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Moody’s: Implementation of LCR requirements is a credit-positive factor for Azerbaijani banks

18 July 2025 12:50 (UTC +04:00)

The Central Bank of Azerbaijan (CBA) will begin the phased implementation of the Liquidity Coverage Ratio (LCR) under the Basel III framework starting August 1, 2025, APA-Economics reports.

Moody’s rating agency has stated that this regulation requires banks to maintain a sufficient volume of high-quality liquid assets in both national and foreign currencies. Full implementation is expected to be completed by the end of 2027.

It has been noted that the new structure is positively assessed in terms of credit ratings and is expected to enhance the financial resilience of the banking sector. According to the agency, these changes will strengthen sustainable liquidity provision in the national currency (manat).

According to the Central Bank of Azerbaijan (CBA), the share of liquid assets in manats increased from 46% in 2020 to 56% by the end of 2024.

Under the new rules, systemically important banks must ensure an LCR (Liquidity Coverage Ratio) of 50% in manats starting from August 2025 and reach 100% by June 2027. Other banks must gradually meet a 40% ratio from 2025, reaching 100% by December 2027.

Both the manat and total LCR will be calculated separately, and banks will be required to report this data daily to the CBA.

Under the regulations, the composition of High-Quality Liquid Assets (HQLA) will include precious metals, state-guaranteed assets, and other eligible instruments. This aims to support bank liquidity, especially during periods of instability.

The CBA notes that currently, all banks meet existing LCR standards. The sector-wide average is 150% in manats and 178% in foreign currencies.

“This shows that banks have strong liquidity buffers and are well-prepared for the new requirements,” Moody’s stated.