These two banks in Azerbaijan TO BE CLOSED

In recent days, we reported that another bank in Azerbaijan ceased operations and was converted into a non-bank credit organization (NBCO). As a result, only 21 banks will operate in the country. It should be noted that in the complaint chart released by the Central Bank, “BTB” Bank ranks first, Express Bank second, AFB Bank third, and next is Azer-Turk Bank.
So, what is the reason for the closure of banks in Azerbaijan? How many more banks may close after this? Why are the interest rates of NBCOs much higher compared to banks?

Medianews.az reports that in an explanation given to Lent.az on the issue, Vuqar Oruc, chairman of the Azerbaijan Appraisers Association, stated that two more banks will cease operations:

“The banking system in Azerbaijan has entered a new phase of development. Many analysts, including international rating agencies, highly appreciate the role of the Central Bank in regulating the banking sector. The recent work done indicates the successes of the regulatory policy.

The banks that have gone out of business or closed were never strong; they were banks operating at a loss with a heavy problematic portfolio. In my opinion, it was necessary to close such banks or change their form. The conversion of banks into Non-Bank Credit Organizations (NBCOs) is the continuation of their activities so far and the performance of their functions in another form.

It can be said that two more banks will close in the near future.

To determine this, it is sufficient to review the banking system. Because in the history of the banks that have closed up to now, debt and financial problems have been evident.

NBCOs are often clients of banks. They sell to the public by charging a certain interest on the capital they receive from banks. The main feature of NBCOs is that legally obtaining a loan from them takes less time. Therefore, citizens often apply to NBCOs, prioritizing the speed of the process without regard to the high interest rate.

Commercial banks implement certain complex processes in their credit policies to maintain liquidity. Therefore, NBCOs with high interest rates have a larger customer base.

Both banks and NBCOs should obtain capital for sales from external international donor organizations. This is both cheaper and does not have a significant impact on the total amount of interest. When obtaining money from the internal market, however, high interest rates cause lower accessibility of credit sales.”