966
Central Bank of the Republic of Azerbaijan
One of the legislative acts adopted soon after Azerbaijan restored its independence—the Constitutional Law of the Republic of Azerbaijan on Grounds for Economic Independence of the Republic of Azerbaijan, dated 25 May 1991—laid the legal foundation for an independent banking system and the circulation of the national currency in Azerbaijan. Article 14, titled “The Banking System and Money Circulation,” defined the status and powers of the National Bank. The National Bank was declared the supreme issuing agency responsible for pursuing state policy in lending, money circulation, settlements, and foreign exchange relations; regulating the overall functioning of the banking system; and performing central bank functions.
The National Bank was established in the Republic of Azerbaijan by the Decree of the President of the Republic of Azerbaijan “On the Establishment of the National Bank in the Republic of Azerbaijan,” dated 11 February 1992. The effective date of the Decree, 12 February, is celebrated as the Bank’s establishment day.
The first law regulating the activities of the National Bank—the Law of the Republic of Azerbaijan “On the National Bank of the Republic of Azerbaijan”—was adopted on 7 August 1992. The Resolution on Approval of the Charter of the National Bank of the Republic of Azerbaijan was adopted by the Milli Mejlis of the Republic of Azerbaijan on 1 December 1992.
The national currency of the Republic of Azerbaijan, the manat, was put into circulation on 15 August 1992 and became the sole legal tender from 1 January 1994. According to paragraph II of Article 19 of the first Constitution of the independent Republic of Azerbaijan, adopted by referendum on 12 November 1995, the National Bank had the exclusive right to issue and withdraw currency to/from circulation.
The Central Bank currently operates under third-generation banking legislation. The second version of the Law of the Republic of Azerbaijan “On the National Bank of the Republic of Azerbaijan” was adopted on 14 June 1996, while the third version was adopted on 10 December 2004.
A legal framework has been established to enable the Central Bank to carry out its objectives and functions, as well as its activities across all functional areas, efficiently and effectively. The Bank’s principal functions include the determination and implementation of monetary and foreign exchange (exchange rate) policy, the organization of money circulation, the regulation and development of payment systems, and the holding and management of the country’s gold and foreign exchange reserves.
Pursuant to the Decree of the President of the Republic of Azerbaijan dated 7 February 2005, “On Changing the Nominal Value of Monetary Units and the Scale of Prices (Denomination) in the Republic of Azerbaijan,” the new manat was introduced into circulation on 1 January 2006. As part of the denomination, 1 new manat was equivalent to 5,000 old manats. The old manat remained in circulation alongside the new manat throughout 2006. From 1 January 2007, Azerbaijan fully transitioned to the new manat, with new manat banknotes and gapik coins introduced in stages.
The Bank’s role as the country’s central bank also led to a change in its name. Following the entry into force of the Referendum Act of the Republic of Azerbaijan dated 18 March 2009, “On Amendments and Changes to the Constitution of the Republic of Azerbaijan,” the institution was renamed the Central Bank of the Republic of Azerbaijan.
In 2016, the Central Bank’s powers were revised as part of the economic and institutional reforms carried out in the country. Under amendments to the Law of the Republic of Azerbaijan “On the Central Bank of the Republic of Azerbaijan,” adopted on 4 March 2016, responsibility for licensing and regulating banking activities, as well as for banking supervision, was transferred to a newly established institution. Following these changes, the Central Bank’s mandate focused primarily on monetary and exchange rate policy; supporting macroeconomic and financial stability; regulating and ensuring the development of centralized interbank and other non-licensed payment systems; and organizing cash circulation.
Under the Order of the President of the Republic of Azerbaijan dated 28 November 2019, “On Improving the Management of the Regulation and Supervision System in the Financial Services Market,” the powers assigned under the laws of the Republic of Azerbaijan to the financial markets supervisory authority were transferred to the Central Bank of the Republic of Azerbaijan. These powers included licensing, regulation, and supervision in the financial services market, as well as responsibilities and powers related to the protection of the rights of investors and consumers of financial services.
The Central Bank’s former administrative building, located at 90 Rashid Behbudov Street in Baku, was commissioned in 1998. The ceremonial opening of the new building was attended by Heydar Aliyev, National Leader of the Azerbaijani people, and other senior government officials.
Opening of the CBA administrative tower, 1998
The Central Bank currently operates from its headquarters at 167 Heydar Aliyev Avenue, Nizami District, Baku. President of the Republic of Azerbaijan Ilham Aliyev attended the ceremonial opening of the new headquarters, which was commissioned in 2026.
Opening of the CBA administrative tower, 2026
Currently, the Central Bank is guided by the third generation banking laws (second edition of the Law of the Republic of Azerbaijan on the National Bank of the Republic of Azerbaijan was adopted on 14 June 1996, and third edition on 10 December 2004).
A legal basis in place allows the Central Bank to more effectively and efficiently discharge its goals and functions, and activities across all functional areas, and determines its main functions – set and implement the monetary and exchange rate policy, organize money circulation, regulate and develop centralized interbank and other licensed payment systems, maintain and manage gold and foreign exchange reserves.
According to Decree of President of the Republic of Azerbaijan on Changes to the Nominal Value of Monetary Units and the Scale of Prices (Denomination) in the Republic of Azerbaijan dated 7 February 2005, a new manat was issued into circulation on 1 January 2006 – 1 new manat equaled to 5000 manats, AZM remained in parallel circulation with AZN in 2006 and only on 1 January 2007 the country started to use the new manat, AZN banknotes and coins were issued into circulation on a step-by-step basis.
Discharge of the country’s central bank functions stipulated review of the bank’s name and it was renamed ‘the Central Bank of the Republic of Azerbaijan’ with the enforcement of the Referendum Act of the Republic of Azerbaijan on ‘Making Additions and Amendments to the Constitution of the Republic of Azerbaijan’ dated 18 March 2009.
The authorities of the Central Bank underwent changes as part of 2016 economic and institutional reforms – under amendments to the Law of the Republic of Azerbaijan on the Central Bank of the Republic of Azerbaijan adopted on 4 March 2016, banks’ licensing, regulation and supervision were assigned to a newly established authority. Since then the Central Bank has focused on the monetary and exchange rate policy, safeguarding macroeconomic and financial stability, regulation and development of centralized interbank and other licensed payment systems and organization of cash circulation.
Historical Phases of Central Banking in Azerbaijan
The history of central banking in Azerbaijan dates back to the beginning of the 20th century. The development of central banking in Azerbaijan can be traced through several historical phases preceding the modern era, which began in 1991: the Azerbaijan People’s Republic (1918–1920) and the Soviet era (1920–1991).
Azerbaijan declared its independence and established the first democratic republic in the **Muslim world—the Azerbaijan People’s Republic—**on 28 May 1918. Initially, Transcaucasian bonds were widely used in the independent republic, along with Russian money and Baku bonds issued by the Baku City Administration and the Municipal Service of the Baku Soviet in January 1918 following a decision by the Baku Council of People’s Commissars. At the same time, the Baku branch of the former State Bank of Russia continued its activities.
The Government of the Republic of Azerbaijan decided to establish the Azerbaijan State Bank (central bank) on 7 March 1919. On 16 September of the same year, the Parliament of the Republic of Azerbaijan adopted the Charter of the Azerbaijan State Bank, and the Bank commenced operations with a formal opening ceremony on 30 September 1919.
The “bank of banks”—the Azerbaijan State Bank—supervised existing credit institutions and issued currency.
Following the collapse of the Azerbaijan People’s Republic on 28 April 1920, the Azerbaijan State Bank was renamed the Azerbaijan People’s Bank by order of the Finance Commissariat of the new state structure, the Azerbaijan Soviet Socialist Republic, on 31 May 1920. By decision of the Revolutionary Committee of Azerbaijan dated 9 June 1920, all banks and other credit institutions were nationalized and subordinated to the People’s Bank. Banking activities became a state monopoly.
The basic function of the Azerbaijan People’s Bank was to issue banknotes. The People’s Bank, which was part of the Finance Commissariat, financed the national economy and was engaged in budgeting and budgetary estimates. The People’s Bank ceased lending activities and became an institution serving budget operations alongside other financial bodies.
The introduction of the New Economic Policy at the end of 1921 necessitated the restoration of the central bank. The Azerbaijan State Bank was established by decision of the Council of People’s Commissars of Azerbaijan dated 16 October 1921, together with the adoption of its Charter.
The Federative Union of the Transcaucasian Soviet Socialist Republics (TSSR), which included Azerbaijan, Georgia, and Armenia, was established on 12 March 1922. The TSSR was incorporated into the Union of Soviet Socialist Republics on 30 December 1922. The TSSR transitioned to a single monetary system pursuant to the Decree of the Board of the Union of the TSSR dated 10 January 1923, which terminated the issuance activities of the Azerbaijan State Bank. By decree of the Council of People’s Commissars of Azerbaijan dated 3 July 1923, the Azerbaijan State Bank was renamed the Azerbaijan State Agricultural Bank, and its central banking functions were terminated. Initially, the Azerbaijan State Agricultural Bank both supported agricultural development and regulated money circulation and commodity turnover.
The Baku Branch was established in 1923 following the establishment of the USSR State Bank. Under the Constitution of the USSR, adopted in December 1936, Azerbaijan became part of the USSR as a “sovereign” republic. The Azerbaijani Office of the USSR State Bank operated from that year until the end of 1991.
