The Central Bank of Azerbaijan has added a new condition to how banks assess loans issued to businesses that sell goods on credit. The rule takes effect on November 10.
Central Bank of Azerbaijan Chairman Taleh Kazimov signed the relevant document on September 15. The new regulation covers both legal entities and individuals engaged in business activity without forming a legal entity, as long as they sell goods on credit to customers.
Under the rule, banks will compare the total value of a client’s sales portfolio and the number of customers, as reported by the client itself, with the corresponding figures held by credit bureaus. If the match rate for any of these indicators falls below 90%, the loan in question will be classified as an unsatisfactory asset.
For example, if a borrower reports a sales portfolio worth 100,000 manats to its bank, but credit bureau records show 120,000 manats, the match between the figures could fall below 90%, giving grounds to classify the loan as an unsatisfactory asset.
Under current legislation, asset classification is based on specific quality indicators, and where an asset meets the criteria for more than one category, the lowest category applies. In this framework, “assets” include loans issued by the bank, other funds placed on a repayable basis, advance payments, equity participation stakes and off-balance-sheet liabilities.
