BAKU, Azerbaijan, March 11. The Central Bank of Azerbaijan (CBA) has approved the "Banking supervision strategy" covering 2026-2027 within the framework of risk-based supervision processes, Trend reports via the CBA.
In accordance with the targets set within the "Financial sector development strategy for 2024-2026" and within the framework of the "Financial sector modernization project" implemented jointly with the World Bank, the initiatives envisaged for the implementation of risk-based supervision have been successfully implemented by the CBA. Thus, during the past two years of the strategy, the "Policy concept of the CBA on risk-based supervision" (https://uploads.cbar.az/assets/7fd12f0749b180441d54cd4de.pdf) was approved, and based on that concept, risk-based supervision tools were created and tested on pilot banks within the framework of the Azerbaijan Risk Assessment System (ARAS).
As a result, last December, the "Instructions of the CBA on risk-based supervision of banks" were approved. Based on the aforementioned Instructions, the CBA approved the "Banking supervision strategy" covering 2026-2027. The strategy aims to implement the following supervisory priorities in the risk areas considered more relevant for banks in the next two years:
Strengthening the resilience of banks to macroeconomic threats.
Improving the activities of banks in managing business model sustainability and profitability;
Strengthening the operational resilience of banks;
Modernizing the risk management framework in banks.
Strengthening the framework for corporate governance, risk culture, and consumer rights protection in banks.
In addition, to support the above priorities, the "Bank supervision strategy" aims to develop the CBA's regulatory framework in the following areas:
Modernizing regulations on improving the risk management and stress-testing framework in banks;
Incorporation of part of the "Recommendations on corporate governance standards in banks" approved by the CBA in 2024 into the regulatory framework;
Application of requirements for the Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) in relation to banks to increase compliance with Basel III standards;
Integration of climate and Environmental, Social, and Governance (ESG) risks into the regulatory and supervisory framework.
The measures taken by the CBA to implement risk-based supervision not only serve the objectives set by the relevant policy concept but also contribute to ensuring the long-term sustainable development of the banking sector and increasing its resilience to potential shocks.
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