Baku: The financial stability indicators of the banking sector in Azerbaijan remain strong, but some weaknesses are also present, this assessment was made in the final statement for 2025 under Article IV of the International Monetary Fund’s (IMF) Articles of Agreement, APA-Economics reports.
According to Azeri-Press News Agency, the statement notes that the banking sector is generally resilient and sufficiently capitalized. Stress tests conducted by the IMF indicate that banks can maintain their financial positions under both baseline (normal) and adverse (crisis) scenarios. However, some banks, due to weak capital reserves, may violate regulatory minimum requirements in an adverse scenario.
The IMF pointed out that the high share of the hydrocarbon sector in Azerbaijan’s economy results in a significant proportion of large corporate deposits in the banks’ deposit portfolios. These deposits, particularly from large companies that are vulnerable to economic shocks, could create liquidity risks in the banking system.
Additionally, while financial dollarization has decreased in recent years, it remains high, increasing the banking system’s sensitivity to exchange rate fluctuations. This situation is compounded by the rapid growth of unsecured consumer loans, which raises cyclical financial risks. Such growth could affect the population’s ability to repay debts, especially during periods of weakened economic growth.