Azerbaijan has set up a financial stability council amid fears of further bank defaults, Fineko news agency reported on July 15. President Ilham Aliyev has appointed Prime Minister Artur Rasizade as the head of the new body.

Following a double devaluation of the Azerbaijani manat in 2015, local banks have descended into a full-blown crisis characterised by poor asset quality, loan defaults, low lending and profits and insufficient capitalisation. In 2015, the country's largest bank - International Bank of Azerbaijan (IBA) - had to be bailed out by the government because it could no longer cover its liabilities. In January, the government closed down six small banks due to insufficient capitalisation. Several other middle-sized banks, including Bank Standard and Bank Technique, have been taken over by the government or had their licences revoked since.

In addition to supporting - or closing down - weak banks, Baku has sought to stabilise the situation through institutional reforms, such as setting up a new financial regulator in March and appointing a presidential aide in charge of reforms.

International observers, including ratings agency Moody's, are expecting further bank defaults by the end of the year. The creation of the new institution could therefore be an attempt to better assess risks to financial stability and address them.

In addition to Rasizade, the council will be overseen by the presidential aide for reforms Natig Amirov, Finance Minister Samir Sharifov, Economy Minister Shahin Mustafayev, central bank governor Elman Rustamov, chairman of the financial markets supervisory body Rufat Aslanli, and Shahmar Movsumov, the executive director of sovereign wealth fund Sofaz.

The council will be required to submit a quarterly report to the head of state on the measures it had taken to ensure macroeconomic and financial stability.