‘Approved’
The Central Bank
of the Republic of Azerbaijan
Resolution № 16/1
10 July 2012
Governor
Elman Rustamov

Regulations on the ratio, calculation and maintaining required reserves

1. General provisions

1.1. These Regulations have been developed in accordance with Articles 29 and 32 of the Law of the Republic of Azerbaijan on the Central Bank of the Republic of Azerbaijan and determine a procedure for the ratio, calculation and maintaining required reserves for the banks and local branches of foreign banks operating in the Republic of Azerbaijan (hereinafter – banks).
1.2. Definitions used herein bear the following meanings:
1.2.1. required reserves – a monetary policy tool used by the Central Bank of the Republic of Azerbaijan (hereinafter – the Central Bank) in regulation of money supply and banking system liquidity;
1.2.2. reserve requirement ratio – an interest indicator used in calculation of bank’s required reserves that represents a certain part of the calculation base;
1.2.3. calculation base – deposits attracted by a bank in national and foreign currencies, precious metals used in calculation of required reserves;
1.2.4. calculation period – the period that covers the days required reserves are calculated for and the calculation base relates to;
1.2.5. maintenance period – the period covering the days of maintaining required reserves calculated on the basis of the calculation base of the last accounting period.
1.3. The reserve requirement ratio is set either the same across all deposits, or differently depending on the deposits’ type, maturity, currency or the size of the calculation base.

2. Reserve requirement ratio and its calculation

2.1. The reserve requirement ratio is determined as a percentage of deposits.
2.2. The reserve requirement ratio is determined by the Management Board of the Central Bank differentiated as follows:
2.2.1. on all volumes of deposits attracted in the national currency and precious metals and the calculation base;
2.2.2. on all volumes of deposits attracted in foreign currency and the calculation base;
2.2.3. on liabilities due to the non-resident financial sector and settlements with international financial institutions.
2.3. When a reserve requirement ratio is set or increased, banks are officially informed accordingly at least one month prior to application of the ratio.
2.4. A decision on cancellation or reduction of the reserve requirement ratio takes effect from the date set by the Management Board of the Central Bank and banks are officially informed about it.
2.5. Required reserves are calculated on the basis of the average daily balance of the bank's calculation base for the calculation period (Annex 1).
2.6. Required reserves on foreign currency and precious metals are calculated at an official exchange rate of manat set by the Central Bank as of the last work day of the calculation period.
2.7. The calculation period begins on the first and ends on the last calendar day of each month.
2.8. When a bank is reorganized in line with the reorganization form required reserves for the reorganized bank(s) are re-calculated on the basis of the bank’s (s’) calculation base.
2.9. The Bank should submit a report on required reserves (Annex 2) to the Central Bank within 5 (five) work days after the calculation period.
2.10. Required reserves for the next maintenance period are determined with the said report.
2.11. Deposits in the balance of the bank outside the Republic of Azerbaijan are not included to the calculation base.

3. Maintaining required reserves

3.1. Required reserves are maintained in the bank’s correspondent account with the Central Bank.
3.2. The maintenance period begins on the 15th calendar day of the month following the end of the calculation period and lasts until the 14th calendar day of the following month.
3.3. Average daily balance of the correspondent account for the maintenance period should not be less than required reserves calculated on the basis of the calculation base covering the last calculation period.
3.4. The balance of correspondent accounts for non-work days over the maintenance period is taken into account in the amount of the balance of the previous work day.
3.5. The Bank should maintain required reserves on deposits in the national currency and precious metals included to the calculation base in correspondent accounts in the manat with the Central Bank, and on deposits in foreign currency in correspondent accounts with the Central Bank in any foreign currency.
3.6. If over the maintenance period the calculation base falls to 50 (fifty) percent and more of the average daily balance of the calculation base for the last calculation period, required reserves calculated for the next maintenance period also apply to this maintenance period.
3.7. If average daily balance of the bank's correspondent account for the maintenance period is less than AZN2000 (two thousand) or equivalent than required reserves calculated for that maintenance period, average daily balance of the bank's correspondent account for the next maintenance period should be kept in excess as much as that amount. This situation is not allowed to be repeated in one calendar year.
3.8. Every bank should appoint an officer responsible for maintaining required reserves and deliver written information on that person (1st, last and middle names, position with the bank and contact requisites) to the Central Bank. In case the officer responsible for maintaining required reserves changes, the bank should deliver the above information on the new officer to the Central bank within 3 (three) work days.
3.9. To make the goal of maintaining required reserves more effective, when the Management Board of the Central Bank takes a decision on payment of interest on required reserves, all credit institutions are notified accordingly.