Azernews.Az

Akbar Novruz

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Regulatory reforms set to be implemented in Azerbaijan starting from 2026 are expected to bring the country’s banking sector closer to international standards, AzerNEWS reports, citing S&P Global Ratings.

According to the agency, the planned transition to risk-based supervision, the implementation of IFRS 9 (International Financial Reporting Standard 9), the alignment of the capital adequacy framework with Basel III requirements, the strengthening of stress-testing mechanisms, and the establishment of recovery and resolution mechanisms for potential crisis situations will significantly reinforce the regulatory environment.

S&P noted that these initiatives are designed to limit banks’ risk appetite and contribute to reducing credit risk across the sector.

The agency also recently revised its assessment under the Banking Industry Country Risk Assessment (BICRA) framework, lowering Azerbaijan’s industry risk score from 8 to 7 and changing the economic risk trend from “stable” to “positive.”

According to the assessment, reforms carried out over the past three years to modernize financial sector regulation and supervision have strengthened the institutional framework. However, S&P continues to view Azerbaijan’s regulatory system as relatively weaker compared to those of developed markets, highlighting the need for continued structural improvements.