ADB: Azerbaijan to strengthen financial infrastructure

Azerbaijan is moving to modernise its financial market infrastructure, with the National Depository Centre (NDC) preparing to assume the role of a central settlement agent, according to the Asian Development Bank (ADB).

The reform, enabled by amendments to the country’s law on the securities market adopted in July 2023, will allow the NDC to provide limited banking services, including opening cash accounts for banks and investment firms. This is expected to enable a “single window” system combining securities and cash settlements, Caliber.Az reports, citing local media. 

Previously, settlement functions were carried out by commercial banks. Transferring these responsibilities to the NDC, under the oversight of the Central Bank of Azerbaijan, is aimed at reducing risks and improving the efficiency and security of transactions.

The ADB said the changes would allow the NDC to set trading limits and monitor collateral directly, while simplifying operations for investment firms.

The bank outlined a phased reform plan. In the short term, the NDC would replace commercial banks as the settlement agent while maintaining existing guarantee mechanisms. Over time, reforms would introduce more market-based risk management tools and modernise settlement processes.

In the medium term, the ADB recommends establishing a central counterparty clearing system to align Azerbaijan with international standards, lower costs for market participants, and improve investor confidence.

The plan also considers providing intraday liquidity from the central bank to support smoother settlements, particularly in government bond markets.

According to the ADB, the broader reform package—including upgrades to collateral management, clearing systems, and liquidity tools—could significantly boost trading volumes and strengthen Azerbaijan’s capital markets as a destination for investment.

By Sabina Mammadli