Azerbaijan Approves New Regulatory Framework For Market Risk Management In Banks

The Central Bank of Azerbaijan has approved a new regulatory framework aimed at strengthening market risk management practices across the banking sector, Azernews reports.

According to the Central Bank, the“Rule on Market Risk Management in Banks”, adopted by a decision of its Board of Directors, is designed to align Azerbaijan's banking regulations with Basel III standards while introducing unified and progressive requirements for managing market risks.

The new rule sets out comprehensive requirements for banks' market risk management systems, including internal policies, governance mechanisms, and risk assessment procedures. It covers key areas such as the identification, measurement, monitoring, and reporting of market risks, ensuring a more structured and transparent approach across the sector.

In particular, the framework defines advanced methodologies for measuring different types of market risk, including interest rate, currency, equity, and commodity risks. It also introduces more sophisticated approaches to managing interest rate risk arising from the banking book (IRRBB), allowing banks to better assess potential vulnerabilities linked to fluctuations in market conditions.

The Central Bank noted that the implementation of the new rules will enable more accurate risk identification and measurement, while enhancing banks' ability to respond to adverse market movements. Overall, the regulation is expected to strengthen the resilience of Azerbaijan's banking sector and reduce potential losses stemming from market volatility.

The full text of the regulation can be found at the link.

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