‘Approved’ Central Bank of the Republic of Azerbaijan Decision№ 16/1-2 24 April 2020 Regulations on calculation of bank capital and its adequacy

1. General provisions 1.1. These Regulations have been developed according to Articles 21.1, 34.2.1, 34.2.2 and 34.2.3 of the ‘Law of the Republic of Azerbaijan on Banks’ (hereinafter – the Law), with due consideration of the Basel III Standard issued by the Basel Committee on Banking Supervision. 1.2. These Regulations determine the structure and components of total regulatory capital, its adequacy and leverage ratios and their minimum amount and procedures for calculation thereof for banks and local branches of foreign banks (hereinafter – ‘banks’) operating in the Republic of Azerbaijan.
2. Definitions 2.1. The definitions used in these Regulations bear the following meanings: 2.1.1. total regulatory capital (funds equated to the paid-in capital for local branches of foreign banks) – the capital used for prudential reporting, the difference between the sum of the components (elements) that comprise Tier 1 (main) and Tier 1I (additional) capital defined herein, and deductions applied to them. 2.1.1-1. Tier 1 Capital – capital consisting of elements that enable the bank to continue its operations on a going-concern basis and that are capable of absorbing losses immediately. 2.1.1-2. Tier 2 Capital – capital consisting of elements that, at the point of non-viability, are capable of absorbing losses through write-off or conversion into equity prior to bank’s depositors and/or other creditors. 2.1.2. risk-weighted assets (RWA) – the value of on-balance sheet assets and off-balance sheet liabilities calculated as per their individual risk weights after deductions. 2.1.3. capital adequacy ratio – the ratio of Tier 1 capital and total regulatory capital to individually risk-weighted assets calculated as per the formulae established herein. 2.1.4. counter-cyclic capital buffer – the buffer comprising Common Equity Tier 1 capital established by the Central Bank of the Republic of Azerbaijan (hereinafter – the Central Bank) in line with the economic cycle and the dynamics of lending portfolio. 2.1.4-1. capital conservation buffer – a buffer composed of Common Equity Tier 1 capital, as defined by these Regulations, established for the purpose of enhancing the bank’s loss-absorbing capacity. 2.1.4-2. systemically important bank capital buffer – a buffer composed of Common Equity Tier 1 capital, as defined by these Regulations, established for the purpose of enhancing the bank’s loss-absorbing capacity, taking into account the bank’s systemic importance index. 2.1.5. credit conversion factor – the indicator that allows to convert bank's off-balance sheet liabilities to on-balance sheet asset values. 2.1.6. general reserves for possible asset losses – the reserves established to cover possible losses on bank's standard assets.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 2.1.7. specific reserves for possible asset losses – the reserves established to cover possible losses on bank's sub-standard assets. 2.1.8. hybrid capital elements – term and perpetual financial instruments that combine characteristics of equities and debt liabilities, including cumulative and non-cumulative perpetual preferred stock, subordinated debt liabilities or other similar securities. 2.1.9. non-cumulative perpetual preferred stock – preferred stocks, that entitle the issuer to decide against paying out dividends to stockholders, as well as do not entitle stock owners to claim previously unpaid dividends (if terms and conditions of the issuance stipulate an alteration of dividend amounts in connection with market conditions and the bank's financial standing, such equities are not recognized as non-cumulative indefinite/perpetual preferred stock). 2.1.10. cumulative perpetual preferred stock – equities where dividends unpaid to holders are regularly accumulated and paid out prior to dividend payouts on non-cumulative perpetual preferred stock and ordinary/common stock as well as where the issuer is entitled to defer dividend payouts for a certain period. 2.1.11. subordinated debt liabilities – liabilities, payable upon maturity, not secured with bankable assets, not redeemable at holder's option, do not carry the right to claim bank's bankruptcy or liquidation if not paid until maturity (principal debt or interest on principal debt and/or other payments specified in the agreement) under terms and conditions of the issue, and, in case of the bank's liquidation, are handled after depositor claims and debt liabilities of bank’s other creditors have been satisfied in full. 2.1.12. share premium (hereinafter capital surplus) – funds gained as a result of spread between market and nominal values of ordinary or preferred stock during their placement. 2.1.13. intangible assets – software, copyrights, patents, rights to utilize natural resources, licenses, trademarks, know-how, goodwill, and other rights that exist in no physical form yet add value, recognized as the subject of property rights. 2.1.14. the leverage ratio – the ratio of the bank's Tier 1 (after deductions specified in sub￾item 8.1.1. Section 8 herein) capital to balance sheet assets and off-balance sheet liabilities, excluding the portion, guaranteed with pledged deposits in the national currency of the Republic of Azerbaijan, foreign currency, or bank metals. 2.1.15. off-balance sheet liabilities – guarantees, warranties and similar contingencies, loan instruments (outstanding portions of liabilities on credit lines and similar credit liabilities) and letters of credit. 2.1.16. market value of securities – the price of securities formed in financial markets as a result of interaction of supply and demand. 2.1.17. consumer loan – loan, including credit lines, issued to individuals for the purposes not related to entrepreneurial or professional activity, as well as purchase or construction of real estate. 2.1.18. business loan – loan issued to legal entities and unincorporated individuals for entrepreneurial purposes, as well as agriculture loans. 2.1.19. bank acceptance – document specifying bank’s acceptance or guarantee to execute short-term debt liabilities. 2.1.20. multilateral development bank (MDB) – international financial institution founded by two or more countries to encourage economic development. 2.1.21. debt-to-income ratio (DTI) – borrower’s monthly debt on consumer loans to his/her monthly income (on individuals in a group of borrowers their total monthly debt to their total income). 2.1.22. non-performing loan (NPL) – outstanding amount of a loan 90 (ninety) calendar days delinquent from the date specified in the contract or payment schedule on unpaid portion of principal, or interest, or any of them.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 2.1.23. non-performing amount of microcredits – a portion of principal payments over 90 (ninety) calendar days delinquent from a contractual date of a microcredit, guaranteed by the Agrarian Credit and Development Agency under the Ministry of Agriculture of the Republic of Azerbaijan (hereinafter – the Agency). 2.1.24. cash flow hedge reserves – accumulated gains or losses recognised in other comprehensive income arising from the hedging of future cash flows through derivative financial instruments, undertaken for the purpose of protecting against potential losses resulting from changes in the fair value of financial instruments in the market. 2.1.25 deferred tax assets – amounts of income tax recoverable in future periods in respect of deductible temporary differences, unused tax losses carried forward, and unused tax credits carried forward. 2.1.26. other comprehensive income (OCI) – income and expenses not recognised in income statement. 2.1.27. cross- investments – situations where a bank directly or indirectly holds shares or other capital instruments, including hybrid instruments, of another financial institution, and that financial institution in turn directly or indirectly holds shares or other capital instruments of the bank (through derivative instruments, loans, guarantees, or similar arrangements). 2.1.28. significant investment – an investment that meets at least one of the following criteria: 2.1.28.1. the bank holds more than 10 (ten) percent of ordinary shares of another legal entity. 2.1.28.2. regardless f the percentage of ownership interest, the bank holds an interest that enables it, by contract or otherwise, to exercise significant influence over the decision-making of another legal entity. 2.1.29. partially significant or non-significant investment – any investment that does not qualify as a significant investment. 2.1.30. financial institutions – entities engaged in the provision of banking services or other financial services (banks, non-bank credit institutions, credit unions, leasing companies, insurance companies, factoring companies, pawnshops, and other similar entities). 2.2. Other definitions used herein bear the meanings specified in the Law of the Republic of Azerbaijan ‘on Banks’ and regulations arising from the Law. 2.3. For the purposes of these Regulations, a ‘credit line’ means the bank’s obligation, under the bank account agreement, to extend credit (credit the account) for the execution of payments notwithstanding the absence of funds in the customer’s account (excluding any obligations arising independently of the customer’s intent to borrow or the credit institution’s intent to lend, including but not limited to those resulting from exchange rate fluctuations or technical malfunctions occurring during clearing). 3. The purpose of total regulatory capital and related requirements 3.1. The main objective of total regulatory capital is to support bank’s business strategy and maintain its financial sustainability during unfavorable changes in domestic and foreign environment. It serves to reduce possible losses that may cause the bank to lose its solvency and increase depositors’ and potential investors’ confidence in the banking system. 3.2. Minimum amount of total regulatory capital should be AZN 50 (fifty) million. 3.3. Total regulatory capital includes financial instruments only payable with funds. 3.4. According to the requirements of Items 21.2 and 21.3 of the Law, no bank may, without the Central Bank's prior written approval, reduce total regulatory capital by paying the value of equities when selling or reducing the nominal value of equities, as well as no foreign bank may reduce local branch's funds equated to the total regulatory capital by withdrawing the funds equated to paid-in capital. 3.5. According to Item 21.4 of the Law, inputs to paid in capital of banks (fund equated to the paid-in capital for a local branch of a foreign bank) are made in the national currency of the Republic of Azerbaijan.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 3.6. Minimum amount of paid-in capital (funds equated to paid-in capital for a local branch of a foreign bank) for newly established banks should be AZN 50 (fifty) million. 4. Capital management 4.1. The Supervisory Board and the Management Board should ensure that the bank maintains bank total regulatory capital at a level commensurate with its overall risk profile, not falling below the minimum requirements set out in these Regulations, and ongoing compliance with the capital adequacy requirements specified in Items 8-3.1 and 8-4.5 of these Regulations. 4.2. Mechanisms should be in place for assessing capital in line with the nature, scale, and complexity of the bank’s business activities and risk environment, including procedures for evaluating the potential impact of credit, market, operational, and other material risks to which the bank is exposed on the adequacy adequacy ratios of total regulatory bank capital. 4.3. A risk management policy includes current and future demand for capital, expected capital expenditures, a desired level and structure, internal and external sources of capital, as well as opportunities and periods to attract additional capital if the bank’s financial stance deteriorates. 4.4. The bank assesses the impact of its risk exposure and risk exposure volatility on bank’s earnings, total regulatory capital adequacy ratios. With the frequency the bank defines, the assessment is conducted by using stress tests or other risk management methods considering features of bank’s risk. The assessment at least covers: 4.4.1. identify, measure all significant risks, and evaluate their impact on bank’s total regulatory capital adequacy ratios. 4.4.2. assess whether the bank attained capital adequacy targets. 4.4.3. evaluate main assumptions used in the total regulatory capital assessment system. 4.4.4. evaluate bank’s future demand for total regulatory capital based on bank’s risks and identify necessity for relevant changes to the risk management policy if needed. 4.5. To maintain total regulatory capital adequacy ratios, bank’s capital and relevant risk management processes are analyzed on the following directions: 4.5.1. how efficient the total regulatory capital assessment process is, given the nature, scope, and complexity of the bank’s activity. 4.5.2. adequate linkage of significant risks to bank’s total regulatory capital. 4.5.3. accuracy and completeness of the information used during assessment. 4.5.4. how justified and reliable assumptions, models and scenarios used in assessment are. 4.6. Findings of assessment and analysis conducted under Items 4.4 and 4.5 herein are submitted to the Supervisory Board as specified in internal reporting regulations. 4.7. Bank’s Total regulatory capital assessment and management processes are evaluated by internal audit at least annually and findings are reported to the Supervisory Board. 5. Total regulatory capital structure 5.1.. Total regulatory capital consists of Tier one (1) and Tier two (2) capital. Components of Tier 1 and Tier 1I capital are defined in Items 6 and 7 herein. 5.2. Tier 1 Capital includes Common Equity Tier 1 (CET1) and Additional Tier 1 (AT1) capital. 5.3. The calculation of CET1, AT1 and Tier 2 Capital are defined in sections 6, 6-1 and 7.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 6. Common equity Tier 1 Capital 6.1. Tier 1 capital is the bank’s core capital, and its amount should not fall below 50 percent of bank's estimated total regulatory capital (after deductions). Common Equity Tier 1 (CET1) capital is equal to the sum of the elements specified in Item 6.2 herein, less the deductions specified in Section 8 of these Regulations. 6.2. Common equity Tier 1 capital includes the following components elements: 6.2.1. fully paid common stock issued to circulation (excluding repossessed shares). 6.2.2. fully paid non-cumulative preferred perpetual stock issued to circulation. 6.2.3. capital surplus on the shares specified in sub-item 6.2.1 of these Regulations. 6.2.3-1. accumulated other comprehensive income. 6.2.4. net retained earnings from previous years 6.3. Net retained earnings from previous years include: 6.3.1. accumulated retained earnings or losses from previous years, less current year losses. 6.3.1-1. current year profit or loss: In the calculation, the amount of dividends approved or expected to be approved by the bank’s general meeting of shareholders is deducted from the current year profit. If the general meeting of shareholders has not made a decision, the expected dividend is deducted, provided it is not less than the minimum amount specified in the bank’s dividend policy. If the bank does not have a dividend policy, the expected dividend is deducted based on the higher of the average dividend payout ratio over the last three profitable years of the bank, or the dividend payout ratio of the most recent profitable year. When calculating the expected dividend, restrictions on distributable net profit set out in Item 8-2.2 of these Regulations are taken into account. 6.3.2. capital reserves, i.e., funds established from retained earnings of previous years. 6.4. Current year profit is included in CET1 capital in accordance with sub-item 6.3.1‑1 of these Regulations if it has been confirmed by an internationally reputable independent external auditor that specific reserves have been created in compliance with the requirements of the Central Bank’s regulations. 6.5. If the current year profit has not been verified by an internationally reputable independent external auditor in accordance with the requirements set out in Item 6.4 of these Regulations, the current year profit is included in the bank’s Tier 2 capital. 6-1. Additional Tier 1 Capital 6-1.1. Additional Tier 1 (AT1) capital is equal to the sum of the elements specified in Item 6-1.2 of these Regulations, less the deductions specified in Section 8 of these Regulations. 6-1.2. AT1 Capital includes the following elements: 6-1.2.1. capital elements issued by the bank that meet the requirements set out in Item 6-1.3 of these Regulations, including hybrid elements. 6-1.2.2. share premium related to shares that meet the requirements referred to in sub-item 6-1.2.1. 6-1.3. Capital elements that meet all of the following criteria are included in AT1 capital: 6-1.3.1. They should be issued and fully paid. 6-1.3.2. In the event of the bank’s liquidation, claims arising from these elements are subordinated to the claims of the bank’s depositors and other creditors, as well as to debt obligations eligible for inclusion in Tier 2 capital, and do not benefit from any payment preference. 6-1.3.3. The obligations under these elements should not be secured by bank’s assets. 6-1.3.4. The principal amount of these elements should be perpetual, and no features should exist that could incentivize redemption (e.g., step-ups in dividends or interest), taking into account the requirements of sub-item 6-1.3.5.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 6-1.3.5. Where a call option exists, such instruments may only be called with the prior approval of the Central Bank not earlier than 5 (five) years from the date of issuance. When granting such approval, the Central Bank considers the following: 6-1.3.5.1. The call should not result in a breach of prudential capital requirements established by the Central Bank. 6-1.3.5.2. Replacement with similar or more resilient capital instruments should be feasible. 6-1.3.6. Payment of the principal under these elements may be made with the consent of the Central Bank, taking into account the requirements of sub-items 6-1.3.5.1 and 6-1.3.5.2. 6-1.3.7. The bank should have the right to cancel any dividend or interest payments on these elements, and exercising this right should not trigger bankruptcy or liquidation. 6-1.3.8. Payments on these instruments should not be conditional on the bank’s credit rating and/or financial condition. 6-1.3.9. These elements should not be acquired by the bank or by any entity under the bank’s significant influence, nor should their acquisition be directly or indirectly financed by the bank (e.g., loans or guarantees). 6-1.3.10. The bank should have the right to write down or convert these elements into ordinary shares if the bank’s CET 1 capital falls below 5.125%. In such case, the bank immediately notifies the Central Bank and reduces or converts the instruments by the amount required to restore CET1 to at least 5.125%. 6-1.4. Once the bank decides to include capital elements that meet all the criteria of Item 6-1.3 in AT1 capital, related information is submitted to the Central Bank within 3 (three) business days. 6-1.5. If significant changes occur in Azerbaijani tax or other legislation affecting these elements, the call option may be exercised within the first 5 (five) years of issuance, subject to Central Bank consent and in compliance with the requirements of sub-items 6-1.3.5.1 and 6-1.3.5.2. 7. Tier 2 Capital 7.1. Tier 1I capital is supplementary capital. Tier 1I capital’s share in bank's calculated total regulatory capital may not exceed Tier 1 capital (after deductions). Any portion more than the said level is not included in calculation of total regulatory capital. Tier 2 (T2) capital is equal to the sum of the elements specified in Item 7.2 herein, less the deductions specified in Section 8 herein. 7.2. Tier 1I capital includes the following elements components: 7.2.1. current year profit (if not recognized in CET1 capital). The amount of dividends approved or expected to be approved by the bank’s general meeting of shareholders is deducted from current year profit in the calculation. The expected dividend is calculated taking into account the requirements of sub￾item 6.3.1‑1. 7.2.2. total reserves (a portion up to 1.25 percent of risk-weighted balance sheet assets and off-balance sheet liabilities (after deductions), that do not exceed general reserves) general reserves (up to 1.25% of risk-weighted assets (RWAs)). 7.2.3. capital’s hybrid elements except for non-cumulative perpetual preferred stock. capital elements issued by the bank that meet the requirements specified in Item 7.3, including hybrid capital elements. 7.2.4. share premium related to shares that comply with the requirements set out in sub-item 7.2.3. 7.3. Capital elements referred to in sub-item 6-1.3.1, 6-1.3.3, 6-1.3.5 and 6-1.3.8 herein, which meet at least all of the criteria specified below, are eligible for inclusion in Tier 2 capital: For the hybrid capital instruments referred to in Sub-clause 7.2.3 of these Regulations to be included in Tier 2 capital, they shall meet at least the following criteria. 7.3.1. They are irrevocable upon creditors claim. 7.3.2. bank should be entitled to defer interest payments on such instruments. 7.3.3. liabilities for such instruments have the last priority in case of bank liquidation in the event of liquidation, obligations under these instruments should rank senior to debt instruments included in AT1

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri capital, but junior to the claims of bank’s depositors and other creditors, and should not benefit from any preferential treatment with respect to payments. 7.3.4. liabilities for such instruments are not guaranteed by assets of bank by any means. 7.3.5. in case capital adequacy indicators fall below the threshold established herein, the bank should be entitled to defer payments on such instruments. 7.3.6. the execution period of principal amount of bank’s liabilities on these instruments should be set for at least after 5 (five) years after the day of liability, or under perpetual conditions. The maturity of the principal amount of obligations arising from these elements is set at no less than 5 (five) years from the date on which such obligations are incurred, and, taking into account the requirements of sub-item 6-1.3.5 of these Regulations, no features that would create an incentive for early redemption (such as step-ups in dividends or interest rates) should be included. 7.3.7. these elements are not acquired by the bank or by the bank’s related party, nor shall their acquisition be financed, directly or indirectly, by the bank (e.g., loans, guarantees, etc.). 7.3.8. within the framework of bank resolution, these elements may be written off or converted into ordinary shares by decision of the Central Bank. 7.3.9. early repayment of the principal amount of obligations arising from these elements are subject to the consent of the Central Bank. When granting such a consent, the Central Bank takes into account the requirements set out in sub-items 6-1.3.5.1 and 6-1.3.5.2 of these Regulations. 7.4. Elements included to Tier 2 capital Capital’s hybrid elements, including subordinated debt liabilities are recorded in Tier 2 Capital with 20 percent decrease per year starting from the beginning of the first year of the remainder period, 5 (five) years until maturity. 7.5. The amount of capital’s hybrid elements considered in calculation of Tier 1I Capital should not exceed 50 (fifty) percent of Tier 1 Capital (after deductions). 7.6. The requirements set out in Items 6-1.4 and 6-1.5 herein also apply to elements of Tier 2 capital. 7.7. Where, under Sections 6-1 and 7 of these Regulations, the consent of the Central Bank is required, the Bank reviews such applications within 30 (thirty) days from the date of their receipt and notifies the bank of its decision in writing. Where consent is refused, the Central Bank substantiates its decision. 8. Deductions from capital 8.1. Prior to the calculation of capital adequacy ratios and the leverage ratio, adjustments (deductions are made) apply to CET1 capital, AT1 capital and Tier 2 capital in the manner set out below. 8.1.1. from Tier 1 capital — all net intangible assets (including amortization) and amount of deferred tax assets as set in the International Financial Reporting Standards. 8.1.2. from total regulatory capital — equity investments in subsidiaries, as well as other legal entities (excluding specific reserves established for these investments). 8.1.3. surplus arising from the revaluation of fixed assets is fully deducted from CET1 capital. 8.1.4. net carrying value of all intangible assets (net of amortisation) are fully deducted from CET1 capital. 8.1.5. deferred tax assets, in accordance with the requirements set out in sub-items 8.1.5.1 and 8.1.5.2 of these Regulations: 8.1.5.1. are fully deducted from CET1 capital, where arising from the carry-forward of tax losses from previous years. 8.1.5.2. the portion of such deferred tax assets that exceeds 10 percent of the bank’s CET1 capital is deducted from CET1 capital (for the purposes of this sub-item, CET1 capital is calculated after the deductions specified in sub-items 8.1.3, 8.1.4, 8.1.5.1, 8.1.6, 8.1.7 and 8.1.8 of these Regulations have been applied), where arising from temporary differences (e.g., provisions, fee income, choice of depreciation method, etc.).

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 8.1.6. cash flow hedge reserves – where the amount of cash flow hedge reserves is positive, it is fully deducted from CET1 capital, where negative, it is added back to CET1 capital. 8.1.7. cross-investments to capital of financial institutions – fully deducted from capital in accordance with the ‘corresponding capital deduction’ approach set out in sub-items 8.1.7.1–8.1.7.4 of these Regulations: 8.1.7.1. investments in ordinary shares – deducted from CET1 capital. 8.1.7.2. investments in other capital elements that meet the requirements specified in Item 6-1.3 of these Regulations – deducted from AT1 capital. 8.1.7.3. investments in other capital elements that meet the requirements specified in Item 7.3 of these Regulations – deducted from Tier 2 capital. 8.1.7.4. investments not covered by sub-items 8.1.7.1–8.1.7.3 – deducted from CET1 capital. 8.1.8. the amount of investments in the capital of financial institutions is treated in accordance with the requirements set out in sub-items 8.1.8.1–8.1.8.2 of these Regulations: 8.1.8.1. for non-significant or partially significant investments – the portion of the aggregate amount of all such investments that exceeds 10 percent of the bank’s CET1 capital is deducted from the bank’s capital, in accordance with the ‘corresponding capital deduction’ approach specified in Sub-item 8.1.7 of these Regulations (proportionally to the weight of the investment in the relevant capital element of the financial institution); for the purposes of this Sub-clause, CET1 capital is calculated after applying the deductions specified in Sub-items 8.1.3–8.1.7 of these Regulations (excluding the deductions specified in Sub-item 8.1.5.2). 8.1.8.2. the amount of significant investments is treated in accordance with the requirements set out in Sub-items 8.1.8.2.1–8.1.8.2.3 of these Regulations: 8.1.8.2.1. the portion of the aggregate amount of investments in the CET1 capital of financial institutions that exceeds 10 percent of the bank’s CET1 capital is deducted from the bank’s CET1 capital 8.1.8.2.2. With the exception of investments in CET1 capital, other investments in the capital of financial institutions are fully deducted from the bank’s capital in accordance with the ‘corresponding capital deduction’ approach specified in Sub-item 8.1.7 of these Regulations. 8.1.8.2.3. for the purposes of the calculation under Sub-item 8.1.8.2 of these Regulations, CET1 capital is calculated after applying the deductions specified in Sub-items 8.1.3–8.1.7 and 8.1.8.1 of these Regulations (excluding the deductions specified in Sub-item 8.1.5.2). 8.1.9. the amount of direct or indirect investments in the capital of legal entities other than financial institutions are fully deducted from CET1 capital. 8.2. Where, in applying the deductions specified in Sub-items 8.1.7 and 8.1.8 of these Regulations, the amount of Tier 2 capital is insufficient, the remaining portion of the deductions are applied against AT1 capital; where the amount of AT1 capital is insufficient, the remaining portion of the deductions are applied against CET1 capital. 8.3. Investments are valued in accordance with International Financial Reporting Standards. 8.4. When applying the deductions specified in Sub-items 8.1.7–8.1.9 of these Regulations, any ‘specific’ provisions established in respect of such investments are excluded from the deduction amount 8-1. Capital adequacy ratio requirements 8-1.1. Banks maintain capital adequacy ratios at levels not lower than the following minimum thresholds: 8-1.1.1. CET1 capital adequacy ratio – CET1 capital to RWAs 4.5 (four point five) percent. 8-1.1.2. Tier 1 capital adequacy ratio – Tier 1 capital to RWAs 6 (six) percent. 8-1.1.3. Total regulatory capital ratio – total regulatory capital to RWAs 8 (eight) percent. 8-1.2. For the purposes of calculating capital adequacy ratios, RWAs are equal to the sum of assets weighted for credit risk, operational risk and market risk.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 8-2. Capital conservation buffer 8-2.1. In addition to the minimum capital adequacy ratio requirements set out in Item 8-1.1 of these Regulations, banks maintain a capital conservation buffer (CCoB) of 2.5 (two point five) percent. Following the application of the CCoB, the new capital adequacy ratio thresholds are as follows: 8-2.1.1. CET1 capital adequacy ratio – 7 (seven) percent. 8-2.1.2. Tier 1 capital adequacy ratio – 8.5 (eight point five) percent. 8-2.1.3. Total regulatory capital adequacy ratio – 10.5 (ten point five) percent. 8-2.2. Where a bank’s CCoB falls below the threshold specified in Item 8-2.1 of these Regulations, distributions of net profit, including dividends (including interim dividends) and bonus payments, are restricted in accordance with the framework set out in the table below: CCoB threshold Distributable part of net profit if 2.5% No restriction applied on distribution of net porofit if over 1.875% and below 2.5% up to 60% of net profit can be distributed if over 1.25%, but less than 1.875% up to 40% of net profit can be distributed if over 0.625%, but less than 1.25% up to 20% of net profit can be distributed if 0.625% or less Distribution of net profit is prohibited 8-2.3. Under the table specified in Item 8-2.2 of these Regulations, the level of the CCoB is determined by the following formula: CCoB level = the minimum of [(actual CET1 capital adequacy ratio – required CET1 capital adequacy ratio); (actual Tier 1 capital adequacy ratio – required Tier 1 capital adequacy ratio); (actual total regulatory capital adequacy ratio – required total regulatory capital adequacy ratio); 2.5%] Where: actual CET1, Tier 1 and total regulatory capital adequacy ratios mean the respective ratios of the bank as of the reporting date. The required CET1, Tier 1 and total regulatory capital adequacy ratios mean the sum of the minimum thresholds specified in Item 8-1.1 of these Regulations and the CCyB and the capital buffer for systemically important banks specified in Sections 8-3 and 8-4 of these Regulations (e.g., let’s assume that CCyB is 0.5% and the capital buffer for a systemically important bank is 1%, then this requirement will be 6% for CET1 capital, 7.5% for Tier 1 capital, and 9.5% for total regulatory capital). 8-2.4. For the purposes of Item 8-2.2 of these Regulations, net profit is defined as the profit required for remuneration and dividend payments as defined in the ‘Corporate Governance Standards in Banks’ approved by Decision No. 41/1 of the Central Bank dated 28 August 2023. 8-2.5. Where a bank’s CCoB falls below the threshold specified in Item 8-2.1 of these Regulations, the bank immediately notifies the Central Bank thereof and, within 5 (five) business days following the breach, submits to the Central Bank a plan for the restoration of the buffer threshold. The restoration plan specifies, at a minimum, the following: 8-2.5.1. the bank’s assessment results and forecasts. 8-2.5.2. the measures envisaged by the bank to increase the CCoB. 8-2.5.3. the period required to achieve full compliance with the CCoB requirement; 8-2.5.4. any additional information requested by the Central Bank for the purpose of clarifying the implementation of the restoration plan.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 8-2.6. The submitted restoration plan is reviewed by the Central Bank within 15 (fifteen) business days, and where the timeframe and measures proposed by the bank are deemed reasonable, the Central Bank approves the restoration plan. 8-2.8. A bank should should ensure that bonus (including deferred bonuses) or dividend (including interim dividend) payments do not result in a breach of the required CET1, Tier 1, or total regulatory capital adequacy ratios. For the purposes of this item, the required CET1, Tier 1 and total regulatory capital adequacy ratios mean the sum of the minimum thresholds specified in Item 8-1.1 of these Regulations and the countercyclical capital buffer and the capital buffer for systemically important banks specified in Sections 8-3 and 8-4 of these Regulations. 8-3. Countercyclical capital buffer (CCyB) 8-3.1. Depending on the economic cycle and the growth rate of the credit portfolio, a CCyB ranging from 0% to 2.5% is applied on top of the minimum capital adequacy ratios specified in Item 8-2.1 of these Regulations. The calculation of the CCyB is determined in accordance with Annex No. 2 to these Regulations. 8-3.2. Where the CCyB requirement is increased, the new requirement enters into force no earlier than 1 (one) month from the date of announcement of the increase. Where the requirement is reduced, it enters into force as of the date of announcement of the reduction. 8-3.3. The CCyB is calculated by the Central Bank quarterly in accordance with the procedure specified in Annex No. 2 to these Regulations and is published on the official website of the Central Bank. 8-4. Capital buffer for systemically important banks 8-4.1. A systemically important bank (SIB) maintains a systemic importance capital buffer at a level not lower than the thresholds specified in the table below, in accordance with the bank’s systemic importance index (SII): SIB Group Systemic importance index Minimum SIB capital buffer Group 4 above 2900 but not exceeding 3700 4% Group 3 above 2100 but not exceeding 2900 3% Group 2 above 1300 but not exceeding 2100 2% Group 1 420 and over, but not over 1300 1% 8-4.2. The SII of a bank is determined in accordance with the ‘Criteria for assessing a bank as a systemically important bank’ approved by Decision No. 11 of the Central Bank dated 19 March 2025. 8-4.3. Where the SII of at least one SIB falls within Group 4 of the table specified in Item 8-4.1 of these Regulations, a new empty group (Group 5) is created based on the SII intervals established for the groups in that table. This process continues whenever the SII of at least one SIB falls within any newly created empty group (e.g., where a SIB is assigned to Group 5, a new empty group (Group 6) is created, and so on). 8-4.4. The minimum SIB capital buffer requirement for each new empty group created in accordance with Item 8-4.3 of these Regulations is set at 1 (one) percentage point higher than the minimum SIB capital buffer requirement applicable to the immediately preceding group (e.g., 5% for the newly created Group 5, 6% for the newly created Group 6, etc.). 8-4.5. The SIB capital buffer determined pursuant to Item 8-4.1 of these Regulations is applied in addition to the minimum capital adequacy ratios specified in Item 8-3.1 of these Regulations.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 9. Minimum capital requirement for credit risk Risk groups of assets 9.1. RWAs for credit risk are calculated based on the values of on-balance-sheet assets and off￾balance-sheet exposures, each assessed in accordance with its applicable risk weight. Prior to the calculation of RWAs for credit risk, specific provisions established to cover potential losses on such assets, as well as the deductions specified in Section 8 of these Regulations, are deducted from the assets. 9.1-1. Banks assign various risk weights to on-balance sheet assets and off-balance sheet liabilities depending on their type, nature, and securitization of the liability. 9.2. Where assets and off-balance sheet liabilities are backed with securities, the market value of securities is considered in calculation of risk weights. 9.3. Balance sheet assets are assigned risk weights based on the following characteristics: 9.3.1. 0 percent (0.0 ratio) risk weight: 9.3.1.1. the national currency of the Republic of Azerbaijan in bank's cash offices, vaults, its representative offices, divisions and branch offices, ATMs and currency exchange offices, as well as in transit, bank metals, currency of countries with minimum ‘AA-’ sovereign debt rating (or equivalent) assigned by international rating agencies (Standard & Poors, Fitch Ratings, Moodys, hereinafter – international rating agencies), as well as securities issued by and direct claims on governments and central banks of such countries, or a portion of the asset unconditionally secured by governments or central banks of these countries. 9.3.1.2. funds in bank's accounts (correspondent, deposit, etc.) held with the Central Bank, as well as repo transactions concluded with the Central Bank. 9.3.1.3. direct claims on contracts signed on behalf of the Republic of Azerbaijan, government securities and securities issued by the Central Bank. 9.3.1.4. mortgage securities issued by the Azerbaijan Mortgage and Credit Guarantee Fund (hereinafter – the Fund). 9.3.1.5. portion of a loan secured with the national currency of the Republic of Azerbaijan pledged in bank’s accounts, bank metals or currency of the countries with minimum ‘AA-’ sovereign debt rating (or equivalent) issued by international rating agencies. 9.3.1.6. direct claims against MDBs with ‘AAA’ credit rating (or equivalent) issued by international rating agencies, or the portion of claims secured with unconditional liability or securities issued by these institutions. 9.3.1.7. a portion of loans granted to entrepreneurs in manat under the guarantee of the Fund, non-performing portion of which accounts for up to 5% of total portfolio, secured by the Republic of Azerbaijan or the Central Bank. 9.3.1.8. Mortgage loans issued with the guarantee of the Fund. 9.3.1.9. a portion of the asset unconditionally secured with government securities of the Republic of Azerbaijan, government guarantee, as well as securities issued by the Central Bank. 9.3.1.10. student education loans issued from the funds of the Education Student Loan Fund under the Ministry of Education of the Republic of Azerbaijan (except for the cases where the bank bears financial liability). 9.3.2. 20 percent (0.2 ratio) risk weight: 9.3.2.1. currency of the countries with minimum ‘A-’ sovereign debt rating (or equivalent) issued by international rating agencies, as well as securities issued by governments and central banks of these countries and direct claims against them, not included to the 0 (zero) risk group. 9.3.2.2. deposit with the minimum ’AA-‘credit rating (or equivalent) issued by international rating agencies or claims against other financial credit institutions and other assets unconditionally secured by them.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 9.3.2.3. a portion of claims backed with securities issued by local authorities or municipalities of the countries with the minimum ‘AA-’ country (sovereign) debt rating (or equivalent) issued by international rating agencies (such claims should be paid from total budget receipts rather than from proceeds from commercial projects). 9.3.2.4. direct claims against MDBs with the minimum investment rating issued by international rating agencies not included to the 0 (zero) risk group or the portion of the claims secured with unconditional commitment or securities issued by these institutions. 9.3.2.5. all assets or any portion thereof, if they are secured with securities issued by a third party and in its turn, the repayment of such securities is unconditionally guaranteed by the Republic of Azerbaijan, the Central Bank, or governments or central banks of the countries with the minimum ‘A-’ sovereign debt rating (or equivalent) issued by international rating agencies. 9.3.2.6. a portion of debts of third parties to the bank, not included to the 0 (zero) risk group and unconditionally guaranteed by the Republic of Azerbaijan, the Central Bank, or governments or central banks of the countries with the minimum ‘A-’ sovereign debt rating (or equivalent) issued by international rating agencies. 9.3.2.7. non-backed securities issued by the Fund. 9.3.2.8. the unconditionally secured portion of business, including agriculture loans issued in manat with the guarantee of funds created by the state and guaranteeing the fulfillment of liabilities on bank loans and other specialized public institutions. 9.3.2.9. a secured portion of microcredits issued under the guarantee of the Agency, the non-performing portion of which accounts for up to 12% of the outstanding portfolio. 9.3.2.10. long-term corporate securities with the minimum ‘AA-’ credit rating (or equivalent), issued by international rating agencies. 9.3.2.11. short-term corporate securities with the minimum ‘A-1’ credit rating (or equivalent), issued by international rating agencies. 9.3.3. 35 percent (0.35 ratio) risk weight: 9.3.3.1. mortgage loans issued out of money of the Fund. 9.3.3.2. claims against local banks (banks operating in the Republic of Azerbaijan and local branches of foreign banks), whose credit rating is maximum of 3 (three) rates lower than the country (sovereign) debt rating of the Republic of Azerbaijan with a term not exceeding 6 (six) months (excluding restructured assets). 9.3.4. 50 percent (0.5 ratio) risk weight: 9.3.4.1. currency of countries not included to 20 (twenty) percent risk weight with minimum investment rating issued by international rating agencies, as well as securities issued by governments or central banks of these countries and claims against them. 9.3.4.2. claims against deposit or other financial credit institutions not included to 20 (twenty) percent risk weight with the minimum ’A-‘credit rating (or equivalent) issued by international rating agencies. 9.3.4.3. a portion of claims secured with securities issued by local authorities, or municipalities of the countries with the minimum ‘A-’ sovereign debt rating (or equivalent) issued by international rating agencies not included to 20 (twenty) percent risk weight (these claims are paid from income generated on commercial projects). 9.3.4.4. mortgage loans issued from bank’s funds and other sources. 9.3.4.5. long-term corporate securities with the minimum ‘A-’ credit rating (or equivalent), issued by international rating agencies. 9.3.4.6. short-term corporate securities with the minimum ‘A-2’ credit rating (or equivalent), issued by international rating agencies. 9.3.4.7. securities issued by legal entities specified in the ‘List of state companies whose income and expenditure estimates should be prepared, approved and monitored for

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri implementation’ approved by Resolution of the Cabinet of Ministers of the Republic of Azerbaijan No. 534 dated 30 December 2016 with the credit rating issued by international rating agencies that fall at most 1 (one) rate below the sovereign credit rating of the Republic of Azerbaijan. 9.3.4.8. national currency denominated business, including agriculture loans not included to the 20 (twenty) percent risk weight, issued to small and medium-sized businesses determined by the related legislation of the Republic of Azerbaijan, whose use for intended purpose is confirmed with relevant documents. 9.3.4.9. national currency denominated business loans not included to the 20 (twenty) percent risk weight, oriented towards financing of (non-oil) export, whose use for intended purpose is confirmed with relevant documents. 9.3.4.10. claims against local banks (banks and local branches of foreign banks functioning in the Republic of Azerbaijan) not included to the 35 (thirty-five) percent risk weight with a term not exceeding 6 (six) months (excluding restructured assets). 9.3.5. 75 percent (0.75 ratio) risk weight: 9.3.5.1. foreign currency denominated business loans oriented towards financing of (non￾oil) export, whose use for intended purpose is confirmed with relevant documents. 9.3.5.2. national currency denominated agriculture loans issued to micro businesses not attributed to 20 (twenty) percent risk weight. 9.3.6. 100 percent (1.0 ratio) risk weight: 9.3.6.1. claims secured with securities issued by the Nakhchivan Autonomous Republic, local authorities, or municipalities of the Republic of Azerbaijan. 9.3.6.2. long-term securities not included to 50 (fifty) percent risk weight, with minimum ‘BB-’ credit rating (or equivalent) issued by international rating agencies or not rated. 9.3.6.3. all fixed assets, including fixed assets not used in banking. 9.3.6.4. payment instruments in the process of collection (executed by, but not reimbursed to the bank). 9.3.6.5. a secured portion of entrepreneur loans issued in manat under the Fund’s guarantee the non-performing portion of which accounts for over 5% of total portfolio. 9.3.6.6. a secured portion of microcredits issued under the guarantee of the Agency, the non-performing portion of which accounts for 12% and more of the outstanding portfolio. 9.3.6.7. other assets not included to risk weights specified in sub-items 9.3.1, 9.3.2, 9.3.3, 9.3.4, 9.3.5, 9.3.7, 9.3.8, 9.3.9, 9.3.10 and 9.3.11 herein. 9.3.6.8. claims against local banks (banks and local branches of foreign banks operating in the Republic of Azerbaijan) not included to the 35 (thirty-five) and 50 (fifty) percent risk weight. 9.3.6.9. national currency denominated agriculture loans to family farms not attributed to 20 (twenty) percent risk weight. 9.3.7. 120 (hundred and twenty) percent (1.2 ratio) risk weight: 9.3.7.1. foreign currency denominated business loans, excluding business loans issued to borrowers who have foreign currency income. 9.3.6.10. Insignificant or partially significant investments in the capital of financial institutions (excluding the portion deducted from capital as specified in sub-item 8.1.8.1 of these Regulations). 9.3.8. 150 (hundred and fifty) percent (1.5 ratio) risk weight: 9.3.8.1. long-term corporate securities with below ‘BB-’ credit rating (or equivalent) issued by international rating agencies. 9.3.8.2. consumer loans with over 45 (forty-five) – 60 (sixty) percent DTI (excluding consumer loans secured with cash funds in national and hard currencies, whose value of collateral does not fall below 100 (one hundred) percent of the commitment it secures, as well as

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri consumer loans secured with real estate and vehicles, whose value of collateral does not fall below 150 (one hundred and fifty) percent of the commitment it secures). 9.3.8.3. consumer loans, whose interest rate at the time of issuance is greater than the sum of the average interest rate of consumer loans on the sector issued during the previous quarter and the one third of it. Average interest rate on consumer loans is calculated by the Central Bank as per Annex 1 herein and disclosed on the official website of the Central Bank until the 25th day of the month following every quarter. Banks are informed electronically or by postal notification within 1 (one) business day following the date the average interest rate is disclosed. Until average interest rate is disclosed, banks use data of the previous quarter. 9.3.9. 180 (hundred and eighty) percent (1.8 ratio) risk weight: 9.3.9.1. consumer loans with over 60 (sixty) percent, but not higher than 70 (seventy) percent DTI (excluding consumer loans secured with cash funds in national and hard currencies, whose value of collateral does not fall below 100 (one hundred) percent of the commitment it secures, as well as consumer loans secured with real estate and vehicles, whose value of collateral does not fall below 150 ( one hundred and fifty) percent of the commitment it secures). 9.3.9.2. consumer loans, whose interest rate at the time of issuance is greater than the sum of the average interest rate on sector’s consumer loans issued during the previous quarter and the half of it. 9.3.10. 200 (two hundred) percent (2.0 ratio) risk weight: 9.3.10.1. consumer loans, whose DTI ratio is over 45 (forty five), but do not exceed 60 (sixty) percent or over 70 (seventy) percent (excluding consumer loans secured with cash funds in national and hard currencies, whose value of collateral does not fall below 100 (one hundred) percent of the commitment it secures, as well as consumer loans secured with real estate and vehicles, whose value of collateral does not fall below 150 ( one hundred and fifty) percent of the commitment it secures). 9.3.10.2. consumer loans whose interest rates are higher than the sum of the average interest rate of the sector on consumer loans issued in the previous quarter and its quarter at the time of issuance. An average interest rate on consumer loans is calculated by the Central Bank as per Annex 1 herein and disclosed on the official website of the Central Bank until the 25th day of the month following every quarter. Banks are informed electronically or by postal notification within 1 (one) business day following the date the average interest rate is disclosed. Until average interest rate is disclosed, banks use data of the previous quarter. 9.3.10.3. excluding business loans issued to borrowers who have income in foreign currency or whose currency risk is hedged otherwise, business loans in foreign currency issued to borrowers whose currency risk is not hedged. 9.3.11. 230 (two hundred and thirty) percent (2,3 ratio) risk weight: 9.3.11.1. consumer loans whose DTI ratio is over 60 (sixty) but does not exceed 70 (seventy) percent. 9.3.11.2. consumer loans whose interest rates are higher than the sum of the average interest rate of the sector on consumer loans issued in the previous quarter and its one third at the time of issuance. 9.3.11-1. 250 percent (2.5 ratio) risk weight: 9.3.11-1.1. significant investments in the capital of financial institutions (excluding the portion deducted from capital as specified in sub-item 8.1.8.2 of these Regulations). 9.3.11-1.2. Deferred tax assets arising from temporary differences (e.g. provisions, fee and commission income, choice of depreciation method, etc.) (excluding the portion deducted from capital as specified in sub-item 8.1.5.2 of these Regulations). 9.4. Where a consumer loan corresponds to conditions of several diverse risk weights, the loan is included to the highest risk weight it corresponds. Risk weights are increased as follows depending on maturity and currency of consumer loans:

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 9.4.1. risk weight of loans with 3 year or more and 5 year or less maturity is increased by 20 basis points (bp). 9.4.2. risk weight of loans with over 5 year or more and 7 year or less maturity is increased by 40 bp. 9.4.3. risk weight of consumer loans in foreign currency is increased by 60 bp. 9.4-1. The risk weight of the loans issued under the behavioral model established in the ‘Regulation on credit risk management in banks’ approved by Resolution No 46/4 of the Management Board of the Central Bank dated 21 September 2023 is increased by 20 bp. 9.5. To risk weigh off-balance sheet liabilities (assets), outstanding amount of off-balance sheet liabilities is multiplied by the credit conversion factor defined in Items 9.6 and 9.7 herein, and the resulting amount is deemed the on-balance sheet equivalent of the off-balance sheet liability and this amount is assigned to the relevant risk weight set for on-balance sheet assets under Item 9.3 herein. 9.6. Off-balance sheet liabilities specified herein are converted to a loan under the ratios established below: 9.6.1. off-balance sheet liabilities, except for consumer loan lines, with up to one year maturity – at 20 (twenty) percent (credit conversion factor – 0.2). 9.6.1-1. consumer loan lines – at 40 (forty) percent (credit conversion factor – 0,4). 9.6.2. off-balance sheet liabilities, except for consumer loan lines, with over one year maturity – at 50 (fifty) percent (credit conversion factor – 0.5). 9.6.3. liabilities on trading of bank acceptance and securities – at 100 (one hundred) percent (credit conversion factor – 1.0). 9.6.4. liabilities that entitle the bank to unilaterally not discharge its obligations in full or partially on a contractual basis, except for consumer loan lines – at 0 (zero) percent (credit conversion factor – 0). 9.6-1. the unused portion of consumer credit lines (recorded in off-balance-sheet accounts), after being converted into a credit in accordance with sub-item 9.6.1-1 herein, are assigned a 100% risk weight. 9.7. FX agreements (forward agreements) are converted to credit using the below ratios: Forward contracts with a fixed maturity (the initial period established by the contract for the purchase of the currency) Credit conversion percentage or factor a) one year and less 2 % or 0,02 b) from one year up to two years 5 % or 0,05 c) over two years. 3% for each subsequent year after the third year («n» is the number of years) 5 %+3 % x n or 0,05+0,03 x n To convert the forward agreement amount into an a balance sheet asset, the appropriate credit conversion factor in the table is multiplied by the contract value, and the resulting amount is deemed on-balance sheet equivalent of the off-balance sheet liability and is thereafter assigned to a relevant risk weight defined for on-balance sheet assets in Item 9.3 herein. 10. Deductions from assets Before calculating risk-weighted assets specific reserves for possible asset losses, as well as Tier 1 capital and deductions from regulatory capital are deducted from the assets (deductions). 11. Minimum capital requirement on market risks

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 11.1. For the purposes of these Regulations market risks include only the currency risk the bank is exposed to. 11.2. Market risk weighted assets are equal to absolute expression of the aggregate open currency position calculated on an average monthly basis established under the ‘Regulations on setting open currency position limits in banks.’ 11.3. If the aggregate open currency position accounts for 2% or more of bank’s total regulatory capital, it is considered in full in market risk evaluation, if it accounts for less than 2% of bank’s total regulatory capital, is set as 0 (zero). 12. Minimum capital requirement on operational risks 12.1. Operational risk weighted assets are calculated by dividing the capital requirement on operational risks by the regulatory capital adequacy ratio set in Items 13.1 8-3.1 and 13.2 8-4.5 herein by means of the following formula: 𝑅𝑊𝐴 (𝑂𝑅) = 𝑂𝑅 𝐴𝑅 where: OR – capital requirement on operational risks, AR – total regulatory capital adequacy ratio. 12.2. The capital requirement on operational risks is calculated via the following formula with the base indicator approach and equals to the average denominator of the sum of bank's positive annual operating profit over past 3 years multiplied by 15 (fifteen) percent: 𝑂𝑅 = ∑ (𝑀 ∗ 15%) 𝑛 𝑖=1 𝑛 where: OR - capital requirement on operational risks, M –positive annual operating profit over past 3 years, n - the number of years with positive operating profit on a three-year period. 12.3. When calculating capital requirement on operational risks, on the year the operating profit is negative or equals zero, operating profit for that year is ignored in the numerator, and the year is ignored in the denominator. 12.4. If operating profit is negative or equals 0 (zero) every year over past three years, bank’s capital requirement on operational risks is set as 0 (zero). 12.5. Operating profit equals to the sum of bank’s net interest and net non-interest income and specific reserves created on interest debts and/or other payments specified in the agreement. 12.6. Gains and losses from trading of other securities, as well as income generated from unexpected types of activities, including insurance activity are not included to the calculation of operating profit, except for securities recognized in bank’s daily report on aggregate income (income statement). 13. Requirements on and calculation of capital adequacy ratios 13.1. Other banks, except for SIBs, should maintain total regulatory capital adequacy ratio not less than 10 (ten) percent. 13.2. The total regulatory capital adequacy ratio of SIBs may not fall below 12 (twelve) percent. 13.3. Other banks, except for SIBs, should maintain Tier 1 capital adequacy ratio not less than 5 (five) percent. 13.4. The Tier 1 capital adequacy ratio of SIBs may not fall below 6 (six) percent.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 13.5. Depending on the economic cycle and lending portfolio growth rate, 0 – 2.5% CCyB is added to the Tier 1 and regulatory capital adequacy ratio. Calculation of the CCyB is established under Annex 2 herein. 13.6. The total regulatory capital, risk-weighted assets and capital adequacy ratios are calculated using the following formulae: 13.6.1. Aggregate capital = 𝑻𝟏 − 𝑻𝑻𝟏 + 𝑻𝟐 − 𝑴𝑻 where: T_1 – Tier 1 capital, TT_1 – deductions from Tier 1 capital, T_2 – Tier 1I capital, MT deductions from total regulatory capital. 13.6.2. Risk weighted assets are calculated with the below formula: 𝑹𝑾𝑨 = 𝑩𝑨 + 𝑶𝑩𝑳 𝑩𝑨 = ∑𝑅𝐷𝑖 ∗ (𝐵𝐴𝑖 − 𝐸𝑖) 𝒊 𝑶𝑩𝑳 = ∑∑𝐾𝐾𝑗 ∗ (𝑂𝐵𝐿𝑗 − 𝐸𝑗) 𝑖 𝑗 ∗ 𝑅𝐷𝑖𝑗 where: RWA – risk weighted assets, BA – risk weighted balance assets, OBL – risk weighted off￾balance sheet liabilities, RDi – i risk weight on assets, BAi – balance assets corresponding to – i-risk weight, Ei – deductions from balance assets corresponding to i-risk weight, KKj – j credit conversion factor, OBLj – execution amount of off-balance sheet liabilities corresponding to j credit conversion factor, Ej– deductions from off-balance sheet liabilities corresponding to j credit conversion factor, RDij – risk weight of i-balance item after multiplying by j credit conversion factor. 13.6.3. Tier 1 capital adequacy ratio

𝑻𝟏 − 𝑻𝑻𝟏 𝑹𝑾𝑨(𝑪𝒓) + 𝑹𝑾𝑨(𝑴𝒓) + 𝑹𝑾𝑨(𝑶𝒓) × 𝟏𝟎𝟎% where: T1 – Tier 1 capital, TT1 – deductions from Tier 1 capital, RWA(Cr) – risk weighted assets on the credit risk, RWA(Mr) – risk weighted assets on the marker risk, RWA(Or) – risk weighted assets on the operating risk. 13.6.4. Total regulatory capital adequacy ratio

𝑻𝑪 𝑹𝑾𝑨(𝑪𝒓) + 𝑹𝑾𝑨(𝑴𝒓) + 𝑹𝑾𝑨(𝑶𝒓) × 𝟏𝟎𝟎% Where: 𝑇𝐶 total regulatory capital, 𝑅𝑊𝐴(𝐶𝑟) – risk weighted assets on the credit risk, 𝑅𝑊𝐴(𝑀𝑟) – risk weighted assets on the marker risk, 𝑅𝑊𝐴(𝑂𝑟) – risk weighted assets on the operating risk. 13.7. When calculating Tier 1 capital and total regulatory capital adequacy ratios market and operating risk weighted assets are considered from 1 January 2021 onward. 14. Requirements on and calculation of the leverage ratio 14.1. Other banks, except for systemically important banks, should maintain the leverage ratio at a level not less than 4 (four) percent. 14.2. The leverage ratio of systemically important banks may not fall below 5 (five) percent. 14.3. The outstanding amount of off-balance sheet liabilities to be considered in the leverage ratio is converted to a credit with the ratios established below:

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri 14.3.1. off-balance sheet liabilities with up to one year maturity – at 20 (twenty) percent (credit conversion factor – 0.2). 14.3.2. off-balance sheet liabilities with over one year maturity – at 50 (fifty) percent (credit conversion factor – 0.5). 14.3.3. liabilities on trading of bank acceptance and securities – at 100 (one hundred) percent (credit conversion factor – 1.0). 14.3.4. liabilities, that entitle the bank to unilaterally not discharge its liabilities in full or partially on a contractual basis – at 10 (ten) percent (credit conversion factor – 0.1). 14.4. Leverage ratio

𝑇𝑖𝑒𝑟 1 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 (𝑎𝑓𝑡𝑒𝑟 𝑑𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑠 𝑠𝑝𝑒𝑐𝑖𝑓𝑖𝑒𝑑 𝑖𝑛 𝑆𝑒𝑐𝑡𝑖𝑜𝑛 8 𝑜𝑓 𝑡ℎ𝑒𝑠𝑒 𝑅𝑒𝑔𝑢𝑙𝑎𝑡𝑖𝑜𝑛𝑠) (𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑠ℎ𝑒𝑒𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 + 𝑜𝑓𝑓 − 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑠ℎ𝑒𝑒𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠) 𝑥 100% 14.5. Deposit foreign exchange swap transactions are considered in the leverage ratio being netted in the following cases: 14.5.1. when total amount of transactions with up to one year maturity account for less than 10 (ten) percent of total assets. 14.5.2. when total amount of transactions with over one year maturity account for less than 15 (fifteen) percent of total assets. 14.5.3. when total amount of deposit foreign exchange swap transactions account for less than 15 (fifteen) percent of total assets. 14.6. During netting bank’s deposits placed with another bank are not considered in the amount of liabilities due to that bank under swap transaction conditions. 14.7. The following conditions should be met to net funds: 14.7.1. placed deposit funds are blocked for the bank that places these funds. 14.7.2. placed deposit acts as collateral for attracted funds. 15. Final provisions These Regulations take effect after being published on electronic version of the State Register of Legal Acts of the Republic of Azerbaijan.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri Annex 1 to the ‘Regulations on calculation of bank capital and its adequacy’ Calculation of an average interest rate of the sector on consumer loans

1. The Central Bank calculates an average interest rate of the sector on consumer loans in the following sequence: 1.1. Average interest rates are obtained from every bank on the following types of consumer loans issued over the previous month: 1.1.1. car loans 1.1.2. credit card loans 1.1.3. home repair loans 1.1.4. home appliance loans 1.1.5 other consumer loans 1.2. A sector median is established per consumer loan based upon generated average interest rates.
2. j average interest rate per consumer loan type issued by every bank in particular currency in the previous quarter (on that bank) is calculated as follows: 𝑷𝒋 = ∑ (𝑳𝒋𝒌 × 𝑰𝒋𝒌) 𝒎 𝒌=𝟏 ∑ 𝑳𝒋𝒌 𝒎 𝒌=𝟏 where: 𝑃𝑗 – average interest rate of loans per 𝑗 consumer loan type issued by the bank in particular currency in the previous quarter 𝐿𝑗𝑘 – 𝑘 number of loan amount issued by the bank in particular currency in the previous month per 𝑗 consumer loan type 𝐼𝑗𝑘 – interest rate of the 𝑘 number of loan amount issued by the bank in particular currency in the previous month per 𝑗 consumer loan type 𝑗 – type of a consumer loan 𝑘 – serial number of a loan, 𝑘 = {1,2, … 𝑚} 𝑚 – total number of loans per 𝑗 consumer loan type.
3. A bank delivers an average interest rate calculated as per Annex 1 herein to the Central Bank together with the data underlying the calculations jointly with prudential reports in the form established by the Central Bank.
4. Where other payments are specified in the loan agreement instead of interest, the sum of those payments are considered in the calculation of the average interest rate.

Effective as of 1 January 2027 Azərbaycan Respublikasının Hüquqi Aktların Dövlət Reyestri Annex 2 to the ‘Regulations on calculation of bank capital and its adequacy’ Calculation and disclosure of the counter-cyclic capital buffer

1. A credit gap acts as a main indicator for creating a counter-cyclic capital buffer.
2. Credit gap — the difference between the average of the ratio of the total loan portfolio extended by banks to customers to GDP and the ratio of the loan portfolio to the non-oil sector to non-oil GDP, and the average of the long-term trends of these ratios for the corresponding period.
3. In calculating the long-term trend of the ratio of the loan portfolio to GDP and the ratio of the loan portfolio to the non-oil sector to non-oil GDP, data covering a period of at least 10 (ten) years are taken into account. A Hodrick-Prescott filter is used to identify the trend, while the smoothing parameter (λ - lambda) may be set 1,600 or 400,000.
4. When as a main indicator the credit gap ranges 2-10%, the CCyB is defined within the 0- 2.5% range with the below formula (as per Item 5 to this Annex): CCyB = = Min (2.5%x Max(Credit gap−2%,0) 10%−2% , 2.5%)
5. When setting a counter-cyclic capital buffer, the following indicators are considered along with the credit gap: 5.1. real GDP and non-oil GDP growth. 5.2. growth dynamics in return on banking sector equity. 5.2-1. dynamics of the leverage ratio. 5.3. banking sector losses. 5.4. deviation of real estate and stock market indicators from long-term trend. 5.5. difference between return on same maturity government and corporate securities. 5.6. banks’ capital position. 5.7. the level of indebtedness of households and non-financial corporations. 5.8. dynamics of loans in troubled financial institutions
6. If the required capital buffer rate is increased, this requirement takes effect after at least 1 (one) month from the date the requirement is announced, while decrease of the requirement takes effect from the date of announcement.