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RESOLUTION OF BOARD OF CENTRAL BANK OF THE AZERBAIJAN REPUBLIC

of September 21, 2023 No. 46/4

About approval of "Procedure for credit risk management in banks"

Based on article 34.5 of the Law of the Azerbaijan Republic "About banks" and article 22.0.17 of the Law of the Azerbaijan Republic "About the Central bank of the Azerbaijan Republic", the Board of the Central bank of the Azerbaijan Republic DECIDES:

1. Approve "Procedure for credit risk management in banks" it (is applied).

2. No. 1951100005 "About approval of "Rules of credit risk management in banks"" to repeal the resolution of the liquidated Chamber on supervision of the financial markets of the Azerbaijan Republic of January 30, 2019.

3. Charge to Legal department (Rena Melikova) in 3-day time to provide submission of this Resolution to the Ministry of Justice of the Azerbaijan Republic for entering into the State register of legal acts of the Azerbaijan Republic.

The Central bank of the Azerbaijan Republic of September 21, 2023 No. 46/4 is approved by the Resolution

Procedure for credit risk management in banks

1. General provisions

1.1. This Procedure is developed according to article 34.5 of the Law of the Azerbaijan Republic "About banks" and determines the minimum requirements to credit risk management in banks.

1.2. Credit risk management in banks is component of risk management system of bank.

1.3. The organizational structure of credit risk management in banks is regulated by "Standards of corporate management in banks".

2. Concepts

2.1. The concepts used in this Procedure have the following values:

2.1.1. credit risk - risk of emergence of losses as a result of inability of the borrower, the issuer or the partner to fulfill the obligations in accordance with the terms of the agreement;

2.1.2. the actual annual interest rate - the annual interest rate calculated according to the procedure, established by Appendix No. 2 to this Procedure;

2.1.3. hedging of the currency rate - means of reduction of losses which can result from change of the exchange rate;

2.1.4. the idle credit - the credit classified as non-standard asset according to acts of normative nature of the Central bank of the Azerbaijan Republic (further - the Central bank).

2.2. The concepts "consumer loan", "business loan", "agricultural loan", "restructuring", "market price", "debt relation coefficient to the income (coefficient of ODD)" used in this Procedure have the values established "By procedure for classification of assets and creations of special reserves for compensation of possible losses", the concepts "credit requirement", "credit relation coefficient to providing" - the values established by "Procedure for rather prudential standard rates and requirements in connection with credit risks, including large credit risks", the concepts "risk appetite", "risk profile" and "shock" - the values established by "Standards of corporate management in banks".

3. Management system credit risks

3.1. The management system credit risks in banks consists of the following elements:

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