On September 27, 2012, IDG's Azerbaijan Competitiveness and Trade (ACT) project organized a one-day "Problem Loan Management" workshop, cofinanced by USAID and the Central Bank of Azerbaijan (CBAR), for representatives of the local banking community to raise awareness among the private sector and bank regulators regarding the risks posed by non-performing loans and the methods by which these risks can be managed.
Non-performing or questionable loans that private banks have either failed to identify, failed to acknowledge, or failed to act on can render a banking system vulnerable to shocks or underperformance. This is a problem shared with banking systems in other countries in the region.
The worksop focused on how to identify problem loans within a bank's portfolio and the actions to take in order to minimize losses and future risks - a topic particularly relevant under current circumstances. Loan portfolios in banks in the region are at risk of deterioration due to the lingering after-effects of the global economic crisis, the depressed prices of various commodities, and a European financial crisis that still remains unresolved.
In particular, the workshop explored the four major components of problem loan management: Problem Loan Detection, Problem Loan Situation Evaluation, Problem Loan Negotiation, and Loan Resolution.
The workshop was innovative as it looked as problem loan management from the perspective of both private banks and bank regulators. Senior level bank supervisors from the CBAR as well as private banks from Azerbaijan and from the National Bank of Kazakhstan and other countries in the region actively participated in the discussions.