Azerbaijan's Central Bank to extend risk assessment system beyond banks

Photo: Trend News Agency

BAKU, Azerbaijan, October 20. The Central Bank of Azerbaijan plans to extend its risk assessment approach from the banking sector to other segments of the financial sector as part of efforts to identify and assess risks proactively, Fuad Isayev, the Central Bank's executive director, said on Tuesday at the Sustainable Business, Corporate Governance, Risk and Compliance (GRC) Conference in Baku, Trend's correspondent reports from the event.

He said assessing banks' financial resilience solely on the basis of capital and liquidity indicators is no longer sufficient.

"Cyberattacks and violations of international sanctions can cause significant financial losses and reputational damage to financial institutions. A cyberattack or a risk of violating international sanctions can expose a financial institution to substantial financial and reputational risks," Isayev said.

According to him, the Central Bank supports the development of a proactive, risk-based regulatory framework that goes beyond reactive measures and enables risks to be identified in advance.

Isayev said the Azerbaijan Risk Assessment System (ARAS) has been applied in the banking sector since late 2025. The approach is expected to be extended to other segments of the financial sector in subsequent stages.

"This approach will make it possible to assess banks not only based on financial indicators, but also in terms of the quality of corporate governance and internal control systems," he said.

Isayev added that the digital transformation of supervisory processes is another key priority for the Central Bank.

He noted that a relevant road map covering 2024–2029 had been developed in cooperation with the World Bank. Its implementation is expected to accelerate data processing and improve the quality of banking supervision.

According to the Central Bank official, the regulatory framework also takes into account the development of financial products and services, broader access to financial services and resources for small and medium-sized enterprises, and the promotion of sustainable development.

He emphasized that it is important to establish regulatory mechanisms that not only ensure effective risk management but also support financial sector development and expand businesses' access to financial resources.