Azerbaijan drafts securitization bill to unlock bank liquidity

A draft law defining the legal framework for asset securitization in Azerbaijan will enable credit institutions to convert loan portfolios into capital market bonds and monetize future cash flows ahead of maturity, MP Vugar Bayramov announced during a parliamentary address.

According to Bayramov, the financial mechanism is designed to reduce the volume of non-performing and overdue loans across bank balance sheets while enhancing liquidity throughout the domestic securities market. Under the proposed framework, credit institutions will sell qualifying assets to a specialized securitization vehicle, which will then issue asset-backed bonds serviced directly by underlying asset cash flows.

The issuance process must follow a plan approved by the Central Bank of Azerbaijan, requiring registration within 60 working days of endorsement. To mitigate credit and systemic risks, the issuing entity will be mandated to retain at least 5% of the debt securities until final maturity.

Gulnar Nazimgizi