Our Analytics 14 november — 13:06

MPs atacked banks: 'They endanger government!' (Our comment)



The activities of the country's banks once again caused a barrage of criticism. This time, criticism was voiced by the parliamentarians during the discussion of the draft state budget for 2019 at the plenary session of the Milli Majlis (National Assembly). The statement of Chairman of the Parliamentary Committee on Economic Policy, Industry and Entrepreneurship Ziyad Samadzadeh was especially noteworthy. He stated bluntly: 'We cannot be satisfied with the activities of banks in Azerbaijan, because their assistance to the real sector is insignificant.'

Ziyad Samadzadeh

And MP Musa Gasimli even accused the banks that they have reached the state of an element that creates a gulf between citizens and the state, social tension and poses a threat to political power.

Musa Gasimli

The accusations, frankly, are serious and require close attention. Over the past year, Azeri Daily has devoted more than one article to this topic. The purpose of the editors is to comprehensively analyse the situation that has developed in the country's banking and financial market, which threatens to put the entire economy in a stagnation pit, from which the government managed to pull out with such difficulty. Trying to show ways out of this difficult situation, we held many meetings and conversations with experts, including the country's chief banker Elman Rustamov. To be honest, at some stage it even seemed to us that the main topic was rather deeply analysed, and it could be closed at least temporarily.

But now deputies familiar with the economic situation in the country, including in its banking system, not by hearsay, again raise this pressing issue. So, were we too soon in removing the issue from the agenda? Banks do not want to draw conclusions not only from criticism of the media, but also from the statements of deputies. Moreover, at the time when these same deputies are discussing the submitted draft state budget for the next year with a view to its further approval. What are the deputies dissatisfied with and why are banks so persistently deny criticism and suggestions?

It would be possible to answer this question briefly and clearly with interest rates on loans. In particular, Academician Ziyad Samadzadeh believes that the annual interest rates on loans offered by local banks are very high and declares the need to come to a consensus in order to reduce them. And indeed, according to the Central Bank, the average interest rate on manat loans in the country today is 14.21%, and on dollar loans - 8.9%. But this rate somehow averaged by the main bank of the country is inaccessible to many in need of loans. In fact, in some banks, the interest rate on loans can reach 30% or even higher. And such rates, of course, not only do not honour our banks, but also force customers - individuals and legal entities - to bypass these offices.

Therefore, apparently, MP Musa Gasimli calls on the government to take concrete measures in this area. They say that it is impossible to create conditions for the arbitrariness of many private banks, this can have dire consequences. And the most annoying thing is that they all see it perfectly, including the Financial Market Supervision Chamber, and the Central Bank. It is difficult to say what the Chamber is doing in this direction, even after the change of its leadership, little has changed here. The Central Bank does some work, in particular, it has reduced the discount rate three times this year and sees the potential for its further reduction.

The actions of the Central Bank look logical, since cheap money is required by banks and the real economy. But, unfortunately, the specificity of the functioning of this tool of monetary policy in Azerbaijan is reduced almost to its complete inefficiency. Discount rates have virtually no effect on the cost of loans from commercial banks, which in itself is a complete absurdity.

Elman Rustamov

True, according to the head of the Central Bank, Elman Rustamov, banks can also be understood - they face great risks. But one thing is not clear: why does CBA make its loans to commercial banks much cheaper if they don’t think to lower their interest rates? It turns out that the Central Bank gives commercial structures the opportunity to earn even more without doing anything. After deposit auctions, this looks like a new feeder for banks. And no 'supply and demand for loans' ratio in this situation will play a special role. Moreover, with such a prolonged 'policy of macroeconomic stability and the normalisation of monetary conditions.' Is this game worth the candle?

One hopes, this time the deputies will be able to get a comprehensive answer to this question. Soon all members of the government, including the heads of the country's banking and financial system, are to report to them. After all, the state budget is to be approved, without which the government will not be able to continue its work. And it is unlikely that people's deputies will release financial and banking officials without receiving reasonable explanations...

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