Fitch Ratings said April 13 that declining oil prices andsubsequent currency devaluation weakened Azerbaijani banks' capital levels and asset quality,eroding their capacity to absorb credit losses, which are expected to rise.

The rating agency said its outlooks on most coveredAzerbaijani banks remains negative due to further pressure.

Fitch generally views the capitalization of the country's lendersas weak. The regulatory capital ratios of most banks rated by the agency fellby between three and five percentage points in December 2015 following a 50%devaluation of the Azerbaijani currency, as their foreign currencyrisk-weighted assets increased. Several lenders also suffered significantone-off currency translation losses due to unhedged short positions, Fitch said.