BAKU, July 31 — The Central Bank of Azerbaijan (CBA) has introduced stricter regulations on consumer lending, aiming to tighten oversight and reduce financial risks for both borrowers and banks.
According to a new resolution signed by CBA Chairman Taleh Kazimov, amendments have been made to the “Rules on Prudential Norms and Requirements Related to Credit Risks, Including Large Credit Risks,” originally adopted on July 22, 2022.
Under the updated rules, the eligibility criteria for securing consumer loans in the national currency have been revised. From now on, eligible collateral will include deposits held in the same bank, high-quality collateral classified in the first group, and precious metals (excluding banking metals) held in custody as collateral. Previously, the rules allowed deposits, banking metals, and other precious metals as valid forms of security.
In a significant change aimed at limiting overexposure, the aggregate amount of unsecured consumer credit lines exceeding five times a borrower’s net post-tax income must not surpass 1% of a bank’s Tier 1 capital (after deductions). When calculating this limit, all obligations of the borrower across all credit institutions will be taken into account, except those secured with approved collateral.
The CBA’s legal department has been instructed to submit the resolution to the Ministry of Justice within three days for inclusion in the State Register of Legal Acts.
These changes reflect Azerbaijan’s efforts to stabilize consumer lending amid growing concerns over household debt and financial sustainability in the banking sector.
