BAKU, Azerbaijan, November 27. The “Rules of Prudential Regulation of Activity of Non-Bank Credit Organizations” and “Rules of Credit Risk Management in Non-Bank Credit Organizations” were approved by the decisions of the Board of the Central Bank of the Republic of Azerbaijan dated November 15, 2024, following the amendments made to the law “On Non-Bank Credit Organizations (NCOs) in 2023," Trend reports.
According to information, these changes were adopted within the framework of strategic objectives defined in the "Strategy of Financial Sector Development for 2024-2026" of the Central Bank of Azerbaijan.
The Central Bank of Azerbaijan notes that the development of NCOs' activities, being an element of financial inclusiveness, provides wider access for the population and small and medium entrepreneurs to financial resources.
Meanwhile, the Central Bank of the Republic of Azerbaijan continues to take necessary steps within its mandate to enhance this role of NPOs, as well as to ensure accessibility and transparency of credit products offered by them.
The rules establish new qualitative requirements. Thus, NCOs are given regulatory requirements concerning the organization of the credit risk management system, credit risk policy, credit risk assessment and administration procedures, risk monitoring, as well as the procedure for calculating the actual annual interest rate under a loan agreement.
In addition, the Rules define for the first time the concept of short-term “daily” loans, maximum limits on the amount, term, and daily interest rate, as well as stricter prudential norms for such loans.
At the same time, the Rules formulate quantitative requirements affecting financial stability. According to the Rules, the requirements to the authorized capital of newly established NCOs have been raised to 1 million manat ($588,000), capital requirements of 1 million manat ($588,000) have been set for existing and new NCOs, and requirements to the ratio of liabilities to capital and requirements to provisioning have been revised.
The requirements in the Rules are aimed at strengthening the financial stability of NCOs and protection of consumer rights. The Central Bank will continue its improvement efforts in this direction, paying special attention to the current processes in the NPO sector as well as the experience of advanced countries of the world in this area.
The relevant aforementioned rules can be viewed at the links below:
Rules for prudential regulation of activities of Non-bank Credit Organizations
Rules for Credit Risk Management in Non-Bank Credit Organizations
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