Azerbaijan's Institutional Framework For Macroprudential Policy Meets Principles Of Good Design IMF

(MENAFN- Trend News Agency) BAKU, Azerbaijan, April 29. Azerbaijan's institutional framework for macroprudential policy broadly meets the principles of good design and could be enhanced by publishing a macroprudential strategy, says the International Monetary Fund, Trend reports.

In its latest report, the IMF notes that the current framework places all macroprudential powers within the Сentral Bank of Azerbaijan (CBA), underpinned by the Law of the Republic of Azerbaijan on the Central Bank of the Republic of Azerbaijan that provides the mandate and ability to act.

“Multiple measures taken in recent years have shown that the authorities have both the willingness and ability to act. Disseminating a macroprudential policy strategy with clear objectives and key indicators will help to guide the timing to activate macroprudential policy tools, communicate to the public, and bolster transparency and accountability,” reads the report.

IMF analysts point out that important progress has been achieved in developing the macroprudential policy toolkit to enhance banks' resilience, including FX risks from high dollarization.

“Since the 2015 Financial Sector Assessment Program, the CBA has established a comprehensive macroprudential policy toolkit, covering borrowerbased measures, 36 capital buffers that include Countercyclical Capital Buffer and additional capital requirement for Domestic Systemically Important Banks, restrictions on large exposures and limits on open FX positions, higher reserve requirements for FX deposits, and liquidity measures that include Liquidity Coverage Ratio implementation in 2023 in line with Basel III. A 0.5 percent Countercyclical Capital Buffer is imposed on banks starting March 1, 2025,” the report says.

IMF notes that the CBA made commendable efforts to implement the Basel Committee on Banking Supervision's international standards adjusted for the domestic setting, strengthening prudential requirements, corporate governance, and risk management standards.

“Many of these improvements are at an early stage. In line with the Financial Sector Development Strategy (2024-2026), the CBA is implementing Basel III prudential standards. A new Risk-based Supervision model has been developed based on international best practices, with the first pilot commencing in early-2025. A larger share of banks is fully compliant with prudential requirements now, following enhanced supervisory actions,” reads the report.

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