Azerbaijan's financial markets regulator has revoked the licences of Dekabank, Kredobank, Parabank and Zaminbank, the regulator's head Rufat Aslanli told a news conference July 22. 

Bne IntelliNews has signalled the risk of further bank defaults in recent weeks. Baku withdrew the licences of six banks in January and early February over poor capitalisation, while the embattled Bank Standard was taken over by state-owned AzerTurkBank (ATB).

“The licenses of those banks have been revoked, as their assets haven’t been classified in line with the law, they haven’t created adequate reserves and the aggregate capital of these banks doesn’t meet the minimum requirements [50 million manats],” Aslanli said, according to Trend news agency. The decision to close down the banks is aimed at reducing the risks in the banking sector, strengthening the financial stability and increasing confidence in the sector, he added.

Sources in Baku tell bne IntelliNews that Dekabank and Kredobank were inactive, while Parabank and Zaminbank are among the medium-sized banks in the country.

The Azerbaijani banking sector has been in crisis since a double devaluation of the manat in 2015 sent asset quality plunging. As non-performing loans (NPLs) tend to accumulate with a lag, the situation has gradually aggravated at different lenders over the past 16 months. The country's largest bank - International Bank of Azerbaijan (IBA) defaulted and was bailed out by the government in 2015 through an AZN3bn (€1.7bn) capital injection.

The official rate of NPLs is under 7%, but analysts like Nomura International's Tim Ash estimate that the rate could be closer to 20% across all lenders.

Baku set up a new institution to oversee the financial sector in March, taking over the central bank's responsibilities, and a financial stability body in July. Ratings agency Moody's said that other CCC-rated lenders, such as medium-sized Unibank, also run the risk of default at a conference in Baku in May.

Taking into account ATB's takeover of Bank Standard, the country now has 32 lenders, down from 43 in early January.