The Central Bank of Azerbaijan (CBA) has approved the Bank Supervision Strategy for 2026-2027, Report informs, referring to the bank.
"The Central Bank has successfully implemented the risk-based supervision initiatives as outlined in the Financial Sector Development Strategy for 2024-2026 and within the ambit of the Financial Sector Modernization Project, which was carried out in collaboration with the World Bank," reads the statement.
Thus, over the past two years of the Strategy, the Central Bank of the Republic of Azerbaijan approved the Risk-Based Supervision Policy Concept of the Central Bank of the Republic of Azerbaijan (https://uploads.cbar.az/assets/7fd12f0749b180441d54cd4de.pdf). Based on this Concept, risk-based supervision tools were created and tested on pilot banks within the Azerbaijan Risk Assessment System (ARAS).
As a result, the Guidelines of the Central Bank of the Republic of Azerbaijan on Risk-Based Supervision of Banks were approved in December of last year. Based on these guidelines, the Central Bank approved the Bank Supervision Strategy for 2026-2027. This strategy aims to implement the following supervisory priorities in the risk areas deemed most relevant to banks over the next two years.
- Strengthening the resilience of banks to macroeconomic threats.
- Improving banks' performance on business model sustainability and profitability management.
- Strengthening the operational resilience of banks.
- Modernizing the risk management framework in banks.
- Strengthening the framework for corporate governance, risk culture, and consumer protection in banks.
Additionally, the Banking Supervision Strategy aims to develop the Central Bank's regulatory framework in the following areas to support the above priorities:
- Modernization of regulations to improve risk management and the stress-testing framework in banks.
- Incorporation of part of the Recommendations on Corporate Governance Standards in Banks approved by the Central Bank in 2024 into the regulatory framework.
- Implementation of Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) requirements for banks to increase compliance with Basel III standards.
- Integration of climate and ESG risks into the regulatory and supervisory framework.
The Central Bank's implementation of risk-based supervision not only serves the objectives outlined in the relevant Policy Concept, but also ensures the long-term sustainable development of the banking sector and increases its resilience to potential shocks.