Azerbaijan

A SUPPLEMENT TO EUROMONEY - April 1997

The banking sector of the Azerbaijan Republic

A banking system was established in Azerbaijan after the collapse of the soviet Union with the proclamation of independence of Azerbaijan in 1991. A legal framework for the banking sector was set up by presidential decree in February 1992 (which established the National Bank of Azerbaijan). In addition to this, consequent Laws on Banks and Banking Activity and the Law on the National Bank of Azerbaijan were passed in August 1992. These laws were amended in June 1996 to form an internationally acceptable and modern banking legislation.

The banking system of Azerbaijan represents a classic two-tier banking system with the National Bank of Azerbaijan as the top tier and the commercial( both state- owned and private) as the second tier.

Two-tier banking system

Central Bank

The Law on the National Bank gave the Azerbaijan National Bank (ANB) the authority of a central bank with powers to do the following:

* issue the national currency (Azerbaijan Manat /Am);

* promote the functioning of the payment system;

* design and implement monetary credit policy to stabilize the currency;

* licence and supervize the banks and other credit institutions;

* serve as fiscal agent for the government;

* hold and manage the official foreign exchange reserves.