Azerbaijan will require banks to ensure that a guarantor’s debt-to-income ratio does not exceed 70% when a guarantee is used to secure a consumer loan.
The Central Bank of Azerbaijan revised rules governing credit-risk management, asset classification and prudential requirements, according to Vesti Baku and Report. Central Bank Governor Taleh Kazimov signed the decision.
The 70% ceiling applies to the guarantor’s monthly debt obligations relative to verified income. It is intended to measure whether the guarantor can meet the obligation if the borrower defaults; it does not set an interest-rate or loan-size cap.
Verified Income Takes Priority
Banks will no longer be allowed to replace documented income with income projected by a behavioral model when a borrower’s earnings can be established from official records or government information systems.
Acceptable evidence may include salary certificates, scholarship records, pension or benefit statements, bank confirmation of interest earned on deposits and other documents establishing regular income.
Installment-Sale Portfolios Face Cross-Checks
The changes also affect loans to companies and individual entrepreneurs that sell goods on installment. Banks must compare the reported value of an installment portfolio and the number of buyers with corresponding information submitted to credit bureaus.
If the match for either measure is below 90%, the asset will be classified as unsatisfactory, requiring the bank to apply a stricter risk assessment.
The new provisions will apply to credit exposures created after the relevant rules take effect. The decision is scheduled to enter into force one month after publication.