BAKU, Azerbaijan, July 19. Professional dialogue between the banking supervisory authorities of Kazakhstan and Azerbaijan is continuing to strengthen, the External Communications Department of Kazakhstan's Agency for Regulation and Development of the Financial Market told TurkicWorld.
"As part of a recent working visit by a delegation from the Central Bank of the Republic of Azerbaijan, the Agency for Regulation and Development of the Financial Market of the Republic of Kazakhstan conducted information and training sessions on risk-based supervision, Asset Quality Review (AQR), Supervisory Stress Testing (SST), Model Risk Management (MRM), and the application of modern digital technologies in supervisory activities," the agency said.
According to the agency, a significant part of the program was devoted to Asset Quality Review (AQR) and Supervisory Stress Testing (SST) as key tools of risk-based supervision.
"Agency representatives presented the methodological approaches used in conducting AQR and SST, including their relationship with International Financial Reporting Standard IFRS 9, data collection and analysis processes, the development of stress scenarios, expected credit loss assessment, approaches to analyzing credit risks for individual and collective loan portfolios, foreign exchange and market risks, as well as the use of AQR and SST results to adjust regulatory indicators, determine supervisory requirements, and establish capital buffers. During the practical sessions, the templates, models, and analytical tools used in conducting AQR and SST were demonstrated," the agency said.
The agency added that a separate part of the program focused on Model Risk Management (MRM). The Azerbaijani delegation was introduced to the agency's supervisory expectations regarding banks' model risk management frameworks, the results of the first assessments of these systems, approaches to establishing a centralized model inventory, and the most common deficiencies identified during supervisory reviews. Examples of interactive supervisory reporting were also presented.
In addition, agency representatives demonstrated analytical tools for the early identification of risks, including an AI-based model used to assess credit risk concentration.
The press service noted that the practical part of the program also included demonstrations of digital supervisory tools, including centralized dashboards for monitoring key banking sector indicators, solutions for analyzing loan portfolios, and tools for detecting signs of artificial loan restructuring.
Moreover, it was also emphasized that, as part of the digitalization of supervisory processes, participants were introduced to the use of artificial intelligence technologies in supervisory activities. In particular, demonstrations covered natural language-based solutions for accessing supervisory data and information systems, as well as specialized AI agents designed to improve the efficiency of supervisory analysis and the processing of supervisory information.
"The visit contributed to strengthening the professional dialogue between the supervisory authorities of Kazakhstan and Azerbaijan and identified promising areas for further cooperation in banking regulation, supervision, and the application of modern technological solutions," the agency said.
