OREANDA-NEWS. August 14, 2012. The Central Bank of the Republic of Azerbaijan has constanly increased qualitative and quantitative capital requirements within the framework of the strategy aimed at further strenghtening of financial stability and sustainability of the banking sector, development of the corporative governance system and protection of interests of depositors and investors built upon best practices, reported the press-centre of CBA.

Currently, banks are capitalized up to a new qualitative level which led to eventual high effectiveness of the banking sector and improved financial sustainability indicators. The banking sector was ready to resist the global financial crisis outbroken in 2008 aided by strong safety cushion due to the substantial capital base.

Currently, the Azerbaijani banking system is ushering in a new development stage. Banks need to be continuously capitalized to deepen financial intermediation, integrate to global financial markets and ensure new quality of banking services in this stage. Strengthening of banks’ capital base is of critical importance from the standpoint of high confidence in banks and elevated international competitiveness.

At the same time, it shall provide high access of economic subjects to financial services, expand a range of banking services and make them cheaper and positively influence development of financial markets, particularly the interbank market. All this shall lead to financial deepening of the banking system in response to double growth and diversification targets of the economy in an upcoming decade.

To that end, CBA Management Board took a decision on July 25, 2012 to increase the threshold of aggregate capital of operational banks, as well as authorized capital for newly launched banks up to AZN 50 mln. A new norm on the minimum amount of aggregate capital shall take effect from January 1, 2014. The transition period shall ensure sufficient timeframe to realize strategies on adjustment to the new capital requirement and allow for gradual capitalization.

The studies suggest that the banking sector display high capacity to align to new capital requirements. Application of new capital requirements shall result in strenghtened capital position of Azerbaijani banks along with high capital quality and effectiveness of financial intermediation, the sustainable banking system and further enhanced financial stability.