Minval.az asked prominent lawyer Akram Hasanov to comment on the situation.
Three major banks in the United States have recently filed for bankruptcy, which hit their economy hard. The global financial system as a whole is shaking badly. How will the closure of Gunay Bank affect the banking sector in Azerbaijan?
The situations in the United States and Azerbaijan are vastly different. They have hundreds of banks, while we had only 25. If you take the number of banks per capita, we have very few banks. So, if three banks close in the US, it is not a problem, small banks close there every year. By American standards, Gunay Bank could be considered quite a stable bank.
But in our country, the closure of this bank was not dictated by market factors. In general, I must say that our banking sector is considered stable. There is no increase in non-performing loans, no outflow of deposits and other problems. Obviously, there are some issues in some banks, but they can be fixed. The very same Gunay Bank announced in the Azerbaijan newspaper that it was going to hold a shareholder meeting on June 5 with only one issue on the agenda: increasing the capital.
That is, if the Central Bank is concerned about the problems of capitalization of the bank, it could have waited a month. The reason for closing this bank is of a different nature. Even the statistics show that 4 banks in some 5-6 years have grown dramatically. This is against the background of about 12-15 banks closed in the last seven years. Of course, the entire customer base of the closed banks has gone to the active banks.
Note that the CBA in its statement openly says that the closure of Gunay Bank does not pose any threat to the banking sector. Yes, they are right, it will not cause any problems, we understand that. But in the end, there will be 10 banks left in the market. That would be horrible for the sector, because we already know that the service quality in these big banks is very low. I have seen this myself more than once. They just cannot cope with the amount of work, and the staff is not the best. And the banks’ policy itself is focused on cost optimization and they do not want to hire high-skilled specialists. Hence the less than high quality of services provided by banks.
I think these banks will be the only ones left in our market three years from now. The quality will be poor, and so will be the environment. At least now there is some sort of competition. There will be none in the future because the commissions, interest rates will all be the same and the service quality will be equally low in all banks. Just like with mobile service providers. I still hope that the issue will be brought to the leadership of the country and appropriate action will be taken.
What other banks are in danger of closing?
The situation at Mugan Bank is tense. Is this a reason to close the bank? I am not sure. There were no problems at Gunay Bank. So apart from four banks, IBB, Xalq Bank, Pasha Bank, Kapital Bank, all other banks are in the risk zone. Any of these banks can be closed for one reason or another. Gunay Bank closing shows that they just wanted to close it. That is all.
But different countries have different numbers of banks. Azerbaijan is a small country with a small population, why would a country like ours need so many banks? Western countries also have few banks relative to their population?
There is open market competition in the West. There are no restrictions, anyone who can stay afloat in the market can open a bank. There are no restrictions of any kind. The situation is incomparable.
The banking sector employs a great number of people, what will happen to them if the banks start to close?
Nothing. They will simply be out of jobs. The most qualified will get jobs at the remaining banks, and the rest will be left jobless, as was the case with the other banks. I would add that the big banks take the best specialists from other banks for lower salaries.
If we look at the global experience, the global labor market is changing. AI, chatbots, and other new technologies are emerging, and the market is undergoing digitalization. For example, after the acquisition of Twitter, Elon Musk reduced the staff by 80%, keeping 20% of the employees. A similar process will begin in Azerbaijan. What will be the transition here in this regard?
We are still a long way away from these processes. We do not yet have high-speed Internet, which is hurting us. Even the big banks can tell us that their system is not running today. Even in the legal field they say that AI will give guidance based on court decisions. Still, these are all issues for the future, and we, as a backward country in this respect, are a long way off, but this is a natural progression.
Nijat Hajiyev
Translated from Minval.az
