The financial stability indicators of the banking sector in Azerbaijan remain strong, but some weaknesses are also present, this assessment was made in the final statement for 2025 under Article IV of the International Monetary Fund's (IMF) Articles of Agreement, APA-Economics reports.
The statement notes that the banking sector is generally resilient and sufficiently capitalized: "In particular, based on the results of stress tests conducted by the IMF, banks are able to maintain their financial positions under both baseline (normal) and adverse (crisis) scenarios. However, some banks, due to weak capital reserves, may violate regulatory minimum requirements in an adverse scenario."
Dollarization and large deposits are potential risk factors
The IMF stated that, due to the high share of the hydrocarbon sector in Azerbaijan's economy, there is a significant proportion of large corporate deposits in the banks' deposit portfolios. These deposits, especially those from large companies and vulnerable to economic shocks, could create liquidity risks in the banking system.
At the same time, although financial dollarization (i.e., the preference of the population and businesses for savings and loans in dollars) has decreased in recent years, it remains high. This increases the banking system's sensitivity to exchange rate fluctuations.
The rapid growth of consumer loans also poses a risk
Additionally, IMF experts note that the rapid growth of unsecured consumer loans in recent times increases cyclical financial risks. This could negatively affect the population's ability to repay debts, especially during periods of weakened economic growth.
Follow us on Telegram
t.me/apanewsaz
Follow us on Instagram
Follow us on TikTok
Follow us on Facebook
Follow us on X
