DECREE OF THE PRESIDENT OF THE REPUBLIC OF AZERBAIJAN

on rehabilitation measures related to preparation of state‐owned shares of the International Bank of Azerbaijan Open Joint Stock Company for privatization

The provision of access of entrepreneurs and population to the financial and banking services and the development of the country’s banking system is always in the center of attention in the Republic of Azerbaijan. Important measures have been implemented in deepening reforms in this field during the years of transition to the market economy, increasing the capacity of financial intermediation of credit institutions and strengthening competition, as well as, a lot of work has been done related to the development, capitalization and increasing financial stability of International Bank of Azerbaijan OJSC, a controlling stock of which is state‐owned.

International Bank of Azerbaijan OJSC, being the largest and systemically important bank in the country according to its financial indicators, plays an important role in implementing settlements and social payments, providing broad banking services to the population and giving loans to entrepreneurs. The relevant government bodies provided continuous support to the bank for the purposes of the maintenance of the financial stability of International Bank of Azerbaijan OJSC, uninterrupted fulfillment of its obligations and settlements, especially in order to prevent the negative impact of the global financial crisis in 2008‐2009 on the financial position of the bank, its capital and liquidity were supported at the required level, and the bank became a reliable partner for local and foreign creditors.

However, recently, shortcomings in the management of the bank and its investment and lending policy, as well as, financing risky investment projects with lower efficiency, have led to deterioration in the financial condition of the bank and an increase in bad assets and a decrease in liquidity. Therefore, there has been a need to remove troubled assets from the management of the bank and transfer to a specialized agency in order to eliminate the situation, restore the financial position of the bank and ensure its sustainability.

Governed by Clause 32 of Article 109 of the Constitution of the Republic of Azerbaijan and in order to ensure the implementation of measures related to the improvement of the financial position of International Bank of Azerbaijan OJSC and preparation of its state‐ owned shares for the privatization, I hereby resolve as follows:

1. The Ministry of Finance of the Republic of Azerbaijan and Central Bank of the Republic of Azerbaijan shall determine the troubled assets belonging to International Bank of Azerbaijan OJSC within fifteen days and take measures for the removal of those assets from the bank’s balance in return of liquid funds in relevant amount in a phased manner and transfer them to the management of Agrarcredit Closed Joint Stock Company Non‐Banking Credit Organization (hereinafter referred to as “Agrarcredit” CJSC).

2. It shall be determined that:
2.1. Financing of purchase and management of the assets mentioned in the part 1 of this Decree by Agrarcredit CJSC shall be carried out by placing long term, low‐interest bonds on the securities market issued by Agrarcredit CJSC;
2.2. The required number and terms of bonds to be issued by Agrarcredit CJSC shall be coordinated with the measures for purchasing assets from International Bank of Azerbaijan OJSC and the corresponding amount of state guarantee shall be taken into consideration in the amount of the state internal borrowing limit for the state budget for each year;
2.3. “Agrarcredit” CJSC shall fulfill the below mentioned functions while managing the assets purchased in accordance with the part 1 of this Decree:
2.3.1. obtain and implement the rights for principal debts (loans) and interests on the assets to be purchased from International Bank of Azerbaijan OJSC, debt collateral (mortgage) and surety in accordance with law;
2.3.2. take measures stipulated by law (submitting a claim in the court, directing a claim for pledge, etc.) for the fulfillment of contractual obligations by borrowers and reimbursement of overdue loans (interests);
2.3.3. in case when claim is directed to pledge (mortgage), implement the management of pledged property, make proposals on transferring that property to state ownership or arrange for its sale in open auctions by specialized organizations and ensure that the received funds are used to pay for the claims arising from debt obligations;
2.3.4. realize costs required in relation to the asset management in accordance with the cost estimate approved each year for these purposes, at the expense of funds obtained according to the Clause 2.1 of this Decree.

3. The Ministry of Finance of the Republic of Azerbaijan shall:
3.1. submit its proposals agreed upon with the Central Bank of the Republic of Azerbaijan on the issuance, amount, term and payment terms of bonds to be issued by Agrarcredit CJSC on the basis of state guarantee to the President of the Republic of Azerbaijan within fifteen days;
3.2. arrange the control over the fulfillment by Agrarcredit CJSC of the obligations specified in Clause 2.3 of this Decree, take measures to coordinate the use of property with the development prospects of the country’s economy in case the claim for debt on the assets is directed to the pledged property during the management of assets purchased by Agrarcredit CJSC together with the Ministry of Economy and Industry of the Republic of Azerbaijan;1
3.3. take effective measures to restructure the bank to the extent permitted by state‐owned shares at International Bank of Azerbaijan OJSC, improve and capitalize the financial situation, increase operating efficiency, organize its management on the basis of modern and cooperative management standards, re‐form the composition of the Executive Board at the general meeting, improve lending, debt and staff policies of the bank, as well as reimburse overdue loans (interests) issued by International Bank of Azerbaijan OJSC;
3.4. after completion of restructuration and improvement measures, develop the action plan for the privatization of state‐owned shares in the charter capital of International Bank of Azerbaijan OJSC within six months and submit it to the President of the Republic of Azerbaijan taking into consideration the opinions of State Committee on Property Issues of the Republic of Azerbaijan and the Central Bank of the Republic of Azerbaijan;
3.5. investigate the compliance with the requirements of banking and civil legislation when issuing loans by International Bank of Azerbaijan OJSC and using loans by borrowers as intended, which were involved from International Bank of Azerbaijan OJSC and overdue, as well as transferred to the management of Agrarcredit CJSC according to the part 1 of this Decree, and take measures together with the law‐enforcement agencies for legal assessment of the persons who caused the revealed shortcomings, and bringing them to justice.

4. The Central Bank of the Republic of Azerbaijan shall:
4.1. take necessary measures on the purchase and liquidity of bonds issued by Agrarcredit CJSC in accordance with Clause 2.1 of this Decree;
4.2. take part in the implementation of measures for the rehabilitation of International Bank of Azerbaijan OJSC before privatization within the framework of its powers.

5. The Cabinet of Ministers of the Republic of Azerbaijan shall:
5.1. ensure the state guarantee for the bonds issued by Agrarcredit CJSC in accordance with Clauses 2.1 and 2.2 of this Decree;
5.2. resolve other issues arising out of this Decree.

Ilham ALIYEV,
The President of the Republic of Azerbaijan

Baku, July 15, 2015
№ 570