On the ratio of required reserves

09-01-2023

9 January 2023, Baku: It has become necessary to reconsider the ratio of required reserves and its differentiation in order to more effectively regulate the money supply by the Central Bank, strengthen the impact of the interest rate corridor on interest rates in the financial system, limit the concentration of liquidity in the banking system, as well as stimulate the de-dollarization trend. To note, the money base increased by 12.1% in 2022.

Taking into account the above, changes were made in the "Regulations on the ratio, calculation and maintaining required reserves" by the Resolution of the Management Board of the Central Bank of the Republic of Azerbaijan with No. 57/1 dated from 19.12.2022 and entered into the State Register of Legal Acts of the Republic of Azerbaijan.

At the same time, the Management Board of the Central Bank, by its Resolution No. 60 dated 28 December 2022 defined the ratio of required reserves as follows:

• 5% on deposits of individuals and unincorporated individuals (hereinafter – private entrepreneurs) attracted in the national currency;

• 6% on deposits of individuals and private entrepreneurs attracted in foreign currency;

• on deposits of legal entities in the national currency, including:

- 5% on the part of deposits of legal entities in the national currency with total amount up to AZN1B;

- 10% on the part of deposits of legal entities in the national currency with total amount over AZN1B;

• on deposits of legal entities in foreign currency:

- 6% on the part of deposits of legal entities in foreign currency with total amount up to AZN750M equivalent;

- 12% on the part of deposits of legal entities in foreign currency with total amount over AZN750M equivalent;

• 5% on deposits attracted in precious metals;

The reserve requirement ratio for liabilities to the non-resident financial sector and settlements with international financial institutions were kept unchanged at zero level.

According to estimates, the mentioned changes related to required reserves have an increasing effect on the cost of liabilities in manat and foreign currency in the banking sector by 0.16% and 0.01%, respectively.

It was decided that starting from January 2023, all banks should calculate required reserves according to the new ratio and maintain required reserves according to the new ratio starting from the next maintenance period (i.e. from 15 February 2023).

Banks have been duly informed about the changes in the "Regulations on the ratio, calculation and maintaining required reserves” and the new ratio of required reserves.