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“S&P Global Ratings” international rating agency has announced a decrease in industry risk for the banking sector in Azerbaijan due to the strengthening of regulatory and supervisory mechanisms.
“Elchi” reports this with reference to the Agency.
The Agency has reduced the industry risk indicator in Azerbaijan’s Banking Industry Country Risk Assessment (BICRA) from 8 to 7. S&P noted that this decision reflects the reforms implemented in the last three years to modernize the regulation and supervision of financial institutions.
According to the Agency’s assessment, corporate governance standards have been introduced in banks within the framework of the Financial Sector Development Strategy covering 2024–2026, restrictions have been imposed on transactions with related parties, and liquidity risk management rules have been adopted in accordance with Basel III requirements.
S&P added that the transition to risk-based supervision in 2026, the implementation of IFRS 9 (International Financial Reporting Standard 9), the alignment of the capital adequacy framework with Basel III standards, and the tightening of stress-testing requirements will limit banks’ risk appetite and reduce credit risk.
The Agency also emphasized that the regulatory body has further strengthened risk management in the banking system in 2024–2025 with steps such as activating a counter-cyclical capital buffer, strengthening liquidity requirements, and tightening regulations on consumer loans.
According to S&P’s forecast, against the background of new regulatory measures, the growth rate of lending will remain in the range of 10–12% in 2026, and the share of problem loans will stabilize at 4.5–5.0%.