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Review of i nterest rate trends in Post-Soviet economies

. . Review of i nterest rate trends in Post-Soviet economies. Dr. Salman Najafov Baku, 2012, February 28. Main tendencies of interest rate on loans in CIS. In Armenia, Azerbaijan and Georgia increase of interest rate on loans is observed

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Review of i nterest rate trends in Post-Soviet economies

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  1. . Review of interest rate trends in Post-Soviet economies Dr. SalmanNajafov Baku, 2012, February 28

  2. Main tendencies of interest rate on loans in CIS • In Armenia, Azerbaijan and Georgia increase of interest rate on loans is observed • In Kyrgyz Rep. and Ukraine interest rate on loans before the crisis decreased but then their increase is observed • In Tajikistan, Moldova, Russia and Belarus interest rate on loans demonstrates stability • Except Armenia, Azerbaijan, Kyrgyz Rep. and Tajikistan in other countries in 2010 interest rate on loans decreased • in most CIS credit margin is high and in 2005-2010 their increase are observed

  3. Interest rate on loans (1)

  4. Interest rate on loans (2)

  5. Interest rate on loans (3)

  6. Real interest rate on loans • In Russian, Ukraine and Belarus negative interest rate on loans is observed, only in 2009 and 2010 they become positive • In most countries deposit rate is very volatile

  7. Real interest rate on loans (1)

  8. Real interst rate on loans (2)

  9. Factors impacting on interest rate on loans • Interest rate on deposits • Nonperforming credits

  10. Interest Rate on deposits • In most countries in 2005-2009 interest rate on deposits significantly increased, but in 2010 remained stable or decreased • In 2005-2010 in Kyrgyz Rep. and Tajikistan deposit rates decreased • In Georgia in 2010 deposit rates significantly increase

  11. Interest rate on deposits (1)

  12. Interest rate on deposits (2)

  13. Credit margin, 2010

  14. Nonperforming loans

  15. Up to global financial crisis a credit boom was observed in all CIS countries, in the crisis years growth rate of credits somewhat decreased, even in some countries (Georgia, Moldova and Ukraine) the total volume of credits decreased; • In CIS countries positive correlation between loans dynamics and interest rate on loans is observed.

  16. General tendencies in banks’ liabilities • Despite decrease in share of deposits in bank’s liabilities they remain a main source of loans • Credit boom observed in CIS mainly occurred due to the resources attracted from abroad. • liabilities of commercial banks before the Central increased and this is connected with the constrained liquidity in the banking sector.

  17. Share of deposits Moldova, Russia and Ukraine - 2009

  18. Share of foreign liabilities in banking liabilities Moldova, Russia and Ukraine - 2009

  19. Share of liabilities to Central Bank Moldova, Russia and Ukraine - 2009

  20. Central Banks policy • Despite relatively constrained monetary policy was implemented in 2005-2008 in these countries, due to the global financial crisis, since 2009, stimulating monetary policy was preferred • Since the exchange rate policies pursued by Central Banks in each of these countries were significantly different depending on macroeconomic and financial status of a particular country, their impact on credit interest rates also reflected itself in different ways; • in almost all of CIS, macroeconomic and institutional factors still play a significant role in increasing credit risks andrisk premiums . • There are problems with accurate definition and reliable protection of property rights (legal-economic status of the borrower, legal guarantee of the collateral, non-observance of the contracts, problems in implementation of court decisions)

  21. Thank you for attention!

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