBA adequately represents Azerbaijan on the international scene. During these years, it was many times the winner in nominations from the influential foreign financial and information structures and received quite high international ratings. And, finally, being the bank of national development, IBA exerts a stabilizing influence upon the condition of Azerbaijan economy as a whole. It must not be forgotten that, being positioned at the second level of country's banking system, we, properly speaking, are the main bearer of the monetary policy developed at its first level - the Central Bank of Azerbaijan.

– Are you comfortable working in the time of crisis?
- I have to admit that at first I instinctively felt slightly uncomfortable. But behind us we have a long experience of successful work and an active innovative and integration position. It has also played a decisive role in continuous strengthening of the bank's image even during the active phase of global financial crisis. And even in the thick of a global turmoil associated with the worst expectations, we managed to maintain the positive dynamics in terms of all indicators of banking activity. In April of current year, the Board of Directors of the "European Economic Chamber of Trade, Commerce and Industry" ranked IBA as the most stable credit organization in Europe successfully operating in the time of global financial crisis. In the same month, the bank was awarded the prizes from two world's leading information and analytical journals: the "Best Bank in Azerbaijan" in the nomination for the "Best Banks in the World's Emerging Markets" from the "Global Finance" journal (New York), and the "Best Local Bank" in the nomination for the "Best Bank in CIS, Central and Eastern Europe" from the "Emeafinance" journal (London). And in June, "Fitch Ratings" confirmed the long-term default rating of the issuing bank at the level of "ВВ+" with the stable forecast.

– What changes have taken place in the activity of IBA due to the crisis? How it was affected by the tightening of conditions for external borrowings?
- During the depths of global crisis, IBA, being the leader in the credit market of Azerbaijan, began to follow the standard banking practice - minimization of credit risks. That is to say, switched from credit expansion over to cardinal raising of standards with regard to quality of borrowers and the casework. In the first place, we tightened the requirements with regard to financial circumstances, liquidity of security, and recoupment of financed project. Despite the tightening conditions at the international capital markets, we succeeded in raising additional funds abroad.

Thus, in August of a current year, we signed a syndicated loan agreement for the amount of over 60 million US dollars. The authorized joint managers of this syndication were the leaders of international banking business: "Citibank", "Raiffeisen Zentralbank", and others. In whole, 10 banks from different countries of the world participated in this syndication. We also raised funds at the domestic money market. The procedures related to obtaining funds from "Royal Bank of Scotland", for the amount of around 50 million US dollars, are currently being finalized. In addition, on a regular basis, the Swiss bank "BCPG" makes available the monthly deposits of up to 20 million US dollars. We also plan to raise funds for the amount of around 150 million US dollars on the basis of private placement, and enter into other, not so large agreements.

– What are your plans with regard to augmenting the bank's capital?
- The increase of bank's capital is one of our top priorities. At the beginning of September, 2009,  IBA's share capital totaled 585.7 million manats (of which 200 million manats was the bank's authorized capital). In terms of this indicator, we surpass our nearest competitor in the country by more than 4 times. Strengthening of bank's capital base was facilitated by the receipt of budgetary funds, as well as the capitalization of the part of profit (40 million manats) for the third quarter of a current year. Despite the sufficiency of capital in terms of standard indicators specified for banking activity, its current rates of growth cannot be considered as corresponding to our plans for development. Therefore, in the near term, we intend to increase the share capital up to 1 billion manats.

– IBA can be rightfully considered as the leader in innovations. Do you promote anything new in the time of crisis?
- The current processes convince the banks of the need for reconsidering their attitude towards new technologies. The introduction of innovations is advancing within IBA in many directions. This includes the attraction of financial resources by way of securitization, expansion of the network of electronic service offices equipped with the cash-in type ATMs (automatic teller machine) and information booths, introduction of mobile banking and electronic commerce systems, application of up-to-date marketing communications, and then some. It is appropriate to recall that last year, the number of electronic banking operations increased by more than a third, while their total amount - by almost 40%. The positive dynamics has continued to the current year - a half-year growth is up by 1.4 and 2 times, respectively.
 
International cooperation
– The International Bank of Azerbaijan is known for its active participation and taking the lead in integration processes within the economic space of the Commonwealth of Independent States. What the bank intend to do to promote further development in this direction?
- For the bank, this line of development is of strategic importance; therefore, we are working hard on it. Our affiliated bank in Moscow has already opened the branch offices in St.-Petersburg and Yekaterinburg. IBA also expands its presence in the other post-Soviet countries. Our affiliated bank "IBA-Georgia" has already been operating for more than two years. We also intend to enter the markets of other CIS countries. First of all, the markets of Kazakhstan and Ukraine.

– Will the integration help the CIS countries to come out of a recession?
- Certainly, but this requires a comprehensive program. I think it is appropriate to carry out a joint development of weighed and real strategy for integration of monetary and financial spheres of CIS countries, creation of flexible and sensitive mechanisms of interaction between the banking systems in crisis situation. We would really like to see in this sphere a unified and transparent information space. This implies the necessity of conducting a comprehensive analysis of current processes at the financial markets of CIS countries, extensive exchange of information between them, establishment of coordination in the sphere of analysis and forecasting of international macroeconomic processes. Of course, that is not the whole framework of problems, which must be addressed in the course of anti-recessionary integration. One of the important and perspective problems is increasing the total share of national currencies in mutual trade. This issue is now raised more often and wins more and more supporters. The solution of above-mentioned problems will strengthen the positive effect of integration initiatives, and, in the long term, may lead to establishment of effective and stable links between the financial and banking systems of CIS countries.

– But the CIS is not the only direction of interbank cooperation?
- Certainly. In parallel with the CIS, IBA closely cooperates with the international banks for development - European (EBRD - European Bank for Reconstruction and Development), Asian (ADB - Asian Development Bank), Islamic (IDB - Islamic Development Bank), and German (KfW - Kreditanstalt fur Wiederaufbau). The special attention is given to the Gulf States, where our representative office in Dubai has already been operating. Another vector of our integration participation is also equally important. I mean the growth in volumes of banking operations at the international money market and the market of capitals. Working with syndications has always been a priority for IBA. This aspect of our activity takes on special significance in the context of limited access to the relatively inexpensive foreign financial resources. Since the beginning of a current year alone, we have signed the syndicated loan agreements with the world's largest banks for the total amount of over 200 million US dollars. In the time of ongoing global financial crisis and the shortage of liquidity at the international financial markets, this serves as the evidence of confidence and great interest displayed by foreign investors with respect to IBA.

– And, how do matters stand with the repayment of external debts?
- Under the current circumstances this the point of prime importance. We have ensured the timely repayment of external loans borrowed by us: in 2008, the total amount of repayments made 800 million US dollars, while since the beginning of a current year - 217 million US dollars. I make no doubt that in future there will also be no delays in this respect.

– When intensifying the integration cooperation, to what extent are you prepared for the changes in the international financial architecture after the crisis?
- Judge for yourself: the establishment of modern banking system in Azerbaijan begun against the backdrop of system crisis on the post-Soviet territory and disintegration of ruble zone. Then were the Asian and Russian crises of 1998, the test, out of which the country came with minimal losses. As to the current crisis, its limited impact on financial sector in Azerbaijan partly rides on the fact that our banking system is not so closely involved in the global financial system, and also has some experience of functioning in the conditions of market instability. In the time of transition to the multi-polar structure of global economic space, the integration of monetary and banking systems of Azerbaijan with the global financial centers, which has substantially been based on the "dollar-euro" vector, is currently being diversified.

Asia and the Pacific and the Islamic countries, where, in particular, for over the past years, there is a tendency for establishment of optimum currency areas, now emerge as the new areas of monetary integration. We consider them as the modern alternatives to the currently existing global financial centers. The development of cooperation in these directions will contribute to the improvement in adaptation of country's banking system to the global crises. Recently the Azerbaijan Banking Association, the vice-president of which I am, has signed two agreements - on establishment of Central-Eurasian Banking Federation that consists of the banking associations from the countries of Central Europe, Central Caucasus and Central Asia, and on cooperation with the Association of Financial Institutions for Development of Asia and the Pacific that unites 100 financial institutions from 40 countries of the world. I consider that these are just the beginnings of new interbank channels of integration, which should be treated as a very promising trends.

– The IBA is known for its wide experience in working with various financial institutions of Islamic world. Does the bank have any plans for development in this area of activity?
- Nowadays, all over the world, much attention is given to the Islamic banking. Thus, five Islamic banks operate in Great Britain, two -  in the USA, and in the nearest future, they are expected to emerge in a number of other western countries: Italy, France, and Sweden. Moreover, 17 British banks and branches of foreign banks operating in the United Kingdom, have the specialized departments - "windows" that render Islamic financial services. In the time of crisis, there is a surge of interest in this subject.

The article that appeared in March in "Osservatore Romano" (the official journal of Vatican) called upon the western banks to thoroughly study the principles of Islamic financial system in order to restore client confidence in the time of crisis. Considering our well-established relations with Islamic financial institutions, we will continue to develop this area of activity: IBA plans to establish a wholly owned affiliate in Qatar in 2010, we seek for opportunities to enter the perspective capital markets, we carry on negotiations with new partners and investors in the Muslim East. Inside the country, there is also a demand for products and services that are structured on not an interest-bearing basis. The negotiation process with Islamic Development Bank on setting up of "Islamic window" in IBA has already started. By the end of this year, a specially organized working group shall present the proposals for its opening. At the same time, our bank, as the privileged partner, will participate at the largest annual international conference on Islamic Banking, which is to take place at the beginning of December in Manama - capital of Bahrain. This event strikes with the number of conferees - 1200 delegates from 50 countries of the world. This sets one thinking about the increased demand for this tenor.
 
On the way to integration of payment systems
– The recently ended Second Baku International Banking Conference of the CIS member states has discussed the issue of establishing the regional international financial centre in the capital of Azerbaijan - Baku. What do you think about this motion?
- At this bankers' forum there had really been much talks about the establishment of such centers. Almaty has made some appreciable progress in this direction, Moscow strenuously prepares for this. The organization of such centre in the capital of our country - Baku - is still at the stage of discussions; therefore, the experience of the above-mentioned cities, as well as the other ones, in particular, Frankfurt am Main, is the subject of our close attention.

– What are the chances of Baku becoming the international financial centre?
- I think it has a good chance of becoming the regional financial centre, considering the special emphasis placed by President Ilham Aliyev on our capital. Of course, there is a lot of work still to be done by the banking community. In addition to the measures aimed at a direct streamlining of the banking market, it is necessary that the national legislation should provide for some preferences and privileges to this centre, and to make changes in the regulatory and legal framework with regard to the issues related to its establishment, and building of an appropriate infrastructure. It will be necessary to harmonize the legal, tax and regulatory framework, and to do a lot of other things as well. In this regard, the great load and responsibility rests with IBA, since our bank, along with the other "captains" of country's financial market, shall become an initiating center of this process, and render an active assistance in establishment of such regional centre in Baku.

– What are the prospects for integration of financial systems of the CIS countries with regard to creation of integrated payment system within the space of the CIS?
- The necessity and practicability of creating the integrated payment space is undisputed. That is really true, there are no opponents to this, however, no one takes concrete steps. Having opened its affiliated bank in Moscow, IBA tried to speed up the solution of this problem under its own steam. By using the performance capabilities of our processing centre – "AzeriCard", we launched a complete set of functional, implemented the card technologies, and established the system of remittances. Without going into details, I will just say that we offer the cutting-edge technologies. However, it is quite clear that we are unable to ensure the solution of this problem only on our own; after all, it requires the availability of developed infrastructure, which will enable to maintain sufficiently low rates of commissions on transactions. There are also some legal difficulties, both of a local character, and on a CIS scale. The legislative regulations of the CIS countries should not contradict, but correspond to each other. When starting this work, it is probably necessary to prepare the concrete and serious argumentation. And, this shall not be a private initiative, but the representative one, which cannot be ignored.

– Are there examples of practical realization of similar ideas?
- As a matter of fact, they are already being realized in some of the regions. As an example, I can mention the payment system of China Union Pay, with which the Asian banks are now actively joining in. Or, for instance, the integration of processing centers of the Middle East countries that has made it possible for Iranian banks, which are excluded from the international payment systems, to maintain their operations outside the country. This will require the enormous and consolidated efforts of all CIS countries, the development of consistent procedures and regulations, and significant financial investments. Nevertheless, all of the above mentioned, is eventually solvable, therefore, the creation of integrated payment system within the framework of CIS is quite a practicable and feasible task. For its part, the International Bank of Azerbaijan and its affiliated structures are ready to share its knowledge, experience, know-how and make the investments in realization of this project.

– How the development of clearing-and-settlement system in Azerbaijan is being realized? What are the initiatives of IBA with regard to the development of its mechanism?
- IBA's main initiative was the establishment of "AzeriCard" processing centre in 1997. Nowadays, it holds the leading positions at the country's market of payment cards. As a matter of fact, this centre currently serves as the payment system of Azerbaijan, and represents an alternative to the International Payment Systems (such as, "MasterCard", "Visa", "American Express"), by which it has been fully certified. "AzeriCard" is actively engaged in implementation of new up-to-date high-technology projects. The card processing software, which has been installed here by "OpenWay", one of leading companies in this area, ensures the trouble-free uninterrupted operation of all systems on a real-time basis, and provides the banks and enterprises with the comprehensive information for mutual settlements.

– Is it possible to replicate this experience within the space of the CIS countries? What good will it do to the banking structures of CIS?
- IBA, together with its Moscow based subsidiary and "AzeriCard" company, are ready to launch the pilot project for integration of card payments with some banks of the CIS countries. This proposal is serious, deliberate, and, one can say, gained through much suffering. We have got quite a good ideas, experience and capabilities, there are branches and additional offices in Moscow, St.-Petersburg, and Yekaterinburg. The share of our bank in the market of payment cards in Azerbaijan exceeds 50%. We have the cutting-edge technologies in this area. Together with our bank, the other banks, with a significant share of operations and infrastructures in the market's card segment, could also undertake this project. For instance, "SberBank" and "VTB24" in Russia, and one of the largest banks in Belarus, and etc. However, the project is open, and all those, who will properly evaluate its prospects, can also join in.

In my opinion, the realization of this project is very beneficial, because it will draw additional depositors to the branches and offices of banks. For instance, the systems of remittances are extremely popular among the migrants, but they use them, at the best, once a month. Therefore, it is necessary to move forward and provide the people with all opportunities, which the modern banking system is capable to offer. It is essentially the different approach, which opens up much wider prospects for development. By the way, during the banking conference that has recently taken place in Baku, much attention was given to this problem and the round-table discussion on this subject has been held. So, persons interested may familiarize themselves with these materials more closely.

– The Banking Conference in Baku, which will, apparently, become traditional, is held at the initiative of the International Bank of Azerbaijan. The bank is one of its main organizers and is the general sponsor. What do you think about the necessity and effectiveness of this forum?
- This year, the second forum gathered an authoritative profile of participants (it was attended by 210 conferees from 11 countries), among which were the representatives of government authorities, associations, national commercial entities, central, state and leading commercial banks, financial and investment companies, and processing centers. More than fifty representatives of mass media from the CIS countries and far abroad were accredited at it. The heightened interest in conference can be explained not only by the topical character of subjects, but also the democratic character of approach on the part of organizers to the selection of presentations, which was based not on the promotion of corporate interests, but on making the most out of the discussions on vital issues concerning the development of financial and banking systems.

Therefore, the banking summits in Baku have become an outstanding event in economic life of the CIS and enjoy the merited recognition among financiers and bankers within this space. The format of their holding presents a unique chance for combining the business program with opportunities of informal communication, owing to which a large number of participants and visitors convene here. There are opportunities for a direct dialogue on the issues of greatest interest to the banking community of the CIS countries. So, I am confident that we will meet more than once at next conferences. And, I think that each time we will ascertain with pleasure that the significant part of the plan has been realized. This will be the main incentive to hold it at even more representative level in the ensuing years.

– Mr. Hajiyev, this year is also very significant personally to you. Only recently, at the end of October, at the Oxford Summit of Leaders, which was held under the auspices of the European Business Assembly, you have been honored with a Queen Victoria Commemorative Medal for your outstanding success in business and remarkable achievements in protection of business values, successful realization of a number of economically and socially oriented programs, and worthy representation of our country on the international scene. Please, accept our congratulations on the occasion.
- Thank you for your congratulations. But I would like to note that it is, certainly, not my personal merit. It is the end product of a teamwork and the concerted effort of all our employees, all our united banking team. I honestly believe that every employee of our bank has pitched in all successes that we have attained. I am confident that in years to come the International Bank of Azerbaijan will maintain its leading positions at the domestic banking sector and will remain the most effective financial institution of our country, the national identity on the international scene. For every national banking system, the main issue today is how, in the near term, to make use of a know-how and the accumulated potential in maintaining its progressive advance within the framework of currently shaping global financial architecture. Therefore, we shall continue our work in this direction with renewed energy and new conception in order to confidently embark on the path of stability and sustainable growth.