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S&P: 2026 reforms in Azerbaijan to bring banking sector closer to international standards

27 February 2026 10:17 (UTC +04:00)

"We revised our economic risk trend to positive from stable for Azerbaijan. The positive economic risk trend reflects our expectation that stronger regulatory oversight will restrain banks’ risk appetite and reduce credit risk in the banking system," APA reports, citing the international rating agency S&P Global Ratings.

It was noted that the agency also revised the industry risk score to 7 from 8. The improvement in the industry risk assessment, namely the institutional framework assessment, captures initiatives undertaken over the past three years to modernize the regulation and supervision of financial institutions in Azerbaijan. Under the Financial Sector Development Strategy for 2024-2026, regulators enacted a corporate governance standard for banks, limiting related-party transactions, and a regulation on liquidity risk management aligned with Basel III requirements. In 2026, regulators are transitioning to risk-based supervision and implementing IFRS 9, revising the capital adequacy framework to align it with Basel III requirements, strengthening banks' stress test requirements, and developing a resolution framework.

The agency believes implementing these initiatives will further strengthen regulation and supervision for banks in Azerbaijan and bring the country's banking system closer to international best practices. Although the agency continues to view the country's regulatory framework as weaker than international standards.

Rahim Tariverdiyev

Azerbaijan S&P Global Ratings Banking sector BICRA Banking Industry Country Risk Assessment Financial regulation Basel III IFRS 9 Risk-based supervision Credit risk Economic outlook Financial sector reform