(MENAFN- Trend News Agency) BAKU, Azerbaijan, October 31. The Central Bank
of Azerbaijan (CBA) has adopted a new version of "Rules of
liquidity risk management in banks" by the decision of the Board of
the Central bank of Azerbaijan (CBA), Trend reports.
The data of the CBA shows that the rules will come into force
from December 1, 2023, and from this date the "Rules of Bank
Liquidity Risk Management" in force since 2009 have been
canceled.
"In accordance with the country's strategic priorities, the CBA
continues its activities within the framework of adapting the
banking sector regulation system to international standards and
improving risk management in banks. The updated rule covers the
latest requirements of international standards, and also provides
for the reflection of the requirements of the previous rule in a
more perfect form. Along with the standards of the Basel Committee,
which formulated effective approaches to banking supervision, when
developing the rules, the experience of external regulatory
authorities, as well as the recommendations of experts of the
International Monetary Fund, progressive proposals during
discussions with the banking community were taken into account,"
said the CBA.
"A new monitoring tool for the concentration of attracted
sources of funds (the Herfindahl–Hirschman index) has been
introduced, the composition of the instant liquidity ratio standard
has been improved. The principles and requirements for daily
liquidity management are also established for the timely
fulfillment by the bank of emerging obligations on payments and
settlements in normal and stressful conditions," said the bank.
"As part of improving the forecasting of the liquidity position
in the bank, the regulations provide a standard for the liquidity
coverage ratio (LCR) separately in aggregate and foreign currency,
based on historical data on the behavior of the bank's customers
presented in the Basel III standards. The goal is to ensure the
stability of the bank's liquidity in the short term (30 days) in
order to continue its activities without interruption, including
the fulfillment of obligations in full and on time," said the
bank.
"The procedure provides for the use of the coefficient both in
foreign currency and in aggregate. Banks that have an LCR ratio of
100 percent or more in aggregate and foreign currency separately at
the date of entry into force of the rules should ensure that the
coefficient does not fall below this threshold. The coefficient
will be applied in stages over 18-24 months in order not to create
sharp pressure on the liquidity position of banks with an LCR
coefficient below 100 percent. The coefficient must be brought by
systemically significant banks to 100 percent within 18 months from
the date of entry into force of the rules, and by other banks - up
to 24 months. Until the LCR ratio is maintained at 100 percent, the
current instant liquidity ratio will continue to be applied," said
the CBA.
"The application of these rules will ensure the strengthening of
the risk management potential in the banking sector, a more correct
prediction of the liquidity position, and thereby more effective
preservation of stability," the CBA said in a statement.
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