Amendments to Regulation on Liquidity Risk Management in Banks approved

07-07-2025

7 July 2025, Baku: The Central Bank has amended the Regulation on Liquidity Risk Management in Banks” (the “Regulation”). The amendments will come into effect on August 1, 2025.

The main goal of the amendments is to manage liquidity risks in banks more effectively by adjusting quantitative and qualitative parameters, strengthen their liquidity positions, and protect the banking sector's ability to finance the real economy.

The new requirements stipulate the application of the Liquidity Coverage Ratio (LCR), which is used to evaluate banks' liquidity positions in both aggregate and national currencies. Starting August 1, 2025, systemically important banks must gradually increase their LCR ratio to 100% in national currency, starting from 50% by June 1, 2027. All other banks must also gradually increase their LCR ratio to 100%, starting from 40% by December 1, 2027. In parallel, the amendments expand the range of assets that banks can classify as high-quality liquid assets. Bank metals, state-guaranteed securities of financial institutions, overnight deposits, and short-term funds placed with the central bank are now eligible for classification as high-quality liquid assets.

The amended regulation will serve to establish more flexible mechanisms for measuring and managing liquidity risks in general, as well as to more optimally predict the distribution of liquid funds in banks between national and foreign currencies, and to form banks' liquid positions in national currency in a more sustainable manner.

The approved amendments can be viewed via the following link:

https://e-qanun.az/framework/60081