Central Bank of Azerbaijan updates credit risk regulations

The Central Bank of Azerbaijan, under the signature of Chairman Taleh Kazimov, has implemented new regulations regarding credit risk management for both banks and non-bank credit organizations.

For non-bank credit organizations, new rules effective October 10 specify that the 20 percent threshold for determining financial difficulty—based on debts overdue by more than 90 days—will no longer apply to daily loans. This change aims to facilitate debt restructuring; under existing requirements, a borrower may restructure a loan once for a maximum of 45 days if they pay 20 percent of the remaining principal, provided no late fees or penalties are applied.

For banks, new measures prevent institutions from bypassing credit limits by writing off bad debts. Previously, banks could issue loans based on behavioral models as long as overdue amounts did not exceed 10 percent of their credit portfolio. Under the new decision, the calculation of these overdue amounts must now include loans that were written off from the balance sheet within the last 12 months. Once the combined total of overdue and recently written-off loans reaches the 10 percent threshold for a specific credit type, the bank must suspend issuing new loans under that specific behavioral model.