The Central Bank of Azerbaijan has approved a new regulatory
framework aimed at strengthening market risk management practices
across the banking sector, Azernews reports.
According to the Central Bank, the “Rule on Market Risk
Management in Banks”, adopted by a decision of its Board of
Directors, is designed to align Azerbaijan’s banking regulations
with Basel III standards while introducing unified and progressive
requirements for managing market risks.
The new rule sets out comprehensive requirements for banks’
market risk management systems, including internal policies,
governance mechanisms, and risk assessment procedures. It covers
key areas such as the identification, measurement, monitoring, and
reporting of market risks, ensuring a more structured and
transparent approach across the sector.
In particular, the framework defines advanced methodologies for
measuring different types of market risk, including interest rate,
currency, equity, and commodity risks. It also introduces more
sophisticated approaches to managing interest rate risk arising
from the banking book (IRRBB), allowing banks to better assess
potential vulnerabilities linked to fluctuations in market
conditions.
The Central Bank noted that the implementation of the new rules
will enable more accurate risk identification and measurement,
while enhancing banks’ ability to respond to adverse market
movements. Overall, the regulation is expected to strengthen the
resilience of Azerbaijan’s banking sector and reduce potential
losses stemming from market volatility.
The full text of the regulation can be found at the link.