S&P: 2026 reforms to modernize Azerbaijan’s banking sector

S&P Global Ratings has revised Azerbaijan’s economic risk trend to positive from stable, citing regulatory reforms that are expected to strengthen oversight and reduce credit risk in the banking sector.

The rating agency upgraded the industry risk score from 8 to 7, reflecting initiatives undertaken over the past three years to modernize financial regulation and supervision in Azerbaijan, News.Az reports, citing S&P Global Ratings.

Under the Financial Sector Development Strategy for 2024–2026, regulators have:

• Introduced corporate governance standards for banks, limiting related-party transactions

• Implemented liquidity risk management rules aligned with Basel III

• Transitioned to risk-based supervision and IFRS 9 accounting standards

• Revised capital adequacy rules to Basel III standards

• Strengthened stress testing and developed a resolution framework

S&P believes these reforms will improve regulatory oversight and bring Azerbaijan’s banking system closer to international best practices, although the country’s framework is still viewed as weaker than global standards.

The agency also highlighted that Azerbaijan has the lowest private sector debt in the region, signaling stability as reforms progress.

News.Az 

By Aysel Mammadzada