BAKU, Azerbaijan, October 15.
The banking system in Azerbaijan is financially resilient,
Executive Director of the Central Bank of Azerbaijan (CBA), Shahin
Mahmudzade, said at a press conference dedicated to the
presentation of the Financial Stability Report in Baku on Thursday,
Trend's
correspondent reports from the event.
According to him, the application of an additional capital
buffer requirement for systemically important banks in Azerbaijan
serves to strengthen the resilience of these banks against
financial shocks, but this requirement doesn’t imply that small and
medium-sized banks are riskier or more vulnerable.
He noted that the establishment of an additional capital buffer
for systemically important banks is part of the regulatory
framework, aimed at ensuring the creation of extra financial
reserves to cover risks these banks might face.
"The purpose of the additional capital buffer is to reflect the
specific needs of systemically important banks. The existence of
this requirement helps make these banks less vulnerable. However,
this doesn’t imply that smaller banks are more vulnerable or prone
to problems," Mahmudzade pointed out.
According to him, stress tests are conducted to assess the
financial condition of banks and their resilience to potential
shocks. These analyses allow determine the potential impact on the
financial indicators of individual banks, as well as the overall
resilience of the banking system.
The CBA executive also noted that the results of the stress
tests are expected to be released early next year. These results
will allow for an assessment of how the banks' capital indicators
might change under various scenarios.
"Our previous reports also highlighted that the average capital
adequacy ratio of the banking system stands at around 17–18%, while
under stress scenarios, it falls to approximately 14%. These
indicators are significant for assessing the overall resilience of
the banking system," he remarked.
Mahmudzade emphasized that the emergence of financial
difficulties in individual banks does not automatically mean a
threat to financial stability as a whole.
"Certain problems may arise in individual banks. This may be
caused by factors related to various business decisions,
shareholder activities and risk management. Our main goal is to
prevent systemic problems and maintain financial stability rather
than problems that may arise in individual banks," the executive
noted.
He added that the introduction of an additional capital buffer
for systemically important banks corresponds to the role of those
financial institutions in the system and the scale of potential
risks. The existence of this requirement doesn’t give reason to
conclude that small and medium-sized banks are more
problematic.
According to Mahmudzade, CBA regularly monitors possible risks
in the banking sector and continues appropriate regulatory and
control measures to protect financial stability.
