Baku:Significant advancements have been made in Azerbaijan's banking sector in recent years, with the sector not posing any concerns from a sovereign rating perspective, according to Erich Arispe Morales, Senior Director and Head of Sovereign Ratings for Eastern Europe at Fitch Ratings. He shared these insights during the 'Fitch in Azerbaijan' event held in Baku.

According to Azeri-Press news agency, Morales highlighted the increased digitalization, reduced reliance on external financing, formation of adequate capital buffers, and improved asset quality within the sector.

Morales emphasized the potential for expanding the banking sector's role in financing economic growth, particularly through opportunities in retail lending. He noted that Azerbaijan's limited external financing channels help shield the country from direct impacts of global financial changes, such as rising interest rates in Europe and the United States.

Furthermore, Morales pointed out that a key monetary policy challenge is ensuring effective transmission of the Central Bank's interest rate decisions to deposit and lending rates, which is influenced by the market structure and excess liquidity within the banking system.

He assured that banks in Azerbaijan are in a strong financial position with sufficient liquidity. However, further expansion in lending requires more bankable projects and increased credit demand from the private sector. Morales concluded by stating that Fitch sees no major concerns regarding the banking system's resilience and positively assesses its progress compared to similarly rated and regional peers.