The vestiges of the oil price shock – coupled with the sharp currency depreciation – continue to weigh on Azerbaijan's weak banking system. The dollarized banking system is still weak, Moody’s said in its report.
‘Although the largest bank, IBA, is in the final stages of its restructuring and has rebuilt capital buffers, other privately-owned banks are in need of capital injection or are at risk of being shut down by regulators. Nonperforming loans (NPLs) – which do not include restructured loans at risk of turning into NPLs – remain elevated across the banking system and have yet to reach a peak. This constrains the ability of banks to lend. Credit by banks to households and businesses continued to contract in year-on-year terms for the 21st month in December 2017’, the agency said.