The National Bank of Azerbaijan is the central bank of Azerbaijan. The central bank is charged with regulating the money supply, circulating currency, and regulating the commercial banks of the country. However, the banking system in Azerbaijan is minimal and ineffective. An estimated $1 billion is held in cash or outside the banking sector, a considerable amount in comparison with the scope of the country's entire economy.
There are approximately 70 foreign and local banks in Azerbaijan. Of the four state-owned banks, only the International Bank of Azerbaijan (IBA) was solvent in 1999. The IBA was in the process of being privatized in that year. Major commercial banks include the Promtekhbank, Azakbank, Azerdemiryolbank, Bacobank, Gunay International Bank, Halgbank, ILKBANK, and the Universal Bank. Most businesses use the IBA, or the British Bank of the Middle East, Baku.
The central bank increased the minimum bank capital to $1.5 million in 1999, and expected to increase the figure to $3 million in 2001, effectively consolidating the sector. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $363.6 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $738.5 million. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 10%.
The Baku Stock Exchange, known as the BSE, opened in 2001 trading short-term treasury bonds and the common stock of recently privatized state-owned enterprises. Trading volume in the first six months was just under $1 million. A regulatory framework for the new exchange is under development and is expected to conform to international transparency standards.