Regulation on related party transactions approved

15-02-2024

15 February 2024, Baku: The Management Board of the Central Bank of the Republic of Azerbaijan by its Resolution No. 06/6 dated 31 January  2024 approved the new edition of the Regulation on Transactions with Related Parties, which will come into force on 13 March 2024. With the adoption of this Regulation, the Regulation on Transactions with Related Parties effective since 2001 has been repealed. The updated regulation incorporates the latest requirements of international standards, requirements for collateral commensurate with the risk of assets, flexible decision-making processes in the bank, and reflects the requirements of the previous regulation in a more improved form.

The new regulation clarifies the definition of a related party, establishes the limit of indirect participation included in the definition, as well as determines the method for calculating the concession defined in the requirement on prohibition of preferential transactions with related parties.

It classifies related party loans into significant and partially significant categories and sets out differential collateral requirements for these loans, as well as requirements for banks’ decision-making processes on related party transactions.

In addition, the regulation has set deadlines for the elimination of regulatory violations detected in the course of monitoring banks' activities in relation to transactions with related parties, as well as improved requirements for reporting to the Central Bank on transactions with related parties.

Overall, the updated regulation will ensure more safer and robust banking transactions with related parties, as well as serve to increase the transparency of these transactions.

More detailed information on the new requirements is available at the link below:

https://e-qanun.az/framework/56340