About us

About us

About the Bank

PASHA Bank is one of Azerbaijan's leading corporate banks. Established in 2007, we offer all major financial services, including investment banking, trade financing and asset management to a range of clients, from large corporates to small and medium enterprises. The Bank works particularly closely with companies operating in the non-oil sectors of the economy, including agriculture, transportation, construction and retail, which are vital for helping Azerbaijan to diversify its economy.

PASHA Bank is the largest private bank in Azerbaijan by total equity, and one of the top 5 private banks by assets. As of 30 June, 2016, the Bank's assets exceeded AZN* 2 027 million, while its total capital amounted to AZN 362 million. More detailed information on the Bank's financial figures can be found in the ‘Financial reports’ section.

PASHA Bank is headquartered in Baku and has a total of 6 business centres across Azerbaijan. In 2013, we opened our first office in Georgia and office in Turkey in 2014. Our long-term regional vision envisages creating interconnected banking operations that will facilitate rapidly growing trade and deal flow between Baku, Tbilisi and Istanbul, the three most vibrant markets of the region.

We strive to be the best performing and most reliable bank in our country and we have been recognised internationally for our work, having been named ‘The Best Investment Bank of Azerbaijan' in 2011, 2012 and 2013 by EMEA Finance Magazine. At EMEA Finance Magazine's Europe Banking Awards 2013, PASHA Bank also won the award for ‘Best Corporate Social Responsibility (CSR) Programme'. In addition, our private banking division PASHA Private Banking was named the ‘Best Private Bank in Azerbaijan 2013' by World Finance magazine. Bank also has been named ‘The Best Bank of Azerbaijan' at the EMEA Finance Europe Banking Awards 2014 and has received the Trade Award 2014 from Commerzbank AG for being Azerbaijan's most active bank in the area of trade finance in 2014.

In addition to international industry recognition, PASHA Bank has received strong ratings from international ratings agencies. Standard & Poor's and Fitch Ratings assigned the Bank a long-term rating of 'BB-' and a short-term rating of 'B'.

Today, PASHA Bank is an international team of about 430 people representing 8 nationalities and members of our team speak a total of 14 languages. We are constantly working to transform the Bank into one of the biggest and leading financial institutions of the region and to enhance the range of international standard products and services that we already offer.

We are part of PASHA Group, a large investment holding based in Azerbaijan, which has assets across a wide variety of sectors, including retail banking, insurance, construction, construction materials and tourism. As one of Azerbaijan's youngest but largest banks, we constantly keep abreast of financial and technological innovations. We work hard to keep ahead of market trends and adopt international experience and state-of-the-art technology to ensure that we provide the best possible service to our customers.

* 1 USD - 1.5421 AZN (31.03.2016)

PASHA Bank: Corporate movie

We present to you a short movie about the bank

Bank details

Full name – “PASHA Bank” Open Joint Stock Company
Contracted name - “PASHA Bank” OJSC
Mailing address - AZ 1005, Yusif Mammadaliyev Street, 13, Baku city, Azerbaijan

Requisites of the Bank:
Code: 505141
TIN: 1700767721
Correspondent account #:
AZ82NABZ01350100000000071944 (AZN)
AZ04NABZ01350200000000071840 (USD)
AZ30NABZ01350200000000071954 (EUR)
SWIFT BIK: PAHAAZ22

Mission and objectives

Mission and objectives

Vision:

Our vision is to be a leading Azerbaijani Bank committed to the highest standards of ethics, indisputable business reputation, quality of services and financial strength.

PASHA Bank's mission is to serve our stakeholders by:

- contributing to the growth of our customers by providing high quality products and services tailored to our customers' needs;
- employing, training and nurturing the competent and devoted personnel;
- committing to the welfare and cultural development of society;
- maintaining strong financial position;
- committing to transparent and prudent conduct of business.

Strategic Goals

• Enhancement of capital and organizational efficiency
• Strengthening core capabilities
• Expand market position
• Bolster customer service
• Create synergies with the Group

Management

Shareholders

The bank's shareholders are PASHA Holding Ltd. (60%), Ador Ltd. (30%) and Mr. Arif Pashayev (10%).

Structure

Structure of PASHA Bank

Link to Structure of PASHA Bank

Customer Care

Our projects

Correspondent relations

Sustainability

Our values and philosophy of customer cooperation

Our values and philosophy of customer cooperation

Our brand ideology reflects the opinion, culture, tradition and values of our company and forms our relations with customers. Ideology of PASHA Bank is based on 5 values: Integrity, Quality, Profitability, Entrepreneurship and Collaboration.

Visual concept of our values is reflected in the color array of our logo. Red color considered as energy and fire symbol in nature reflects the leader position, strength and vigilance of our Bank. Being symbol of life, regeneration, perennial youth stands for trust in tomorrow, positive worldview, achievement of goals and aiming at perfection.

The logo, which is the symbol of ancient cultural traditions, moral values and modern thinking, represents the main premise of our ideology – idea of creation of new reality.

Risk management

Liquidity

In order to manage liquidity, OJSC Pasha Bank has developed the Liquidity Management Policy which is intended to regulate the following procedures of the Bank:
- management of intraday liquidity;
- management of current liquidity;
- management of structural liquidity.

Liquidity management procedures are based on the following principles:
- the conflict of interest between profitability and liquidity, which, among other factors, emerges due to low returns on liquid assets or high cost of resources, is resolved in accordance with the procedures described below regardless of the cost of resources and returns on liquid assets;
- the forecast of the liquidity status is based on a pessimistic scenario related to the condition of the market, status of debtors, lenders and other factors affecting the Bank’s liquidity;
- the forecast of the liquidity status is based on a possible transfer of the Bank’s market quotation requirements to the commercial portfolio and subsequent realization within three to five working days with a discount to the current market value;
- the following currencies are allocated for liquidity evaluation: the Azerbaijani Manat, the US Dollar, the Euro and Other Currencies, including all financial instruments of the Bank nominated in other currencies. The analysis of liquidity is made for each currency separately and for all currencies together in a similar manner;
- the forecast of the liquidity status is based on a presumed rotation of the Bank’s liabilities “on demand” and the presence of fixed costs in such liabilities;
- the forecast of the liquidity status is based on a possible early claiming of term deposits by the population, as well as other liabilities whereby (according to an agreement or law) early claiming is stipulated.

Based on a combination of external and internal factors, the Bank has the following classification with regard to the need for liquid assets:
- “Excessive liquidity”;
- “Normal liquidity”;
- “Liquidity crisis threat”;
- “Liquidity crisis”.

Depending on the status of the Bank with regard to the need for liquid assets, areas of responsibility and liquidity management tasks are indentified in accordance with the methodology developed to this end. Liquidity management procedures in a stable external and internal environment are administered with the following frequency:
- management of intraday liquidity — daily;
- management of current liquidity — weekly;
- management of structural liquidity — monthly.

The criterion for assessing the Bank’s liquidity management is the duration of the Bank’s stay in the “Normal liquidity” status. The Bank’s entering the situations of “Excessive liquidity”, “Liquidity crisis threat” and “Liquidity crisis” are interpreted as negative in assessing liquidity management quality.

Control over the status of liquidity on the part of the Bank’s Supervisory Board is exercised by means of quarterly submission of data in accordance with Annexes to the present Policy, timely notification of the Bank’s Supervisory Board of “Liquidity crisis threat” and “Liquidity crisis” situations.

The Bank uses the following sources to disclose information about its liquidity and data on its activity:
- publications in the media, including print and electronic editions of news and analytical agencies;
- publication of data and developments on the Bank’s server;
- placement of information about the Bank’s financial status, including annual reports, reports on profits and losses and requirements on the Bank’s Internet server;
- monthly exchange of financial status data with correspondent banks and contractors.

Legal risks

The bank pursues the following objectives in organizing a system on the management of legal risks:
- to ensure legitimacy of its activity in all spheres;
- to ensure that its legitimate interests at the time of signing and execution of agreements are met;
- to establish a legitimate framework for relationships between the Bank and its employees, to ensure that labor laws, business and corporate ethics are observed by the Bank and its employees.

The key objectives in establishing a system on the management of legal risks are:
- to organize unified management of legal risks;
- to engage all subdivisions and employees in risk management procedures;
- to establish common principles for identification, evaluation and control over legal risks required and sufficient to ensure the Bank’s interests in the legal sphere.

The fundamental principles for the organization of a system on the management of legal risks are: - to determine a procedure for identifying, evaluating, establishing an acceptable level (a level which does not jeopardize the financial security of the lending institution and the interests of its lenders and depositors) of legal risks and monitoring (permanent observation) of the level of legal risks, including consolidated grounds;
- to develop a set of measures towards maintaining an acceptable level of legal risks, including control and (or) minimization of risks;
- to specify a procedure for information support on issues of legal risks (procedure for exchange of information between subdivisions and employees, procedure and frequency of submission of reporting and other information pertaining to the management of legal risks, etc.);
- to determine a procedure for the management of legal risks in remote banking, including Internet banking, in developing and introducing new technologies and conditions for bank operations and other transactions, in other financial innovations and technologies, in accessing new markets;
- to allocate authority and responsibility among the Supervisory Board, executive bodies, subdivisions and employees as regards main principles for the management of legal risks;
- to establish a procedure for exercising control over the effectiveness of management of legal risks.

Considering the said principles, the Bank is using the following methods to minimize the level of legal risks:
- to standardize banking operations and other transactions (procedures, regulations, technologies for implementing operations and transactions and signing agreements);
- to establish in-house regulations for having agreements, banking operations and other translations differing from standardized ones approved by the Bank’s legal department;
- to analyze the impact of the factor of legal risks (both as a whole and in line with their classification) on the Bank’s performance indicators;
- to permanently monitor changes in national legislation of the Azerbaijan Republic, legislation of the countries in which the Bank operates or plans to operate;
- to coordinate activities towards identifying, classifying and evaluating legal risks;
- to ensure that the Bank’s legal department is subordinated to a unified executive body;
- to optimize workload of legal department employees to ensure their continuous professional development;
- to allow the maximum possible number of employees access to the latest information on legislation;
- to encourage employees depending on their impact on the level of legal risks;
- to enhance reserves for the event of possible losses;
-to arrange for the insurance of legal risks, including the risk of losing ownership rights.

The system on the management of legal risks is organized by the bank in three stages:
- preliminary;
- current;
- subsequent.

The preliminary stage represents a system of administrative, organizational and financial measures towards preventing the emergence of legal risks before the Bank enters into contractual relations. This system also includes a set of measures to prevent offences on the part of Bank employees.

The current stage consists of identifying, analyzing and evaluating the emerging risks, as well as the current monitoring of the level of legal risks.

The subsequent stage consists of analyzing the drawbacks in the organization of the system which have led to the emergence of risks, recommendations on streamlining it and control over its effectiveness.

To prevent the emergence of risks, the Bank takes the following measures:
- to develop a transparent and appropriate management model aiming to rule out conflict of interest and management quality risks.
- to establish qualification requirements for its employees to avoid incompetent and unjustified actions; to make such requirements part of job description and (or) Regulations on subdivisions. Qualification requirements are also established for managers of the Bank, employees and the legal department.
- to conduct rigorous screening among Bank employees to exclude those with a history of offences, as well as persons suspected of legalizing incomes obtained in criminal ways, and financing terrorism.
- to provide a system for users to access the required legal information by means of specialized legal programs and to acquire the necessary legal information for the needs of the legal department.
- programs have been developed and introduced to identify and study customers, first of all those the Bank implements banking operations and other high-risk transactions with, and to establish and identify beneficiaries. The legal department provides legal support to officers dealing with identification of customers.
- to adopt and use the principles “know your customer” and “know your employee”. - to establish accountability of managers and employees, establish a procedure for decision-making on banking operations and other transactions in accordance with the authorities stipulated under constituent and in-house documents; this procedure is established in such a way as to rule out conflict of interest at all stages of banking activity.
- to organize a system on developing, endorsing and approving standard agreements and transactions that would meet the requirements of legal protection of the Bank’s interests. - to establish requirements for coordinating operations with the legal department in specific cases.
- to establish a procedure for exercising in-house control over banking operations and other transactions considering the nature and scope of activity, including the issues of countering the legalization (laundering) of incomes obtained in criminal ways, and financing terrorism. - to establish a procedure for encouraging employees depending on the level of their qualification and workload; in doing so, the level of their engagement in the management of legal risks is taken into consideration.
- in order to prevent misappropriation and abuse, the Bank uses restrictive measures (limited access to the repository, signing of agreements on full financial liability with relevant employees, limited issue of resources to be accounted for, etc.).

The Bank exercises current control over changes in the legal framework and arranges for timely update of in-house regulatory documents and communication of such changes to its employees. Employees are continuously informed of the changes in national legislation by the legal department by means of electronic distributions containing brief summaries of changes in laws. The Bank monitors all information about the Bank available in the public domain in order to assess its impact on its business reputation, and makes a legal assessment of this information. The Bank makes a legal assessment of claims sent to the Bank and takes measures necessary to protect its legitimate interests.

The Bank continuously exercises control over professional aptitude of its employees, exercises current control over the integrity of valuables – auditing (inventory taking), control over the issue of funds to be accounted for and spending of materials for timely detection of misappropriation and abuse.

Operational risks

The management of operational risks is part of the Bank’s risk management system. The need for managing operational risks is determined by the proportions of possible operational losses which may pose a threat to the Bank’s financial stability.

In order to improve its business reputation, OJSC PASHA Bank considers it appropriate to communicate information (including the information provided as part of annual reports) on the management of operational risks to partners (shareholders), lenders, depositors and other customers, external auditors, rating agencies and other interested persons. In doing so, the bank wants to ensure that the level of detail being disclosed corresponds to the nature and scope of its activities.

The system on the management of operational risks at OJSC PASHA Bank has been organized to meet the following objectives:
- to ensure complete, timely and effective achievement of the Bank’s strategic goals in accordance with the nature and scope of its activities;
- to optimize technological processes;
- to observe legislative requirements, rules and traditions of the business turnover, conditions of agreements and transactions being executed, and to enhance the level of confidence in the Bank (business reputation) on the part of its customers and deposits.

The key missions of the system on the management of operational risks are as follows:
- to identify, evaluate and analyze emerging operational risks;
- to minimize operational risks, including by way of introduction of standardized procedures and maximum automation of banking processes;
- to improve the effectiveness of banking processes.

The fundamental principles for the organization of a system on the management of operational risks are:
- to determine a procedure for identifying and evaluating an acceptable level of operational risks and monitoring of the level of operational risks, including consolidated grounds;
- to develop a set of measures towards maintaining an acceptable level of operational risks, including control and (or) minimization of risks;
- to specify a procedure for information support on issues of operational risks (procedure for exchange of information between subdivisions and employees, procedure and frequency of submission of reporting and other information pertaining to the management of operational risks, etc.);
- to determine a procedure for the management of operational risks in remote banking, in developing and introducing new technologies and conditions for bank operations and other transactions, in other financial innovations and technologies, in accessing new markets;
- to allocate authority and responsibility among the Supervisory Board, executive bodies, subdivisions and employees as regards main principles for the management of operational risks;
- to establish a procedure for exercising control over the effectiveness of management of operational risks.

The Bank has laid down principles for the management of operational risks through appropriate in-house regulatory documents pertaining to every direction of its activity.

Considering the said principles, the Bank is using the following methods to minimize the level of operational risks:

- to standardize banking operations and other transactions (procedures, regulations, technologies for implementing operations and transactions and signing agreements);
- to organize a system of additional and subsequent control, a system of current verification of transactions and operations;
- to establish in-house regulations for the development and endorsement (approval) of in-house regulatory documents;
- to analyze the impact of the factor of operational risks (both as a whole and in line with their classification) on the Bank’s performance indicators;
- to ensure the required level of professional qualification and personnel development;
- automation of banking processes and technologies, especially in areas relating to standard operations and large workloads;
- to allocate responsibilities among subdivisions considering optimization of workload on individual employees;
- to furnish employees with the legal framework meeting domestic and external requirements to the maximum extent possible;
- to encourage employees depending on their impact on the level of operational risks.

The system on the management of operational risks is organized by the bank in three stages:
- preliminary;
- current;
- subsequent.

The level of operational risks is identified, evaluated and analyzed in accordance with an approved Methodology. Monitoring of operational risks is carried out on the basis of regular analysis of a system of indicators developed in accordance with the approved Methodology. Through this Methodology the Bank establishes the frequency of operational risk monitoring depending on its significance for a certain activity direction, in-house processes or the system of information technologies.

Minimization of operational risks envisages a wide range of measures aiming to reduce the likelihood of events and circumstances leading to operational losses and (or) reduce (limit) the volume of potential operational losses. Methods of minimizing operational risks depend on the nature of such risks.

The following measures are particularly important for exercising control over operational risks:
- to exercise control over compliance with limits established on banking operations and other transactions;
- to observe the established procedure for accessing the Bank’s information and material assets;
- to ensure proper personnel training;
- to regularly align basic documents and accounts on banking operations and other transactions.

In order to limit operational risks, the Bank has envisaged a comprehensive system of measures to ensure uninterrupted financial and economic activity in implementing banking operations and other transactions, including contingency plans (plans on ensuring uninterrupted and (or) resumed financial and economic activity).
The Bank attaches special importance to ensuring the integrity and restorability of its information systems and resources. To achieve this, the Bank stores initial and reserve information separately to avoid their simultaneous loss and (or) damage, and envisages other measures to protect information as stipulated under the Information security policy.

The Bank exercises control over the effectives of operational risks management. Management bodies regularly assess the effectives of operational risks management, and Bank employees are required to provide them with any requested information.

The Bank regularly but at least once in six months evaluates the level of operational risks and submits information to that effect to the Supervisory Board and the Board of Directors. The effectives of operational risks management is evaluated as a whole considering other elements of the risk management system.
The Bank regularly revises appropriate in-house processes and procedures and information technologies used to identify the previously unknown sources of operational risks. The frequency of such revisions is established as and when necessary but at least once in two years.

Credit risks

In order to exercise control over risks in the process of the most effective placement of credit resources, OJSC PASHA Bank adheres to a specifically developed Lending Policy. The main objective of the Bank’s lending policy is rational and effective placement of monetary resources enabling maximum revenue with minimum risk, while maintaining the required liquidity level of the Bank.

The Bank’s lending policy lays down the goals and priorities of lending activity, means and methods of their realization, contains principles and procedures for organization and control over credit operations.

The key factor of the Bank’s credit policy is the focus on meeting customer demand for borrowed funds with a broad selection of forms and methods for the provision of credit products and reduced risks of non-redemption of the principal amount and interest on it.

The Bank attaches special importance to the following priorities of control over risks:
- Qualitative assets
- Profitable relations
- Reasonable growth of the advances portfolio

To meet the objective of the best placement of resources, the Bank is governed by the following criteria:
- Requirements of the National Bank of the Azerbaijan Republic
- Mission and Corporate Strategy of the Bank (including high ethics standards)
- Lending culture of the Bank
- Interests of security and reasonable caution, which means participation only in transactions legitimate and reasonable from the risk standpoint.

To meet these objectives, the Bank has mid- and long-term strategic requirements on the advances portfolio. These requirements correspond to strategic directions and the acceptable level of risks. When these strategic requirements are determined, a careful analysis is conducted to consider their expected rate of return and risks. Strategic requirements are regularly reviewed and, if necessary, amended and supplemented.

It is the responsibility of every employee of the Bank involved with lending to act in accordance with the Lending Policy. All loan requests are considered in the following sequence: quality, profitability and portfolio growth.

In order to minimize the Bank’s credit risks in line with the requirements of the National Bank of the Azerbaijan Republic, as well as internationally recognized principles and standards on the management of credit risks in banking and recommendations of the Basle Committee on Banking Supervision, the Bank manages credit risks in accordance with the following key principles:
- Authority in the area of lending activity.
- Diversification of the advances portfolio.
- Monitoring of the advances portfolio.
- Creation of reserves to cover possible losses.

The Bank has also developed an in-house rating system as a standard means for evaluating borrowers. Information on customer ratings is used by the Bank at different managerial levels to ensure better understanding of the quality of assets and segmentation of the Bank’s credit portfolio.

The Bank regularly evaluates its assets to determine possible losses. If objective indications are revealed that assets are depreciating, the Bank establishes appropriate reserves in accordance with international requirements, regulations of the Central Bank of the Azerbaijan Republic and in-house regulations pertaining to lending activity.

If negative trends are discovered in the structure of the credit portfolio, the Bank takes prompt action to rectify lending activity within the framework of key principles of the current lending policy and the risk management policy.

When determining a fair value of the loans being advanced, the Bank proceeds from the need to fully reimburse the costs associated with the engagement of resources, and include overhead and commission enabling the Bank to compensate its expenditure on studying, processing and maintaining a loan, and receive acceptable profit considering the risk potential of a credit operation.

Control over the Bank’s lending policy and specific operations relating to the placement of resources is exercised within the framework of the Bank’s general system of in-house control. Besides the Supervisory Board and the Board of Directors, control is also exercised by in-house subdivisions (Credit Committee, Committee on risk management, Department of financial management, Department of risk management, Department of internal audits and Department of credit control).

To reflect the level of credit risks and their directions, to meet the requirements on issue, management and control over loans, as well as the quality of the advances portfolio and off-balance liabilities, the Bank operates the Information System of Management (ISM). The ISM provides information on the content and structure of the credit portfolio and exercises control over established limits, thus reducing the concentration of risks. The ISM also informs authorized employees and managers of the Bank involved with lending activities when credit risk indicators approach the limit. The ISM provides the Management with timely and regular information on the non-conformity of current quality criteria with the plan.

Market risks

The management of market risks at the Bank is based on the principle of differentiation between sources of market risks, liability for the risks being assumed, limitation of potential losses and centralization of market risks management.

The Bank organizes the system of market risks management with the following purposes:
- to avoid potential losses as a result of market fluctuations;
- to observe the requirements of the Central Bank of the Azerbaijan Republic regarding the assurance of the Bank’s financial stability;
- to ensure that the Bank’s legitimate interests and its customers are met when operating with market instruments.

The key objectives behind the establishment of a system of market risks management are as follows:
- to establish control over the diversification of commercial portfolios;
- to maintain the Bank’ open positions at a level not threatening its financial position.

In accordance with the principle of risk differentiation, each responsibility center carries the market risks characteristic only of a specific business. This principle enables effective distribution of limits and operational control over their use.

The Board of Directors determines the list of subdivisions authorized to carry out operations on external markets and open positions.

In accordance with the principle of limitation of losses, the total volume of limits established by the Board of Directors (including limits on open foreign exchange position) must not exceed the regulations established by the Central Bank of the Azerbaijan Republic. The Bank also carries out analytical research to limit the level of market risks and can establish limits based on the results of such analysis.

In accordance with the principle of liability for risk, the departments authorized to carry out operations associated with market risks are responsible for efficient use of such authority.

In accordance with the principle of centralization of management of market risks, all information on transactions affecting the Bank’s open positions (including open foreign exchange position), as such operations are carried out, is delivered to the Financial Management Department for intraday control of positions and forecast of positions at the end of a business day.

The methods of market risk management depend on the nature of arising risks and are divided as follows:
- general, i.e. applicable to all risks considered as market risks (i.e. currency, interest, stock);
- special, i.e. applicable only to specific risks or financial instrument (commercial portfolio).

System on the management of currency risks

The management of currency risks is related to structural methods of management. The following are subject to currency risk management:
- general open foreign exchange position of the Bank;
- sub-positions:
--- investment open foreign exchange position of the Bank;
--- commercial positions.

The key instruments of control over currency risks are:
- unified currency rate policy;
- system of control over open foreign exchange positions.

System on the management of interest risks

Interest risks may emerge both in connection with assets and liabilities. The following are key instruments of interest risks management:
- unified policy on the establishment of interest rates;
- control over GAP.

The Bank pursues a unified interest rates policy considering internal and external factors. External factors include the value of market interest rates for a certain type of instruments. Internal factors include the ratio of the Bank assets and liabilities by rates and maturity, and determination of gaps.

System on the management of stock risks

The system of limits is the key instrument of stock risks management. The following system of stock market limits is used by the Bank:
- limit for the issuer of securities;
- limit for the share of securities in commercial and (or) investment portfolio;
- limit for uniform financial instruments;
- stop loss limits.

The system of limits is an integral part of the risk management system and is supported by relevant internal regulations defining a procedure for establishing limits, their types for specific instruments, as well as the authority and responsibility of involved departments.

System of control over market risks management efficiency

Control of the efficiency of market risks management is exercised on several levels. The Bank’s Board of Directors exercises overall control over market risks, establishes the list of instruments containing market risks, limits on them, and control over their execution, makes decisions on regulating the commercial portfolio in the event of sudden fluctuations of market prices or other abrupt changes of the market environment.

The Committee on the management of assets and liabilities ensures a uniform policy with regard to interests and exercises control over it.

The Department of financial management exercises current control over the level of market risks, manages and re-distributes sub-limits within the commercial portfolio, analyzes the market environment and forecasts levels of market risks.

The accounting and reporting department exercises control over the observance of requirements of the Central Bank of the Azerbaijan Republic with regard to market instruments, including the value of open foreign exchange position and the amount of market risks covered by the Bank’s capital; accumulates and processes the information submitted to the Central Bank of the Azerbaijan Republic, exercises operational control over the formation and change of structure of the commercial portfolio, compliance with the limits established and implementation of transactions.

The middle office exercises control over the total amount of limits, including limits on open foreign exchange position, control over current observance of limits, initial check of ticket compliance with the terms of the deal.

The risk management department carries out efficiency checks of the risk management system or its individual elements in accordance with its action plan or upon request of the management; including checks on the classification of the elements of estimated reserve base against potential losses, completeness of reserves, observance of limits.

The risk management committee regularly assesses the adequacy of market risk levels established, develops measures to improve the system of market risks management and reports to the Supervisory Board on the level of the Bank’s market risks.

Strategic risks

The difference between strategic and other banking risks (e.g. credit, currency or legal risks, the risk of losing business reputation, etc.) is the possibility that the Bank may sustain financial losses in consequence of managerial imperfections or incorrect determination of strategic goals and objectives.

OJSC PASHA Bank has organized the management of strategic risks to meet the following objectives:
- to minimize the possibility that the Bank may select a wrong, ineffective or insufficiently balanced strategy (both overall development strategy and individual strategic decisions) which may lead to the loss of the Bank’s business reputation, affect its positions on the market and, consequently, to financial losses;
- to reduce possible losses, preserve and maintain the Bank’s business reputation before customers and contractors, founders, participants in the financial market, bodies of state authority and local governments, banking associations of which the Bank is a member;
- to improve the effectiveness of operations being carried out by way of streamlining the quality of their management;
- to ensure compliance with the legitimate interests of customers, shareholders and depositors which have entered into financial relations with the Bank.

The key objectives behind the establishment of a system on the management of strategic risks are as follows:
- to develop a sound and effective corporate governance model meeting the goals and scope of the Bank;
- to build the reputation of a bona fide bank through ensuring that the Bank honors its commitments, follows the requirements of regulatory bodies, observes the norms of business ethics, professional rules and standards;
- to rule out conflict of interest at all stages of the Bank’s activity.

While developing the system on the management of strategic risks, the Bank applies the following key approaches:
- permanent control over compliance with laws of the Azerbaijan Republic, including the laws on bank secrets and organization of in-house control with the aim of countering the legalization (laundering) of incomes obtained in criminal ways, and financing terrorism;
- timely processing of customer and contractor orders, payment of amounts on deposits, interest on accounts (deposits) and processing of other transactions;
- monitoring the effectiveness of operations and their quality assurance;
- control over the accuracy of accounting reports and other published information submitted to founders (partners), customers and contractors, regulatory and surveillance bodies and other interested persons, including the information required for advertising purposes;
- development of a common system of information support and document flow, which prevents the use of the Bank information by persons accessing such information for personal interests and ensures timely, complete and reliable provision of information to persons requiring such information for decision-making;
the principle of joint decision-making on issues representing particular importance to the Bank’s operation, and regulatory support of this principle;
- compliance with the principle of division of responsibilities among subdivisions involved in management processes.

The common principles of the system on the management of strategic risks are as follows:
- to establish a procedure for identifying, evaluating and determining an acceptable level of strategic risks, and to monitor strategic risks;
- to take measures to maintain strategic risks at an acceptable level, including control and (or) minimization of risks;
- to establish a procedure for submitting information on the management of strategic risks to the Supervisory Board, executive bodies, subdivisions and employees of the lending organization;
- to allocate powers and responsibilities among the Supervisory Board, executive bodies, subdivisions and employees regarding the implementation of the main principles of strategic risk management;
- to exercise control over the effectiveness of strategic risk management.

The system of the management of strategic risks consists of three key directions:
- a system of measures to prevent the emergence of risk factors (preventive measures);
- a system of measures to identify, analyze and evaluate risk factors (current measures); - a system of measures to optimization, including the elimination of risk factors discovered (subsequent measures).

In order to establish a procedure for identifying, evaluating and determining an acceptable level of strategic risks, the Bank has developed a Methodology to identify and evaluate strategic risks. Interaction between subdivisions with the aim of identifying and evaluating strategic risks is carried out within the framework of their functions defined in the “Policy on the management of strategic risks”, as well as their responsibilities, job descriptions and the role in the management of the Bank’s activities.

Responsibility for the development and introduction of strategic risk management principles rests with the Supervisory Board in line with its powers as set forth by the Bank’s charter.

The Bank organizes a system of protective measures to prevent third-person actions towards engaging Bank employees in unlawful activity.

In order to carry out effective analysis and make decisions on minimization of strategic risks, the Bank, in accordance with the spheres of its activity, develops and maintains an analytical database on losses sustained as a result of strategic risks. The database reflects information on the proportion of losses, their causes and methods of reimbursement, and information about increased risk factors.

The Bank monitors all information in the public domain about the Bank and its managers in order to assess its impact on its business reputation. The Bank also makes a legal assessment of such information.

The subdivisions involved in the system of strategic risk management are as follows:
- Supervisory Board;
- Chairman of the Board and his deputies;
- Collegiate executive bodies (Board of Directors, Committees, etc.);
- Risk management department;
- Security department;
- Human Resources department;
- Control Compliance group;
- Other subdivisions of the Bank.