OREANDA-NEWS. October 29, 2009. In capital of Azerbaijan was held the Second Baku International Banking Conference of CIS member states dedicated to "Increasing of the stability of financial and banking systems of the Commonwealth states", organized by the Finance & Banking Council (FBC) of CIS supported by the Executive Committee of CIS, Administration of the President of Azerbaijan and International Bank of Azerbaijan, reported the press-centre of IBA.

It was attended by 210 delegates from 11 countries. Conference has gathered the authotitative team of participants among whom are the representatives of the executive authorities, associations, national commercial structures, central, state and leading commercial banks, finance, investments and processing companies. Forum was highlighted by 55 representatives of magazines, newspapers and other mass media from CIS and far abroad.

Bankers’ Forum in Baku becomes a tradition

International conference under the sponsorship of FBS CIS is held in Baku for the second time. Similar forum was organized in October of 2008. The time passed since was very complex, but also interesting. Last year became a true test for the many countries of the world on stability of their financial and banking systems. We all witnessed, how the global crisis has shaken the basis of the global economic order, forced the financial and banking institutions to rethink their operations and commence the search for new ways of settlement of problems occurred. Experts have long time ago came to agreement on the fact that modern economic cataclysms, shall result in fundamental long-term changes in the global financial architecture. But what they will be? How under the contradictive conditions set, shall be provided the stability of the financial and banking sectors of countries passing the transition stage?

Answers to these and other associated questions shall be provided by this summit held by the FBC of CIS. The heightened attention to this conference was not ungrounded. It was explained not only by the topicality of the issue, but also the democratic approach of organizers to selection of presentations, directed not at promotion of the corporate interests, but also gaining actual benefits from discussion of urgent issues on development of financial and banking systems. Three main topics have been reviewed within the conference: stability of national banking systems of the Commonwealth under the condition of instability of global financial markets; development of the financial infrastructure in CIS as the basis for formation of the integrated regional banking market; formation of the single payment space within the payment and settlements systems in CIS and its perspectives.

With welcoming word to conference was made by the Chairman of the Executive Committee-executive secretary of CIS, S. N. Lebedev. Noting the demand for significant activation of joints efforts of banks and financial-investment institutions on deepening of economic integration of the Commonwealth countries and building of the common financial and banking space in CIS, speaker has noted the timeliness and currency of the event. It is more obvious that conference is held in the light of decisions made in Kishinev Summit of the CIS Heads of States on October 9, 2009 и joint efforts action plan on overcoming of the consequences of the global financial and economic crisis by the CIS member states during 2009-2010.

As an example of the positive adoption to conditions of unstable global financial markets was brought the Azerbaijan Republic: its economy has had suffered less than others from the crisis, and financial-banking system demonstrated the required stability. S. N. Lebedev has expressed the hope that duscussion and opinion exchanges will be fruitful, and during them there will be expressed constructive ideas and proposals, which will serve to resolution of problems identified by the conference agenda. This had put the banking forum under certain spirit, which was felt in future, during plenary sessions.

Stability of National Banking Systems

Khagani Abdullayev, Director General of the Central Bank of Azerbaijan, during his speech at the conference briefly characterised the main trends of the global economic crisis and provided the overview of the macroeconomic situation in Azerbaijan. Among positive factors he has noted the recovery of leading world economies from recession, transition of global economy into new macroeconomic balance with new structural balances and shears, appearance of new force centers in the modern financial architecture.

Speaking of national economy, which is the part of the global economy strongle integrated over the last few years into the global economic processes, Kh. Abdullayev accented the attention of conference participants on the fact that starting from second quarter of this year the situation not only stabilized, but also improved. This thesis was based on the specific statistical data on growth of GDP, payment balance, strategic currency reserves and monetary sector. For example, on CBA indicators, such as Economic Activity Index, Monetary Conditions Index and base inflation, there is significant improvement observed, which outlines the growth of demand and increase of liquidity in economy.

Was provided the detailed analysis of the anticrisis policy of CBA, realization of which played a significant role in mitigation of impacts of global recession on national economy and its priority goals for year 2010 have been set. Specifically was stated that active studies are performed of the Spanish model of counter-cycling provisioning, which is considered a successful international practice. Representatives of the financial and banking community of the post-Soviet regions have expressed obvious interest to the presentation of Jahangir Hajiyev, Chairman of Board of the International Bank of Azerbaijan, Vice-President of FBC of CIS. During his very interesting, featured and polemic speech the main idea was that Azerbaijan Republic today is self-sufficient country which provides itself with required financial, energy, food and labour resources. All these has provided strong foundation for the improvement of competitiveness, reliability and efficiency of the banking system of Azerbaijan, which over the years continues to be ahead of general economic growth.

To support the statement, were provided the international assessments of the financial and banking sector of the country, many of which became the revelation for many participants. There were mentioned the references to opinions of international financial institutions (IMF, EBRD, World Bank, Asian Development Bank), rating agencies (Fitch Ratings, Standard&Poor's and "ExpertRating"), prominent British Research Centre -Economist Intelligence Unit and one of the leaders of the Russian market of professional services- RBK company, on Indicator of the Financial Market Development and Ranking of Bank Systems of the World Economic Forum, World rating of financial health-2009, one of the main economic publications The Banker.

Naturally, the main place in the presentation of J.Hajiyev was dedicated to the International Bank of Azerbaijan, which place a significant role in all achievements of the national banking sector. IBA is now strong in its position of the system formation bank and one of the largest holding groups in the country. Its affiliate structures also hold leading positions in their fields of activities, such as insurance, leasing, plastic cards processing. The presentation had offered specific data, which provided all-sided illustration the leading positions of IBA in the national financial and credit sector.

IBA is actively present in integration processes, one vector of which is the expansion of its operation volumes on the international finance and capital market. From the commencement of this year only with largest banks of the world have been signed the syndicated loan agreements for the total value of above 200 mln. dollars). Under the conditions of the continuing global financial crisis and deficit of free funds on the international financial markets this is the evidence of trust and high level of interest in IBA from financial investors. Meanwhile, the repayment of loans have been performed in timely manner: in 2008 the total amount of repayments was at 800 mln. USD, and from the beginning of this year- 35 mln. USD.

IBA is most active in Russia: subsidiary bank in Moscow has opened affiliates in Saint-Petersburg and Yekaterinburg and listing in the ranking of Top-30 Russian stress resistant banks. IBA expands its participation in other post-Soviet states also. Specifically, it has been more than two years since IBA-Georgia subsidiary bank operates. And this is not the end. Currently, as speaker noted, bank looks into other CIS countries. In general the IBA integration in the CIS represents its strategic development direction. Besides, IBA cooperates closely with international development banks – European (EBRD), Asian (ADB), Islamic (IDB) and German (KfW).

Special attention is paid to countries of the Persian Gulf, where already functions the representative office in Dubay, and is planned to open the subsidiary structure in Qatar in 2010. At the end of his presentation, J.Hajiyev has noted, that the under the conditions of expected serious post-crisis transformations in the financial market the main issue the each national banking system is to use in short-term the accumulated experience and potential on provision of sustainable development within the newly formed global financial architecture. Speaking of this, the speaker has concentrated on main problems solution of which will help the sustainable development of IBA. This includes the deepening of integration activities, specifically within CIS; introduction of the Islamic banking elements; minimization of credit risks; attraction of syndicated loans, increase of capitalization; implementation of innovations.

By its actuality, scale and acuteness of topics discussed during the first session of the conference, the moderator for which was A. B. Kazakov, Chairman of the Coordination Council of FBC of CIS, shall also be noted the presentations of V. A. Gustov Chairman of the CIS Committee of the Federative Council, A. V. Murichev Chairman of the International Banking Council, S. V. Chernishev Director of Department for Economic Cooperation with CIS countries of the Ministry of Economic Development of the Russian Federation, G. V. Soldatenkov Deputy Chairman-President of the VTB OJSC, I. G. Suvorov president of the CIS Interstate Bank, A. I. Guley Chairman of Board of the State Savings Bank of Ukraine, D. K. Akhatov, Deputy Chairman of the Board of Central Bank of Turkmenistan, M. U. Matovnikov General Director of Interfax Business Service CJSC etc.
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During discussions held have been covered the issues of the current conditions of the national banking systems of CIS; role of state authorities in overcoming the crisis occurrences in the banking sectors of Commonwealth states; ways on improving of loan portfolios, perspectives on increasing of capitalizations of CIS banking institutions; consolidated processes in the banking sector of CIS countries; role of the interstate banking unions and associations etc.

Within the discussion on situation in the financial markets of CIS member states, the conference participants, critically assessing the global situation with financial relations and efficiency of the regulatory institutions of the sector, have noted the following: financial crisis has identified the instability of the banking sector of CIS countries and its dependence on the speculative forms of capital movements, has heightened the requirement for the additional capitalization of the CIS banking systems. Separated financial markets of CIS have a limited capacity, which is insufficient for the provision of investment demands of national economies. Banking crisis has demonstrated the requirement of the state financial regulation via institutions of the development and increasing of liquidity of banking systems through refinancing and recapitalization of loans. Provision of the growth of economy depends on the capitalization of the banking sector (not less than 5-10% of the CIS GDP).

Financial infrastructure and common payment space in CIS

Two following sessions of the conference were also interesting, under the facilitation of P.P. Nefidov General Director of FBC of CIS. On one session were discussed the issued of the financial infrastructure within Commonwealth. Among key speakers on subject matter should be noted, E. A. Uzakbayev- Co-Chairman of the Economic Council of CIS, Authorized Representative of the President of Kyrgyzstan Republic on Integrational Cooperation within CIS and EvrAzEc, A. B. Aristanov- Chairman of the Agency of the Republic of Kazakhstan on Regulation of Operations of the Financial Center of Almaty city, I. Landyel- General Secretary of the Banking Association for the Central and Eastern Europe, K. N. Korijenko- President of the MICE CJSC, G. A. Egorov, Chairman of Board of Belvnesheconombank PJSC, Y. N. Gusev-Territorial Development Corporation State Company, A.A. Boyko- Chairman of Board of Directors of "B2B-Bank", F. R. Abdullayev, Chairman of Board of IBA-Moscow, Y. V. Kosilova- Customer Services Manager of the Russian/CIS Business Development Department of Deutsche Borse and others.

As we can see from the list above, the geography of speakers is very wide. As far as the range of issues covered is concerned, this is in the first place the experience of collaboration of the national banking institutions and regulators in the integration processes on financial markets, problems of establishment and development of national stock markets, experience of organization and operation of the Regional International Financial Centres (RIFC), their interstate speciality, unification of the legal, tax and regulatory efforts on the subject issue etc. Thus, currently the FBC of CIS works on the issue of RIFC establishment. In this direction some achievements identified by the conference, in Almaty and intensive preparatory work done by Moscow. The organization of such centre in Baku is at the discussions stage, therefore the initial experience of the above mentioned cities as well as achievement of the Frankfurt am Main have developed large interest.

Speakers, on the basis of specific examples have demonstrated the privileges and benefits provided to these centres, have specified the measures required on improvement of legislation etc. Specifically, in Almaty along with development of infrastructure of the financial centre is performed the preparation for the formation of the Islamic finance centre, and therefore in February, 2009 there were changes introduced to legislation of Kazakhstan, related to operations of the Islamic banks and Islamic finance organizations.

During the second plenary meeting of the conference the “round” table was held dedicated to problems and perspectives of formation of the common payment space in CIS. During this session have been heard the presentations by G. S. Gospodarik- Deputy Chairman of Board of ASB Belarusbank OJSC, , A. A. Polomarenko- head of Department of Information Technologies and Development of Payment Systems of the Interstate Bank, E. O. Sadigov- General Director of the Azericard Processing Centre, P. A. Tamarov- Head of the Department for Regulation of Settlements of the Central Bank of Russia, D. A. Romanov- Managing Director of Nibur Trade Financing Ltd., I. V. Klyuchnikov- Senior Vice-President of Coinstar Eurasia Ltd. and others.

During the exchange of opinions have been raised issues on development of the international payments and settlements systems of the Commonweatlh, reinforcement of national currencies, formation of the regional reserve currency etc. Speakers have stressed that on domestic markets of CIS member countries the international payment systems (IPS) VISA and MasterCard are dominant, and their specifications de-facto became the industry standards for the plastic cards market. Therefore all international settlements between the sender and recipient banks of the Commonwealth are performed by use of IPS, by their rules and tariffs, with conversion of national currencies via dollar and euro cross-rates.

All this have negative results. For instance, dependent of the policy of two above mentioned American companies, including the issues on regulation of access to the non-cash settlement operations of the Commonweatlh member states (provisions of membership, licenses). Also is performed the distraction of currency resources of IPS member banks on deposits in foreign banks for the provision of settlements on international operations on the territories of the Commonwealth member states. Besides, the performance of settlements via IPS is associated with losses on cross-rates of national currencies vs. dollar and euro, which in turn, creates increase of tariffs for customers.

Under current circumstances, the joining of Commonwealth member-state banks- is significant step to their integration into the Common Payment Space (CPS). Discussions held allowed to draw the conceptual provisions of SPS development and its infrastructure. Also shall be noted, that during the conference session held under chairing of A. V. Murichev there was open meeting of the International Banking Council held. The main issue in the agenda- adoption of the most up to date document "Anti-crisis regulation experience in the bankins sectors of CIS, Central and Eastern Europe". This document comprising of the anti-crisis experience of 9 states: Azerbaijan, Belorussia, Georgia, Kyrgyzstan, Russia, Serbia, Tajikistan, Uzbekistan and Ukraine, will be distributed to governments of Commonwealth and prominent analytic centres.

Summary and expectation of new meetings

The final conclusion of the conference participants was unanimous: Baku banking summits were the noticeable event in the economic life of CIS and have the deserved recognition by the financiers and bankers in the region. Format of the conduct provides the unique opportunity to combine the business program with opportunities of informal communications, this gathering the large number of participants and guests. The structure of conference meetings allows holding of the direct dialogue on combination of key issues, trends and perspectives of development of financial and banking systems of CIS, identification of ways for optimization of the legal environment, regulatory and monitoring practices in the banking business, as well as other issues most interesting for the banking community of Commonwealth countries.

As far as this conference is concerned, its participants have accented on the following issues:

1. Improvement of the stability of banking system, to which helps the coordination of activities of financial and banking institutions of the Commonwealth countries, as well as formation of various anti-crisis foundations. First step in this direction is an establishment of the anti-crisis foundation of EurAzEs, which is also available for other countries of the Commonwealth. This foundation shall serve as sample for the development of similar financial instruments for the support and increasing of stability of financial systems in entire CIS.

2. Establishment of the international payment system on payments in national currencies on the basis of the Interstate Bank of CIS or other agreed mechanisms via central and commercial banks of Commonwealth countries.

3. Recognition of expediency of implementation of project of IBA, AzeriCard and Coin Star Processing Centres on provision of social transfers of individuals with payment to card accounts. This project will be adopted as a pilot model for development of the integrated market of money transfers in CIS.

4. Application on behalf of conference participants to governments, regulatory bodies, central (national) banks of CIS states on immediate adoption of new charter, which would stipulate the capitalization and reorganization of the CIS Interstate Bank in accordance with new condiions of formation of the common payment space in Commonwealth, providing the organization and performance of settlements in national currencies between the subject member states. In this was identified the expediency of review of the issue of the Central Bank of Azerbaijan becoming the member of this banking structure.

5. The wide use of the innovated banking technologies, including those developed by national structures. This allows significant increase of the efficiency and profitability of banking operations, interstate payments and settlements, introduction on market of new financial instruments and products, attraction of additional resources to banking systems of the Commonwealth.

6. For the purposes of provision of stability of national banking systems in CIS the participants of conference deem necessary to increase the role of the regulatory institutions. Specifically, their mobilization is intended to settle the following issues:

- creation of favorable conditions for the formation of interstate investment structures, free flow of capital, formation within the Commonwealth of internal long-term investment projects.

- Adoption of measures of struggling of inflation, provision of stability of the payment balance and reduction of the negative impacts of the financial crisis on the quality of assets of the CIS banking system.

- Stimulation of use of national currencies of the Commonwealth countries’ national currencies in settlements on import and export operations.

- Adoption of measures of termination of interstate barriers in trade of goods and services.

- Performance of exchange of information on measures applied in the CIS member countries on regulation of financial markets etc.

At the same time the conference participants has thought it is expedient to recommend to the FBS of CIS:

1. Activate efforts on: development of proposals on expansion of the geography of participation of national financial companies and investment development banks in the financial of large system formation projects and programs, generating the integration in CIS; search for internal reserves to increase the capitalization of banks, attraction of long-term financial resources into the real sector of economy, development of investment projects for the purposes of attraction of resources of foreign funds in syndication with member banks of FBS CIS, coordination of joint efforts of the banking community of Commonwealth states in this area, development of recommendations on the analysis of financial stability, including the assessment of debt stability on the country level; preparation of the list of most significant (integration generating) “problem assets” for the purposes of further development of schemes of their “rehabilitation” and operational cooperation with participation of foreign investment funds and joint efforts of CIS banks.

2. The work group is to apply maximum efforts for the development of favorable conditions for CPS, integrated within Commonwealth, specifically on: devellopment of schemes and models of operations with national currencies by stimulation of main contracting agents; development of proposals on formation of two-sided correspondent relatons of CIS banks on servicing of export and import operations; development of mechanism for formation of reserves of the FBS of CIS members banks in national currencies, development of proposals on provision of direct mutual exchange rates of national currencies of the relevant CIS member countries; development of the complex of activities on establishment, development and collaboration of RIFS on the territories of CIS member countries as instrument of the resolution of current problems of the currency and settlement regulations.

3. FBC of CIS shall prepare for review at the Economic Council of CIS states, the materials on various aspects of formation of the common market of CIS countries. Conference participants have expressed the assurance that its implementation has allowed identification of the existing problems and finding the highlights of ways for development of the financial and banking integration of the CIS member states under current conditions. Saying goodbye to our hospitable city, most of them were sure that most of things planned will be implemented before the next conference in Baku.