BAKU, July 18, 2025 — Azerbaijan’s Central Bank will begin implementing international liquidity standards starting August 1, marking a significant step in aligning the country’s banking sector with Basel III regulations.
The move involves the phased introduction of the Liquidity Coverage Ratio (LCR) — a key benchmark requiring banks to maintain sufficient high-quality liquid assets to cover short-term obligations, both in aggregate and in national currency.
According to Moody’s, the new framework is a “credit-positive” development for Azerbaijani banks, currently rated Baa3 with a positive outlook. The agency notes it will enhance the resilience of banks by strengthening their manat-based liquidity positions — a critical element in improving financial stability and ensuring long-term sector sustainability.
Phased Rollout Through 2027
Under the Central Bank’s roadmap:
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Systemically important banks will be required to raise their manat LCR from 50% in August 2025 to 100% by June 2027.
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Non-systemic banks must reach a national currency LCR of 100% by December 2027, starting at 40% this August.
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Aggregate LCR requirements (including foreign currency) are already at 90–100% across the board.
Banks will report LCR data daily to the Central Bank to ensure close monitoring.
| Bank Group | LCR Type | Aug 2025 | Dec 2025 | Jun 2026 | Dec 2026 | Jun 2027 | Dec 2027 |
|---|---|---|---|---|---|---|---|
| Non-systemic | Aggregate | 90% | 100% | 100% | 100% | 100% | 100% |
| National currency | 40% | 55% | 70% | 80% | 90% | 100% | |
| Systemic | Aggregate | 100% | 100% | 100% | 100% | 100% | 100% |
| National currency | 50% | 65% | 80% | 90% | 100% | 100% |
Expanded Definition of Liquid Assets
The reform also broadens the list of eligible high-quality liquid assets (HQLA) to include:
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Precious metals,
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Government-backed guarantees,
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On-demand deposits,
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And other previously non-qualifying instruments, provided they meet quality benchmarks.
Particular emphasis is placed on national currency assets and gold, which will now qualify as HQLA if they meet new risk and stability criteria. This is especially crucial during market turbulence, allowing banks to maintain liquidity without rapid asset conversions.
Strong Sector Positioning
According to the Central Bank, average LCR across the sector already stands at 150% in manat and 178% in foreign currencies, far above minimum thresholds. All banks are currently in compliance with liquidity norms.
“This indicates robust liquidity buffers and a high level of preparedness within Azerbaijan’s banking system,” Moody’s concluded.
The reform underscores Azerbaijan’s continued effort to modernize its financial infrastructure and integrate more deeply with global financial norms.
