30 September 2020, Baku: The Central Bank of Azerbaijan approved additional measures to support the financial sector by the Resolution No. 16 of the Management Board of the Central Bank of Azerbaijan dated 24.04.2020 as part of the implementation of the ‘Granting a regulatory holiday to credit institutions to allow them to regulate liabilities of pandemic-affected businesses during lockdown’ action of the Actions Plan approved by the Cabinet of Ministers with respect to the implementation of Item 10.2 of Decree # 1950 of the President of the Republic of Azerbaijan dated 19 March 2020 on ‘A number of measures to mitigate the negative impact of Coronavirus (COVID-19) pandemic and consequent sharp fluctuations in global energy and stock markets on the economy of the Republic of Azerbaijan, macroeconomic stability, employment and businesses’.

The approved measures aimed mainly to support individuals and businesses, especially pandemic-affected entrepreneurs, to relax the regulatory burden on banks, increase access of certain economic areas to credit resources, reduce the cost of payment services for economic entities during the pandemic, maintain insurance service continuity and protect rights of the insured and to provide regulatory holidays and discounts for capital market participants.

As part of measures to support individuals and entrepreneurs affected by the pandemic, as well as modification of the regulatory framework for the banking sector, by 30 September 2020, regulatory requirements for the classification of loans have been relaxed, dividend payments have been restricted and loan classification exemptions applied to interest-subsidized business loans and restructuring of business loans issued out of state funds. In addition, credit organizations were reccommended not to deduct additional interest fines, charges and other payments from borrowers until 30 September, 2020, as well as to submit negative information on borrowers to the credit bureau with a special note.

During the quarantine period in connection with the pandemic, banks began the process of large-scale restructuring of loans of pandemic-affected individuals and entrepreneurs. As of 15 September 2020, restructuring appeals in the amount of 1.3 billion manat were submitted and 85% of them were satisfied. Currently, the banks are in the process of reviewing applications for restructuring.

Taking into account the ongoing processes of applying restrictive measures to сertain economic areas, as well as issuing related subsidies by state funds in connection with the continuing threats to the financial stability of the banking sector as a result of incomplete recovery of economic activity, low economic activity and dropped income of businesses and households, and deterioration of solvency due to pandemic, it was considered expedient to extend the period of application of adopted decisions and recommendations from 30 September, 2020 to 1 January, 2021 to reduce the regulatory burden on credit institutions and to protect the rights of consumers of financial services.

Also, in order to stimulate cashless payment services during the pandemic and reduce the costs of economic entities for these services, the Central Bank's decision to reduce service fees charged from banks in interbank payment systems by about 50%, was extended until 1 January, 2021.

Despite the conditions of special quarantine measures in connection with the pandemic, positive trends in the insurance market continued. In the first 9 months of the year, insurance premiums and payments increased compared to the same period last year, which ensured a satisfactory level of liquidity of insurance companies. Satisfactory liquidity of the insurance sector does not require the maintenance of a grace period for payment of calendar fees to the Compulsory Insurance Bureau. At the same time, in order to further strengthen the financial stability of insurance companies against macroeconomic shocks in a pandemic situation, it was deemed appropriate to extend the restrictions on the distribution of profits of insurers based on the financial results of 2019 and the payment of dividends by the end of the year.

The extension of the exemption period from regulatory requirements aims to reduce the impact on households and businesses in connection with loan repayments, support and stimulate the economic activity, and to strengthen the capital positions of the insurance sector against economic risks related to pandemic, by supporting the ongoing process of loan restructuring.