Higher capital requirements have contributed to strengthening the resilience of Azerbaijani banks, according to a new report by international rating agency Moody’s. Experts confirmed the sector’s growing resilience to potential economic risks.
According to the agency, new capital buffers under Basel III standards have already been introduced in the country. Full compliance with these requirements is expected to be achieved in 2027. Analysts note that banking sector regulation is being strengthened by aligning the regulatory framework with international standards and introducing risk-based supervision.
These changes are credit positive as they help improve loan portfolio quality, enhance banks’ capacity to absorb losses, and gradually reduce systemic risks.
The document emphasizes that regulatory reforms have led to tighter prudential requirements and an improved risk management system. The measures adopted include increasing capital buffers, more conservative asset classification, enhanced provisioning for potential loan losses, and improved liquidity management.
According to Moody’s estimates, higher capital requirements have strengthened the solvency of banks in Azerbaijan (rated Baa3 with a positive outlook) and Kazakhstan. Stronger supervision has reduced instances of delayed loss recognition, while regulatory actions have become more proactive.
According to the agency’s forecasts, regional governments will continue to strengthen prudential standards, paying special attention to financial stability, transparency, and limiting contingent liabilities. Meanwhile, the pace and effectiveness of reforms will depend on the quality of public institutions, the independence of banking supervisory authorities, and commitment to market economy development.
Source: jnews.az