Unified regulatory framework for bank stress testing adopted

13-05-2026

May 13, 2026, Baku: Based on the Financial Sector Development Strategy for 2024-2026, the Management Board of the Central Bank of the Republic of Azerbaijan approved the Regulation for Conducting Stress Tests in Banks (Regulation) to strengthen financial stability in the banking sector and increase compliance with international regulatory standards. The Regulation were developed based on progressive international practices, including the Basel Committee's and the European Banking Authority's principles.

The Management Board also approved amendments to the Corporate Governance Standards in Banks, the Credit Risk Management Regulation, the Liquidity Risk Management Regulation, the Operational Risk Management Regulation, and the Market Risk Management Regulation to align them with the new Regulation.

The new Regulation reflects the fundamental principles of stress testing in banks, including the composition of programs and modeling methods, requirements for validating stress test models, the scope of sensitivity and scenario analyses, and requirements for stress tests and risk interactions for the primary risk types (liquidity, credit, market, and operational). It also outlines the reporting of stress test results to the Central Bank. The Regulation also addresses questions that can be used to evaluate the quality and adequacy of stress test models within banks and within the supervisory process framework.

Consequently, the Regulation will provide a comprehensive assessment of banks' individual resilience and the sector's overall risk tolerance by establishing a unified, systematic regulatory framework for conducting stress tests and evaluating their outcomes.

The approved changes can be viewed via the following link:

https://e-qanun.az/framework/61803