ADB Signs $30M in Subordinated Debt Facilities to Boost Lending Capacity of Two Banks in Azerbaijan

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending subordinated loans totaling $30 million to two major commercial banks in Azerbaijan to bolster their capital positions and expand their lending activities for small and medium enterprises and the retail sector.

ADB will extend a $20 million sub-debt Tier II loan to International Bank of Azerbaijan, the country’s largest bank, and a $10 million sub-debt Tier II loan to Bank Respublika, which ranks fifth by assets. Tier II refers to unsecured subordinated debt, undisclosed reserves and loan-loss reserves that do not dilute ownership.

The loans are expected to support the development and growth of a sustainable banking sector in Azerbaijan through the provision of Tier II capital. “In the current credit environment, we see Tier II and Tier I capital as significant determinants of a bank’s future. We, in ADB, are willing to support our key clients in this respect,” stated William Willms, Director of the Capital Markets and Financial Sectors Division.

The private banking sector of Azerbaijan currently is underdeveloped and not fully able to mobilize available liquidity and channel it toward small and medium enterprises. Support for the growth of well-managed private banks like Bank Respublika and International Bank of Azerbaijan, which is majority Government owned, are expected to contribute to address the main constraint faced by many small and medium enterprises, accessing financial services in Azerbaijan.

Small and medium enterprises play an important role in the economies of ADB’s developing member countries and are the key drivers of employment, economic growth and development.

“The development of small and medium enterprises is crucial to the future growth and economic diversification of Azerbaijan, away from its oil export dependence.” said Pamela Bracey, Investment Specialist for capital markets at ADB’s Private Sector Operations Department.