The international rating agency S&P Global Ratings has reported that industry risk in the sector has decreased against the backdrop of strengthening regulatory and supervisory mechanisms in the banking sector in Azerbaijan, APA-Economics reports, citing the Agency.
The agency has lowered the industry risk indicator in Azerbaijan's Banking Industry Country Risk Assessment (BICRA) from 8 to 7. S&P noted that this decision reflects the reforms implemented in the past three years to modernize the regulation and supervision of financial institutions.
According to the agency's assessment, within the framework of the Financial Sector Development Strategy covering 2024-2026, corporate governance standards have been implemented in banks, restrictions have been imposed on transactions with related parties, and liquidity risk management rules in accordance with Basel III requirements have been adopted.
S&P added that the transition to risk-based supervision in 2026, the introduction of IFRS 9 (International Financial Reporting Standard 9), the alignment of the capital adequacy framework with Basel III standards and the tightening of stress testing requirements will limit banks' risk appetite and reduce credit risk.
The agency also emphasized that the regulatory body has further strengthened risk management in the banking system in 2024-2025 with steps such as activating the countercyclical capital buffer, strengthening liquidity requirements and tightening consumer credit rules.
According to S&P's forecast, against the background of new regulatory measures, the growth rate of lending will remain in the range of 10-12% in 2026, while the share of problem loans will stabilize at 4.5-5.0%.
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