Azerbaijani regulator closes down four branches of Nikoil Bank

By bne IntelliNews September 9, 2016

Azerbaijan's financial markets regulator has suspended the licences of four branches of Nikoil Bank, a medium-sized lender, for incompliance with the principles of “healthy lending, violation of the ratio of monthly debt to borrowers' income, violation of law in cash operations and distortion in accounting”, Trend news agency reported on September 8.

Demand for foreign currency, especially dollars, has been mounting in Azerbaijan, prompting fears among consumers and banks of a further depreciation of the currency, which would push the enfeebled banking sector into a full-fledged crisis. Authorities have already revoked the licences of ten banks since January, in a bid to clean the banking sector of incompliant lenders. Azerbaijani banks have seen their asset quality, capitalisation and profits plummet as a result of monetary instability, which has plagued Baku since February 2015.

Declining oil revenues and pressure from falling currencies in Russia and Central Asia prompted the regulator to drop the manat's peg to the dollar in order to enable Baku to save fast declining foreign exchange reserves. Since then, the Azerbaijani currency suffered a major depreciation in December and has been gradually falling since May despite the central bank's monetary tightening in recent months.

Since April, the central bank has banned loans in foreign currency - borrowers in foreign currencies have disproportionately defaulted on their loans since the devaluation - but an inspection at several of Nikoil Bank's branches have revealed that the lender continued to issue such loans. Inspectors also found that the bank held foreign currencies in cashboxes that it was not selling to clients, artificially contributing to a foreign currency crisis in the country.

After this year's bank closures, there are now 33 lenders left in the country, and analysts expect for there to be further consolidation in the sector as 14 banks are believed to be at risk of being closed.

Demand for foreign currency in Azerbaijan remains high as trust in the manat is at record lows and people are scrambling to exchange the local currency for fears of a looming depreciation. At a regular currency auction on September 9, sovereign wealth fund Sofaz quadrupled its offer of foreign currency to $200mn, but still fell short of meeting the $403mn demand, abc.az reported.

Sofaz has held regular biweekly currency auctions since January in order to meet the lenders' needs for foreign currency and to thus stabilise the exchange rate. The wealth fund has sold over $2bn worth of dollars in these auctions since January. The central bank spent more than two thirds of its reserves, or $11bn, between November 2014 and December 2015 on supporting the manat. 

Related Articles

Azerbaijan's IBA doubles authorised capital to €640mn after share issuance

The International Bank of Azerbaijan, the country's largest lender, has doubled its authorised capital to AZN1.24bn (€640mn) through the issuance of shares on the domestic stock exchange, ... more

Azerbaijani central bank drops exchange rate corridor to float manat

Azerbaijan's central bank has dropped the 4% exchange rate corridor it imposed on commercial banks in order to allow the currency to float freely, the regulator said in an announcement on January 12. ... more

World Bank raises growth forecasts for Kazakhstan and Azerbaijan

The World Bank’s latest “Global Economic Prospects” report issued on January 10 offers a mixed picture when it comes to the GDP growth prospects of countries across Central Asia and the ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss