risk management

having reached the optimal risk-profitability ratio, the bank puts a high value upon efficient financial risk management

the bank’s risk management system is based on the legislation of the Republic of Azerbaijan, international standards and principles based on best practices in the relevant field. The bank employs internal procedures to assess capital adequacy, carries out stress testing, identifies existing risks takes them into account for the action plan in the future

the bank enhances its approaches to risk management through improving the necessary infrastructure and information systems, and considering the internal credit risk models

Azer Turk Bank introduces the practices of a risk management system considering financial risks, and pays special attention to managing a number of significant risks, including those unrelated to retail loans, credit risks of counterparties, retail loan risks, market risks, operational risks, liquidity risks, interest rate risks, banking operational risks, etc.

the bank employs risk management concept on three independent directions, with consideration to absence of conflicts of interests and distribution of responsibility for risks

the bank conducts a calculated risk severity assessment, defines limits for acceptable risks, monitors risk levels, performs control procedures and provides reporting for taken risks

risk management within the second direction in the bank is carried out by the relevant department, which operates independently. This structural subdivision is responsible for the operation of the risk management system established in the bank, risk management, identification of uniform principles and methods in this area, assessments and presentation of information to the bank’s management

the bank’s external auditor

financial risks

  • credit risks
  • liquidity risks
  • market risks

non-financial risks

  • operational risks
  • strategic risks
  • reputational and other risks

the bank defines one of the following strategies in relation to each type of risk

  • risk acceptance
  • risk minimization
  • risk reinsurance
  • risk avoidance

risk management methods and tools

Azer Turk Bank employs following tools to carry out its risk management policy:

  • limitation system
  • distribution of powers and
  • decision-making system
  • risk management parameters system
  • calculation and disclosure system
  • set of solutions during emergencies
  • control system

the following analytical methods are mainly used in the risk management process:

  • GAP interest rate risk analysis
  • analysis of currency and credit risks in accordance with the VaR coefficient (Value at Risk)
  • calculation of currency risks and stress testing for sensitivity
  • analysis of assets and liabilities by maturity (Maturity analysis)
  • GAP liquidity risk analysis
  • analysis of the aggregate risk level based on the overall statistical indicators of the portfolio
  • calculation of credit risk according to the probability of default
  • calculation of operational risks employing the basic indicator and standardized approach methods

structures responsible for risk management:

  • within the structure of the bank, the credit committee manages credit risks, the committee for asset and liability management is responsible for liquidity risks and targeted employment of financial resources, and all other risks are within the accountability of the risk management committee, in charge of coordinating the activities of the existing internal committees.