How should irregularities in banks be prevented? 

The pandemic did not bypass the banking sector, the "coronary artery" of the economy. The quarantine regime entirely, or partly restricted the activity of the banks. As the closure of some activity spheres caused a reduction in the personal income, the were delays in loan repayments and decline in savings at the banks.  

Along with this, the depositors did not stay out of negative tendencies as participants of banking operations. Closure of four banks in the country resulted in difficulties in the repayment of savings because more than AZN 60 million, which were received illegally, were blocked temporarily. 

Illicit activities in the banks damaged confidence in the banking system. Embezzlement of a large amount of money by Nadir Ismayilov, the Chairman of Zaminbank OJSC, closed in 2016, extended the list. Of course, all shortcomings in the sector happened before the pandemic, but they now draw more attention.  

Report researched reasons for these irregularities, and steps to prevent them. 

There are some facts that heads or officials of banks have embezzled the money of customers. A few days ago, the General Directorate for Combating Corruption detained the head of Zaminbank OJSC Nadir Ismayilov over misappropriating more than AZN 20 million. 

What steps must be taken to prevent such cases? 

An expert on the banking sector Akram Hasanov told Report that mainly the heads of the banks create the problems in the banks: 

"It is stemmed from the allocation of illegal loans. The major part of the troubled loans are funds that the heads of banks give to their companies, and they are not repaid. This money doesn't belong to banks. They are funds of depositors, companies. Traditional banks don't face such cases or prevent them immediately if they occur. As banks operate with others' money, there must be an authority to control them. Therefore, the Central Bank of Azerbaijan (CBA) grants licenses to banks and sets rules to regulate their loan activity. At the same time, the CBA must permanently control the banks' activity."

According to him, it's not hard to control the banks: "We can easily identify in any bank that what loans have the heads of banks granted illegally. We'll see that these loans have been allocated for a long-term period, with low interest, low-price pledge, or without any pledge. Even, we can see that the borrowers have no business to receive a loan. The CBA cannot be unable to see it as a regulatory authority. There is no need to establish a new body to control the banks. The existing body should be honest and not allow banks to steal the money." 

The expert commented on the issue regarding Zaminbank OJSC: "Zaminbank was declared bankrupt four years ago. The bank was closed upon a decision of the Financial Markets Supervisory Authority. In May 2016, the Authority took over the control of the bank. The Authority said that the bank had always released a distorted financial statement. It means that the bank has submitted those financial statements to the CBA. In this case, the CBA had to take relevant measures.

The regulatory Authority also bears responsibility for all these problems. Other banks also showed that the heads of banks acted illegally. However, let us take into consideration that the state also had control over them. The CBA did not fulfill its duties correctly, and consequently, the heads of banks embezzled a large amount of money."