Regulation on Setting Open Currency Position Limits in Banks

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‘Approved’
Central Bank of the
Republic of Azerbaijan
Decision № 45/1
23 December 2025
Regulation on setting open currency position limits in banks

1. General provisions
   This Regulation has been developed in accordance with Article 34.2.11 of the Law of the Republic of Azerbaijan on Banks and govern setting open currency position and its limits for banks and local branches of foreign banks operating in the Republic of Azerbaijan (hereinafter – the banks) to regulate exchange rate risk.
2. Definitions
   2.1. The definitions used in this Regulation bear the following meanings:
   2.1.1. currency position – bank claims and liabilities in foreign currency and bank metals.
   2.1.2. open currency position – difference between the amounts of bank’s balance and off￾balance sheet claims (hereinafter – claims) in individual currencies, as well as bank metals and
   balance and off-balance sheet liabilities (hereinafter – liabilities).
   2.1.3. short open currency position – an open currency position where the amount of bank’s
   liabilities in any currency exceeds the amount of its claims.
   2.1.4. long open currency position — an open currency position where the amount of bank’s
   any foreign currency claims exceeds the amount of its liabilities.
   2.1.5. net open currency position —an indicator that is absolutely quantitatively large
   between the sum of all long open currency positions in manat equivalent and the sum of all short open currency positions in manat equivalent.
   2.1.6. closed currency position – where the amount of bank’s claims in any foreign currency
   are equal to the amount of its liabilities.
   2.1.7. open currency position limit – the limit set herein on the ratio of manat equivalent of
   the open currency position to bank's total regulatory capital.
   2.1.8. freely convertible currency (FCC) – currencies specified in Annex 1 herein.
   2.1.9. closed currencies – currencies other than those specified in Annex 1 herein.
   2.1.10. exchange rate of the day - the official exchange rate of manat against foreign
   currencies set by the Central Bank of the Republic of Azerbaijan (hereinafter - the Central Bank) or the cross rate calculated on the official exchange rate on the date of calculation of the open currency position.
   2.1.11. structural currency position – long-term currency positions adopted to minimize the
   impact of currency risks on bank capital. Such a position includes establishment of subsidiaries by banks abroad, issue and placement of shares in a foreign currency and positions opened on other non-speculative transactions, etc.
   2.1.12. hedging – prevention of losses due to exchange rate fluctuations through derivative
   financial instruments, as well as forward contracts.

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2.2. The definition ‘foreign currency’ used herein bears the meaning specified in the ‘Law of
the Republic of Azerbaijan on Currency Regulation’ and the definition ‘bank metals’ the meaning specified in the ‘Law of the Republic of Azerbaijan on Precious Metals and Stones’.
3. Open currency position: calculation requirements and limits
3.1. The following is considered when calculating open currency position for each currency:
3.1.1. net spot position (total liabilities (including accrued interest) are deducted from total
assets in a relevant foreign currency).
3.1.2. net forward position (difference between amounts to be received and paid under
forward contracts).
3.1.3. realizable and non-refundable guarantees (already claimed by the beneficiary) and
similar instruments (e.g., credit lines, letters of credit, etc.).
3.2. When calculating the open currency position on credit lines, the following credit
conversion factors (CCF) apply:
3.2.1. if maturity is up to 1 year – 20% (twenty) (CCF) – 0,2).
3.2.2. if maturity is over 1 year– 50 % (fifty) (CCF – 0,5).
3.2.3. if the bank is granted the right unilaterally not to fulfill commitments in full on a
contractual basis – 10% (ten) (CCF – 0,1).
3.3. When calculating the open currency position, assets written off at the expense of reserves
from the balance sheet and recorded in off-balance sheet accounts are excluded.
3.4. When calculating the open currency position, balance sheet assets are recorded less
relevant reserves (general and specific reserves).
3.5. All hedging contracts concluded by the bank are taken into account when calculating the
open currency position. Within the next three (3) business days following the conclusion of a hedging contract, the bank submits electronic notification thereof to the Central Bank.
3.6. When calculating the open currency position, off-balance sheet liabilities (less the part
secured with funds in deposit accounts and guarantees of banks with minimum investment rating issued by international rating agencies on long-term liabilities, as well as guarantees of the banks operating in the Republic of Azerbaijan whose credit rating issued by international rating agencies is maximum of 2 (two) points below the country's (sovereign) debt rating) are considered in net amount.
3.7. When calculating the open currency position, structural currency positions are excluded.
3.8. The open currency position is calculated by the bank daily at the exchange rate of the day
for freely convertible and closed currencies.
3.9. To limit risks associated with changes in the exchange rate and the value of bank metals,
the open currency position limit should not exceed the thresholds specified in Annex 3 herein.
3.10. Open currency position limits apply only to final indicators of the trading day, not
taking into account the currency positions opened by banks during the trading day.
4. Report on the open currency position
4.1. Reports on the open currency position are prepared daily, weekly, and monthly in the
form specified in Annex No. 2 to this Regulation. The reports include consolidated information on branches and divisions located both within and outside the country. Banks that have branches outside the territory of the Republic of Azerbaijan additionally submit a separate report reflecting information on branches and divisions located within the country.
4.2. Reports on the open currency position are developed electronically.

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4.3. Daily reports are submitted by 10:00 a.m. on the next business day; weekly reports
developed by days are submitted on the first business day of the following week; and monthly reports are submitted on the first business day of the following month, approved by the enhanced electronic signature of the Chairperson of the Management Board, the Chief Financial Officer, or the head of the bank’s financial management function (for a local branch of a foreign bank — the branch manager or chief accountant (or the person acting in this capacity)) and submitted to the Central Bank via the Central Bank’s Electronic Services Portal.

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Annex 1
to the ‘Regulation on setting open currency position limits in banks’ LIST of freely convertible currencies used for the purposes of the ‘Regulation on setting open currency position limits in banks’ Issuing country/institution Currency ISO code United States of America US dollar USD European Union euro EUR Canada Canadian dollar CAD Japan Japanese yen JPY Great Britain English pound GBP Switzerland Swiss frank CHF International Monetary Fund Special Drawing Rights SDR Currencies of countries with a minimum “AA-” (sovereign) debt rating (or another equivalent rating) issued by international rating agencies

Annex 2
to the ‘Regulation on setting open currency position limits in banks’ REPORT on open currency position (__________20-__) Bank name: ____________________________ Responsible person: ______________________ Phone: ____________________________ Currency Central Bank exchange rate Claims (in foreign currency) Liabilities (in foreign currency) In manat equivalent Open currency position (OCP) OCP ratio Long Short % on balance sheet on off￾balance Total on balance sheet on off￾balance Total Currency AZN Currency AZN sheet sheet claims liabilities USD EUR GBP JPY CHF AUD CAD NZD DKK ISK SEK SDR CNY RUB

TRY
NOK
AED
Currency
Central
Bank exchange rate
Claims
(in foreign currency)
Liabilities
(in foreign currency)
In manat equivalent
Open currency position (OCP)
OCP ratio
Long Short % on balance sheet on off￾balance Total on balance sheet on off￾balance Total Currency AZN Currency AZN sheet sheet claims liabilities KZT UAH GEL IRR XAU XAG XPT XPD Other currencies TOTAL Total on FCCs on closed currencies on bank metals Total regulatory capital of the bank as of the reporting date:
Net on FCC
Note: (Information on structural currency position) Net OCP on closed currency Net OCP

Annex 3 to the ‘Regulation on setting open
currency position limits in banks’
Open currency position limits
Open currency position FCC Closed currency Bank metals Long open currency position (for one currency) 10% 5% Short open currency position (for one currency) 10% 5% Net long open currency position 20% 10% 3 % Net short open currency position 20% 10% 3 %