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About reserve requirement ratios
20-11-2023
20 November 2023, Baku: In order to regulate liquidity in the banking sector more effectively and to reduce the level of liquidity concentration, new criteria for differentiating reserve ratios have been defined. Taking into account the results of the conducted analysis and simulations, the reserve requirement ratios have been differentiated depending on whether the total amount of national currency denominated deposits of legal entities exceeds AZN1B and total amount of foreign currency denominated deposits of legal entities exceeds AZN750M equivalent, as well as depending on the share of connected deposits and deposits of related parties of a bank in the total amount of deposits. In this regard, changes were made to the "Regulations on the ratio, calculation and maintaining required reserves" by Decision of the Management Board of the Central Bank of Azerbaijan No. 53/1 dated November 1, 2023. The full text of the changes to the Regulations is published on the official website of the Central Bank (www.cbar.az) and on the website of the Single Electronic Database of Legal Acts of the Ministry of Justice of the Republic of Azerbaijan (https://e-qanun.az/framework/55583).
According to Board Decision No. 53/1 dated November 1, 2023, the reserve requirement ratios under the new differentiation criteria are defined as shown in Table 1.
According to the adopted decision, from November 2023, all banks must calculate required reserves according to new reserve ratios and submit them as of December 15, 2023. Until the new ratios are implemented, banks must maintain required reserves in accordance with the existing ratios.
Table 1. New differentiation criteria and reserve requirement ratios based on these criteria
|
Differentiation criteria |
Reserve requirement ratio, % |
|||
|
On liabilities in national currency |
On liabilities in foreign currency |
On liabilities in precious metals |
||
|
1 |
· Deposits of legal entities ≤ AZN1B (AZN750M equivalent)* · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% |
5% |
6% |
5% |
|
2 |
· Deposits of legal entities ≤ AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% |
10% |
12% |
10% |
|
3 |
· Deposits of legal entities ≤AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% |
10% |
12% |
10% |
|
4 |
· Deposits of legal entities ≤AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% |
12.5% |
15% |
12.5% |
|
5 |
· Deposits of legal entities>AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% |
10% |
12% |
10% |
|
6 |
· Deposits of legal entities>AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% |
20% |
20% |
20% |
|
7 |
· Deposits of legal entities>AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) ≤20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% |
20% |
20% |
20% |
|
8 |
· Deposits of legal entities>AZN1B (AZN750M equivalent) · Share of connected deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% · Share of related party deposits in total deposits (sum of national and foreign currency deposits of legal entities and individuals) >20% |
25% |
25% |
25% |
|
9 |
· Amounts due to the non-resident financial sector and settlements with international financial institutions |
0% |
0% |
0% |
*The indicator in brackets applies to liabilities denominated in foreign
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