Moody’s: Azerbaijan’s banking sector prepared for new challenges

The international rating agency Moody's Ratings predicts that the key indicators of Azerbaijan's banking sector will remain at a consistently good level over the next year, Analyst, Junior Vice President of Moody's Ratings Lev Dorf, told Report.

He noted that the agency maintains a positive outlook for the banking sector of Azerbaijan for this year.

“Favorable economic conditions, including sustainable growth in the non-oil sector, create a comfortable operating environment for banks. This contributes to the expansion of lending and maintaining good profitability. Along with this, strengthening banking regulation helps reduce systemic risks. We expect that in the next 12 months, the key indicators - asset quality, profitability, capital and liquidity - will remain at a consistently good level,” Dorf noted.

He recalled that the agency has been assigning ratings to Azerbaijani banks since 2006. During this period, the sector has gone through a number of serious tests, including external shocks and internal problems - from weak corporate governance to insufficient risk control.

"After the 2015 crisis, Azerbaijan's banking legislation was significantly strengthened. Stricter consumer lending rules were introduced, a ban on foreign currency loans for the population was introduced, and prudential standards for credit risk management were tightened. These measures allowed banks to strengthen their resilience and prepare for new challenges, including the 2020-2022 pandemic," he added.

According to Dorf, there is currently an increase in corporate governance requirements, active implementation of Basel III standards, including additional capital buffers and the liquidity coverage ratio (LCR).

"Requirements for systemically important banks have also been increased, especially in terms of capital adequacy standards. All these steps contributed not only to sustainable growth, but also to qualitative changes in risk management, strengthening the stability of the banking sector of Azerbaijan," he added.

As of July 1, 2025, the total assets of Azerbaijan's banking sector reached 56.73 billion manats ($33.370 billion), which is 12.7% more than in the same period last year.

During the reporting period, the liabilities of the banking sector increased by 12.9% to 49.788 billion manats ($29.287 billion), including the deposit portfolio increased by 6.2% to 37.353 billion manats ($21.972 billion). The balance sheet capital of the sector increased by 11.3%, amounting to 6.946 billion manats ($4.085 billion).