Moody's: Regulatory reforms strengthened resilience of Azerbaijan's banking sector

Continued improvements in Azerbaijan's banking sector regulation and oversight bolster the sector"s resilience through recent shocks, characterized by stable asset quality, ample provisioning and robust capital positions, Report informs referring to Moody's international ratings agency.

"Our assessment of Azerbaijan's banking sector risk at "baa" reflects the small size of the banking system, which limits contingent liability risks. Continuation of banking sector reforms, including the roll-out of Basel III requirements relating to liquidity and risk management, will further promote stability in the banking system," Moody's noted.

The Central Bank of Azerbaijan has given local banks one year to bring their capital into compliance with Basel III standards. The CBA Board adopted a decision on December 16 of last year amending the "Rules for Calculating Bank Capital and Its Adequacy." These changes brought the bank capital structure, capital adequacy ratios, capital buffers, and a number of other requirements and rules into compliance with Basel III standards.

Banks have been granted a one-year transition period to adapt to the new capital structure, align internal banking rules and procedures with the new regulatory requirements, conduct the necessary industry training, and integrate the new approaches into prudential reporting.

Thus, banks will be required to fully comply with the new requirements starting January 1, 2027.