AZERBAIJAN FINANCIAL AND BANKING SYSTEM DURING THE GLOBAL CRISIS: SHIFT OF EMPHASIS IN INTERNATIONAL COMPARATIVE ASSESSMENTS
Abstract
The creation of a robust, innovative financial and banking system capable of meeting the needs of society is among the strategic tasks of the republic’s economic policy aimed at ensuring the national sovereignty of this system as the country integrates into the global market. A sound financial system and increasing competitiveness of the banking sector are effective factors of sustainable economic growth making it possible to survive the global financial and economic collapse with relatively insignificant losses. International comparative assessments are among the main instruments for analyzing the financial and credit strength and vulnerability of individual countries. At the same time, the realities of the global crisis show that the techniques, principles, emphasis and focus of these assessments in current conditions should change radically. Otherwise, their objectivity and validity will be called into question, and this will in turn have a negative impact on the decision-making process.
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See: Statistical Bulletin of the National Bank of the Republic of Azerbaijan, Baku, No. 5, 2009, p. 4.
See: IMF World Economic Outlook Database, April 2009.
Current trends in Azerbaijan’s financial and banking system are examined in greater detail in the scientific works of J. Hajiev, Chairman of the Board of the International Bank of Azerbaijan (see: (J. Hajiev, The Monetary System and the International Bank of Azerbaijan, CA&CC® Press AB, Stockholm, 2009, pp. 104-153); J. Hajiev, “Vremia—dumat o budushchem,” BDM. Banki i delovoi mir, Moscow, No. 4, 2009, pp. 52-53), E. Ismailov, President of the Azerbaijan Banks Association (E. Ismailov, “National Currencies of the Central Eurasian Countries in the Context of Financial Globalization,”in: Central Eurasia: National Currencies, CA&CC® Press AB, Stockholm, 2008, pp. 23-31) and Z. Mamedov, doctor of economics, professor at the Azerbaijan State Economic University (Z. Mamedov, “Denezhno-kreditnaia sistema Azerbaid-zhana,” Obshchestvo i ekonomika, No. 3, 2009, pp. 82-106).
See: Statistical Bulletin of the National Bank of the Republic of Azerbaijan, pp. 7-9.
This is indicated in a report by Standard & Poor’s (see: Bank Industry Risk Analysis, S&P, 1 June, 2009).
This circumstance is noted, in particular, by Standard & Poor’s (see: Bank Industry Risk Analysis).
See: B.G. Litvak, Ekspertnye otsenki i priniatie resheni, Moscow, Patent, 1996; idem, “Bankovskie reitingi,”Biznes. Pribyl. Pravo, No. 3, 1997, pp. 5-14; idem, Ekspertnye tekhnologiii v upravlenii, Delo, Moscow, 2004, 398 pp.;N. Muzaffarli (Imanov), Reiting Azerbaidzhana v mezhdunarodnykh sravnitelnykh issledovaniakh, Kavkaz, Baku, 2006,pp. V-VIII, 1-9; A. Melville, “Rossia v mirovykh reitingakh,” Ekspert, No. 43, 20 November, 2006; V.T. Sevruk, “Znach-enie reitingov dlia sravnitelnogo analiza finansovykh pokazatelei stran SNG,” in: Formirovanie integratsionnykh ob’edineni stran SNG: finansovyi, valiutnyi, bankovski aspekty. Nauchnyi almanakh fundamentalnykh i prikladnykh issle-dovani, Finansy i statistika, Moscow, 2006, pp, 73-87; idem, “Mezhdunarodnye reitingi—indikator konkurentosposob-nosti rosiiskikh uchastnikov mirovogo finansovogo rynka,” in: Deiatelnost bankov na finansovom rynke: rossiiskaia praktika i mirovoi opyt. Nauchnyi almanakh fundamentalnykh i prikladnykh issledovani, Finansy i statistika, Moscow,2007, pp. 138-152; M.G. Mironyuk, I.N. Timofeyev, Ya.I. Vaslavsky, “Universalnye sravnenia s ispolzovaniem koli-chestvennykh metodov analiza: obzor pretsedentov,” Politicheskie nauki. Sbornik nauchnykh trudov, Issue 3, No. 5,2007, pp. 43-76; A.A. Chaikovskiy, “Primenenie otsenok v ekonomike,” Vestnik universiteta (State University of Man-agement), GUU, Moscow, No. 5, 2007; M.A. Sidorenkov, Bankovskie reitingi, available at [http://www.cfin.ru/finanal-ysis/banks/bank_ratings.shtml], 24 April, 2008.
For more detail, see: V.T. Sevruk, “Mezhdunarodnye reitingi—indikator konkurentosposobnosti rosiiskikh ucha-stnikov mirovogo finansovogo rynka,” pp. 139-147.
See: KOF Index of Globalization 2009, Zurich, Swiss Economic Institute / Swiss Federal Institute of Technology,27 January, 2009. In our opinion, the set of nine indicators used to compile the index of economic globalization is insuffi-cient and it would make sense to add a number of indicators reflecting banking globalization, which would generally make these rankings more objective.
See: “How Azerbaijan Is Responding to the Global Economic Turmoil,” S&P, 15 July, 2009.
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Azerbaijan—Aide Mémoire for the 2008 IMF Staff Visit Discussions, 10-17 December 2008.
For a detailed SWOT analysis of the domestic banking sector see: F. Murshudli, “Azerbaijan Banking System:
hallenges and Prospects of Globalization,” The Caucasus & Globalization, Vol. 2, Issue 2, 2008, pp. 76-87.
See: F. Murshudli, “Mezhdunarodnye otsenki bankovskoi sistemy Azerbaidzhana—vazhnyi indikator ieio integratsii v mirovoi finansovyi rynok,” Banki & Biznes, No. 2, 2008, pp. 46-53; “Azerbaijan Banking System: Challenges and Pros-pects of Globalization,” pp. 79-87.
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These rankings were compiled using data on bank accounts of different countries (hard data) and the results of a survey of top bank executives (survey data). As a result, banking systems were assigned scores of 1 to 7, where 7 means generally healthy banks with sound balance sheets, and 1, insolvent and may require a government bailout.
This is noted by other economists as well (see: V.Yu. Dodonov, Konkurentosposobnost investitsionno-finan-sovoi sfery Kazakhstana v otsenkakh mezhdunarodnykh organizatsi, available at [http://www.iwep.kz], 21 May, 2008;K.V. Shvandar, “Mirovoi krizis skvoz prizmu platiozhnogo balansa i konkurentosposobnosti,” Bankovskoye delo, No. 5,2009, pp. 54-60).
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See: C. Piggott, “Risers and Fallers,” The Banker, January 2009, pp. 62-63.
For a detailed discussion of the importance of a state’s external debt as a criterion of its economic independence see: Sh. Hajiev, N. Muzaffarli (Imanov), et al., “Economic Reform in Azerbaijan: Achievements and Problems,” The Cau-casus & Globalization, Vol. 2, Issue 4, 2008, pp. 52-53.
See: The Banker, January 2009, pp. 64, 66.
See: The Banker, January 2009, p. 67 (according to IMF World Economic Outlook Forecast, November 2008).
See: The Banker, January 2009, p. 63.
See: Bank Industry Risk Analysis, p. 1.
See: The Banker, January 2009, p. 68.
Calculated based on data from: Statistical Bulletin of the National Bank of the Republic of Azerbaijan, Baku, No.
, 2008, pp. 4, 19.
See: The Banker, January 2009, p. 63.
Ibid., p. 68.
See: IMF Global Financial Stability Report, July 2008.
In this context, we believe that Standard & Poor’s estimate of gross problematic assets in Azerbaijan’s banking system in the 35-50% range (see: Bank Industry Risk Analysis) is totally unjustified.
This rank could have been even lower because the necessary data for many countries were unavailable.
See: World Economic Outlook: Crisis and Recovery, IMF, Washington, D.C., April 2009, p. 84.
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Azerbaijan—Aide Mémoire for the 2008 IMF Staff Visit Discussions, 10-17 December 2008.
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See: Declaration on Strengthening the Financial System, London, 2 April, 2009, available at [http://www.g20.org];Global Plan for Recovery and Reform: the Communiqué from the London Summit, London, 2 April, 2009, available at [http://
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