PASHA Bank

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.