12 May 2020, Baku: In accordance with Articles 57.1 and 57.3 of the Law of the Republic of Azerbaijan on Banks, temporary administrators were appointed to the ‘Atabank’ OJSC, the ‘AGBank’ OJSC, the ‘NBCBank’ OJSC and the ‘Amrahbank’ OJSC, all powers on their management, including powers of general meetings of shareholders were transferred to temporary administrators by the resolution of the Management Board of the Central Bank of the Repulbic of Azerbaijan dated 27 April 2020. Further the Management Board of the Central Bank revoked the licenses of the two of them – the ‘Atabank’ OJSC and the ‘Amrahbank’ OJSC with its decision of 28 April 2020.

Since the decisions were taken, the temporary administrators appointed to the AGBank’ OJSC and the ‘NBCBank’ OJSC have continued to take legtislative actions and maintained relevant assessments.

Assessments of the ‘NBCBank’ OJSC by the temporary administrator reconfirmed that the financial condition of the bank is unsatisfactory, capital is fully lost and the bank has serious liquidity problems, the assessment also revealed that the bank failed to meet deposit liabilities and follow enforcement measures imposed. As a result of the risky and non-prudential credit policy applied by the ‘NBCBank’ OJSC, 54% AZN(73M) of the lending portfolio of the bank is non-performing as of 30 April 2020, excluding mortgage loans issued out of the funds of the Azerbaijan Mortgage and Credit Guarantee Fund. After corrections to specific reserves bank’s total regulatory capital made AZN(24M). The bank needed AZN74M worth of additional capital to restore the capital position. The temporary administrator also discovered that the bank had distorted prudential and statistic reports it submitted on an ongoing basis.

Clarifications by the temporary administrator at the ‘AGBank’ OJSC revealed that the financial condition of the bank is unsatisfactory, the capital position is fully lost and has further deteriorated. As of 30 April 2020 51% of the bank’s lending portfolio is in non-performing status. After corrections to specific reserves bank’s total regulatory capital made AZN(167M). The bank needed AZN212M worth of additional capital to restore the capital position.

Given the above, the Management Board of the Central Bank revoked the license of the ‘AGBank’ OJSC under Articles 16.1.6, 16.1.7 and 16.1.9, and the ‘NBCBank’ OJSC under Articles 16.1.6, 16.1.7, 16.1.8, 16.1.9 and 16.1.16 from 12 May 2020 onward due to the fact that they lost their capital in full, failed to meet their liabilities before creditors and maintain current activities in a reliable and prudential order and applied to court to liquidate them via bankruptcy.

The main target of the steps taken by the Government and the Central Bank is to rehabilitate the banking sector as a whole, protect interests of and, in particular, deposits of the population with banks, prevent a threat of loss of their deposits and allow their free use. Total amount of insured deposits of the population with the four banks, whose licenses have been revoked, makes up AZN686M (total 215 thousand depositors). Insured deposits account for 99% of total lending portfolio of these banks and they are fully compensated.

Discharge of banks’ liabilities by the liquidator will start from returning deposits. Funds from realization of assets and sale of property will be channelled to the execution of other liabilities of the said banks (due to businesses, as well as individuals not covered with the deposit insurance scheme) in the sequence set in the legislation.

We would like to inform that, according to the legislation, the ‘Atabank’ OJSC and the ‘Amrahbank’ OJSC were announced bankrupt by the Baku Court of Appeal with the decisions of 30 April based upon the Central Bank’s application, and the Deposit Insurance Fund (ADIF) appointed the liquidator. The process of handing over the banks to the liquidator began on May 1, and now the process is nearing completion. According to the decision of the Board of Trustees of the ADIF the ‘Kapitalbank’ OJSC was selected an agent bank to compensate insured deposits to be fully compensated according to the Law of the Republic of Azerbaijan on Full Deposit Insurance.

All liquidated banks are the members of the ADIF and insured deposits of the population will be paid by the Fund without attracting any public funds out of money from realization of the assets of closed banks and calendar fees paid by operating banks.

The Central Bank broadly communicates the decisions it takes to rehabilitate the banking sector, keeps the public informed and the process will continue.