CBA: All credit institutions will be able to use new hedging mechanism

The new hedge mechanism introduced by the Central Bank of Azerbaijan (CBA) will be accessible to all banks and non-bank credit organizations (NBCOs), CBA Governor Taleh Kazimov told a press conference on the bank's decision regarding the interest rate corridor parameters, Report informs.

Kazimov explained that when applying this tool, the focus would be primarily on the capital or the credit portfolio of the financed sector. The hedged funds will amount to 5% of the bank's total capital or 20% of the credit portfolio. He further added that the costs for banks, depending on market conditions, would range from 3-4%, and there are no significant credit risks involved.

According to the CBA governor, the total funds that credit institutions can attract through the hedge system will be around $600 million.

"We have not set any specific targets regarding this, but we are offering this tool as an incentive. This system is new to us, and we are still testing it. The estimated costs for banks related to this system could be around $18 million, which is not a significant amount for the banking sector or the CBA," Kazimov added.