Azerbaijan’s financial sector preparing for welcoming French bank - RESEARCH

As part of the visit of the First Vice President of Azerbaijan Mehriban Aliyeva to France in March 2019,  the Central Bank of Azerbaijan and French Rothschild&Cie bank signed a strategic cooperation agreement. So, the famous bank, which offers financial services with its 3,500 specialists in more than 40 countries will contribute to Azerbaijan’s financial sector.

İn line with to the agreement, the sides will cooperate on three strategic directions. One of them is the assessment of the current situation in the banking sector and main factors affecting the sector, review of business models of leading banks in accordance with the scoring methodology, preparation of recommendations on necessary measures for strengthening of financial sustainability of the banking sector and completion of restructuring processes. The second is the comprehensive assessment of interbanking, capital and debt markets, market participants, procedures and infrastructure, products, participation opportunities of banks in international debt and capital markets. The third is the preparation of recommendations on and review of existing financial instruments and markets in national currency, their development perspectives, role of financial institutions, opportunities in enhancing cooperation between local and international clearing and depositary organizations.

These measures to be taken on the basis of leading international practice will play an important role in implementation of goals for deepening and development of capital and money markets, strengthening of financial sustainability of the banking sector, increasing the role of the sector in economic growth.

Speaking to Report on cooperation opportunities with the French bank, Doctor of Philosophy in Economics, dean of Finance and Accounting Faculty at the State Azerbaijan State University of Economics Garay Musayev said that in order to restore economic stability, accelerate economic growth rate, ensure sustainability of economic growth, adequate steps should be taken in financial sector as done in all fields. Therefore, the steps aimed at building of a mechanism to reduce the state funds to minimum in the process of establishing financial stability, ensuring its sustainability, and normalizing financial institutions, restructuring banks and increasing the impact of the financial sector on GDP and economic growth are of great importance.

"There is no doubt that the agreement between CBA and Rothschild&Cie will contribute to abovementioned issues, particularly, normalization of financial institutions, enhancement of financial sustainability of the banking sector and reparation of recommendations for completion of restructuration processes. For this purpose, main factors which impact the current situation of the banking sector will be assessed, business models of the leading banks will be reviewed in accordance with the scoring methodology," he said.

According to the expert, this cooperation will be effective in terms of both domestic and international level: "This cooperation will help improvement of capital and debt markets, market participants, procedures and infrastructure, involvement of foreign investments in the financial sector, extension of competitiveness and e-banking in the sector, diversification of bank products. On the other hand, it will allow to direct the investments abroad correctly, ensure determination of sectors, participation of banks in the international debt and capital markets."

Moreover, Musayev said that Rothschild&Cie’s opinion about Azerbaijan will lead to close recognition of our country in the international markets, establishment of cooperation, increase of reliability and involvement of foreign investors in this field.

Restructuration of banks, of which capital sustainability was not restored, restructuration of non-performing assets still remain actual and this process is expected to come to an end in 2020. Therefore, recommendations of the French bank on restructuration, and alternative will be taken into account," he added.

Foreign experts also highly assess the agreement. Michel Makinsky, general manager of consultants Ageromys International, told Report that Azerbaijan makes efforts to diversify its economy: "Along with oil and gas fields, other fields are on the focus. Therefore, Azerbaijan’s banking sector needs to be developed too. For this purpose, Azerbaijan should develop cooperation with Europe

"Therefore, the agreement between CBA and Rothschild&Cie is of great importance. Apart from this bank, assessment from French GAFI and Financial Action Task Force (FATF), recommendations will serve improvement of CBA’s activity. With the help of French banking specialists, Azerbaijani banks may be interesting for multilateral financial organizations. France has cooperation programs, which can make Azerbaijan attractive for investors, and help more dynamic and multilateral development."