IMF Staff Country Reports

Republic of Azerbaijan: Financial Sector Assessment Program-Financial System Stability Assessment

April 22, 2025

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International Monetary Fund. Middle East and Central Asia Dept. "Republic of Azerbaijan: Financial Sector Assessment Program-Financial System Stability Assessment", IMF Staff Country Reports 2025, 099 (2025), accessed May 17, 2025, https://doi.org/10.5089/9798229008754.002

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Summary

This paper focuses on the Republic of Azerbaijan’s Financial Sector Assessment Program as part of Financial System Stability Assessment. Azerbaijan’s economy has recovered from two downturns prompted by the collapse of global oil prices in 2015 and coronavirus disease 2019 pandemic in 2020. An intensification of regional conflicts poses risks to the economy. Similarly, the high reliance on oil and gas revenues renders Azerbaijan vulnerable to oil and gas price declines. This in turn would impact banks’ asset quality and liquidity. Key structural risks to banks stem from substantial reliance on volatile wholesale corporate deposits; continued high financial dollarization, particularly in business loans and deposits; and high credit concentration. Further measures to strengthen regulation and supervision would reinforce financial sector resilience. As noted in previous FSAPs, addressing long-standing issues would entail fully implementing a consolidated supervision framework; safeguarding the Central Bank of the Republic of Azerbaijan’s (CBA) independence; establishing an interagency body for crisis preparedness and management; and giving the CBA full powers for bank resolution.

Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Crime, Financial regulation and supervision, Financial Sector Assessment Program, Financial sector policy and analysis, Financial sector stability, Macroprudential policy

Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Asset quality, B. risk analysis framework, Bank solvency stress test, Emergency liquidity assistance framework, Financial Sector Assessment Program, Financial sector stability, Financial system assets, Global, Macroprudential policy

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