Trends of development of Azerbaijan’s banking sector

Abstract

Aim. To identify new trends in the development of the banking sector of Azerbaijan, one of the key links in the national economy of the country, based on the analysis of its condition in the last five years.Tasks. To analyse the mandate of the Central Bank of Azerbaijan (CBA), the structure of the country’s banking market, the level of banks’ capitalisation; to sum up the results of the analysis; to formulate proposals for improving the situation.Methods. The study relies on a systematic approach to solving the set tasks. The article presents different points of view of authors and analysts regarding reforms in the banking sector of Azerbaijan. The dialectical approach to the analysis of the main phenomena and regularities, as well as the systematic approach to the disclosure of the key factors of development of the national banking sector of the country served as the methodological basis of the study.Results. The main trends in the development of the banking sector of Azerbaijan were analysed, its current state was assessed, and the mandate of the CBA was determined. The research shows that the growth of the banking market, new trends in the expansion of banking services create significant qualitative changes in this market. During the year, the banking sector as a whole showed resistance to exogenous shocks.Conclusions. In the banking business of Azerbaijan, one of the special tendencies manifested in the activity of the banking services market is technological improvement and expansion of application of modern automatic systems. The analysis showed that in recent years, despite the growth of current expenses in the activity of banks, the most modern and productive communication technologies replacing labour-intensive processes are introduced. The mandate of the CBA was focused mainly on monetary policy, ensuring regulation and development of interbank centralised and other unlicensed payment systems. Monetary policy implemented by the CBA has been aimed at mitigating inflationary pressures. Although high global inflation remains risky in the context of uncertainty due to the global geopolitical and geo-economic situation, the accelerated recovery of economic growth, the country’s trade surplus and the increase in strategic foreign exchange reserves allow the macroeconomic environment of the financial system to remain stable.