Azerbaijani Central Bank decides on credit incentives

Azerbaijani Central Bank decides on credit incentives

25 April, 15:34 Share on social media:

The Central Bank of Azerbaijan (CBA) has adopted a decision for credit incentives in the banking sector, taking into account the recommendations of the Financial Stability Board.

The decision has been synchronized with the relevant measures provided for in the order of Azerbaijan’s Cabinet of Ministers, and also covers broader directions, including matters related to the restructuring of mortgage loans issued to individuals via the country’s Mortgage and Credit Guarantee Fund assets; the restructuring of business loans issued via assets of the state funds, as well as through support of participants of the insurance and capital markets.

According to the CBA, in order to support sectors of the economy and entrepreneurs affected by the COVID-19 pandemic, Azerbaijan will provide an opportunity to restructure loans issued by credit organizations to private business entities, including individuals engaged in entrepreneurship, from March 1, 2020, the quality of which is satisfactory, and interests on the loans will be subsidized by the state.

The term of these loans can be extended by banks on the basis of an appeal from entrepreneurs and a mutual agreement. In this case, the quality of the loan will not deteriorate until September 30, 2020, regardless of the borrower’s financial condition and the loan restructuring.

At the same time, it’s envisioned to create opportunities for restructuring business loans, which were issued via the assets of state funds and had satisfactory quality as of March 1, 2020. As a result, 1 billion manat ($59 million) was allocated from the funds of the Entrepreneurship Development Fund to provide benefits to about 10,000 business loan debtors.

To support individuals (not engaged in entrepreneurial activity), opportunities will be created for restructuring mortgage loans issued via Azerbaijan’s Mortgage and Credit Guarantee Fund assets. As a result of these measures, 23,000 borrowers will have the opportunity to take advantage of restructuring a total volume of up to 1.1 billion manat ($650 million).

The loans will be restructured based on the borrowers’ appeal. If restructuring of such loans issued before March 1, 2020 and having satisfactory quality is carried out before September 30, 2020, then their quality will not deteriorate.

At the same time, in order to stimulate mortgage lending of banks through own assets, it was decided to reduce the risk rates for loans of this category from 100 to 50 percent.

In case of full or partial delay in business and consumer loans (principal or interest-bearing debt), credit organizations will be advised not to levy a fine, forfeit and other payments from the debtor and not worsen the borrowers' credit history until September 30, 2020. During this period, credit institutions will continue to calculate interests on the principal debt and ensure their repayment.

In order to create conditions for the implementation of these measures, and to ensure the sustainable provision of financial services for business and population, as well as to allow banks to use the pillow of stability accumulated in previous periods for increasing lending opportunities, measures to reduce the regulatory burden are also envisaged.

For this purpose, it’s envisioned to exempt 1 percent of the aggregate capital requirements for banks before the end of 2020. At the same time, a number of other regulatory requirements that put pressure on capital of banks will be postponed until the end of the year.

The risk level of loans issued to manufacturers of medical supplies and equipment will be reduced from 100 percent to 20 percent to simplify access to credit resources of some economic sectors, which will allow banks to provide loans.

In order to stimulate non-cash payment services and reduce costs, given the decrease in economic activity and income of businesses and households, as well as the negative impact on indicators of the use of payment services, by September 30, 2020 interbank payment systems will take measures to reduce the cost of services charged to banks, up to 50 percent, and in a similar manner - tariffs for payment services provided to customers of banks.

The CBA also provides for measures to reduce the negative impact of the COVID-19 pandemic on capital market participants.

To this end, in case of violation of the capital requirements of investment companies, the interventions will be extended until January 1, 2021, and the disclosure of the annual audit reports of investment companies and the stock exchange - by September 30, 2020.

At the same time, the disclosure period for reports by emission issuers, whose securities were released for trading in the regulated market, has been also extended by 1 month.

Meanwhile, the National Depositary Center will be recommended not to charge tariffs for registering REPO transactions, as well as transactions in the secondary market with shares and bonds until September 30, 2020 from investors.

Baku Stock Exchange will be recommended not to charge corporate bond tariffs from emission issuers until January 1, 2021 and minimize the number of documents required for placing securities by the mass offer method.

These measures have optimized the investor's transaction costs by easing the regulatory burden of capital market participants and more flexible conducting of repeated market operations on the government securities market.

As general, the measures envisaged will create conditions for ensuring the sustainable provision of financial services to business and population, continuing lending to the economy and protecting the rights of consumers of financial services in the COVID-19 pandemic conditions.