Moody's: Dollar loans decline in Azerbaijani banks

Baku. 27 March. REPORT.AZ/ Last year the share of loans in foreign currency in the credit portfolio of banks of the CIS countries decreased by 2.9 percentage points. In Azerbaijan, Tajikistan and Ukraine, where the devaluation of the national currency continues, decline was 4.4 percentage points.

Report informs citing the report of Moody's international rating agency on currency risks and dollarization in the CIS countries.

The agency believes that the reduction in the volume of foreign currency loans in the CIS countries is mainly due to prohibitions by regulators: "Regulators in a number of CIS countries, including Kazakhstan, Azerbaijan and Ukraine, temporarily banned the issuance of loans in foreign currency to individual and corporate clients that do not have export earnings. This is a thoughtful, but rather belated step, which is clearly visible in terms of the volume of loans issued in foreign currency. In addition, many banks have restructured foreign currency loans and transferred them to the national currency. This process includes extending the maturity of loans. But monthly payments remained unchanged. This strategy is based on the lack of liquidity of the local currency and open short currency positions."

According to Moody's, there is a big gap between dollar loans and deposits: “Though these mismatches are gradually shrinking as the de-dollarization in funding outpaces the process on the assets side, foreign currency deposits still exceed loans in many CIS countries, leaving banks with open short FX position. This exposure renders them vulnerable to currency fluctuations and requires a reliance on costly hedges. The largest gap between loans and deposits in foreign currency observable camping in Azerbaijani banks, Belarus and Kazakhstan. Some regulators have supported hedging operations using swap instruments."