"Regulation is evolving in Azerbaijan's banking sector, but governance and transparency remain weak," says the assessment of the banking sector of Azerbaijan by the international credit rating agency S&P Global Ratings, Paralel.Az-Economics reports.

The S&P Global Ratings notes that the institutional framework in Azerbaijan remains relatively weak by global standards but comparable with regional peers.

S&P believes that regulatory initiatives introduced in 2023 by the Central Bank may improve corporate governance, including amended requirements for independent board directors and changes to risk management requirements.

The rating agency has also commented on the impact of migrant and capital flows to Azerbaijan during the Russia-Ukraine war: "The positive impact of the inflow of migrants and capital is less pronounced than for regional peers. Since Azerbaijan has kept its land borders closed since 2020, the country has not experienced the large influx of migrants, remittances, and nonresident deposits that materially benefitted the banking sectors of Georgia, Armenia, Kazakhstan, and Uzbekistan in 2022-2023."