DOI: https://doi.org/10.36719/2706-6185/59/233-239
Huseyn Abdullazade
Azerbaijan State University of Economics
Master student
https://orcid.org/0009-0003-5428-2672
huseynabdullayev1996@gmail.com
Effıcıent Bank Supervision System Modeling Opportunites
Abstract
This study is devoted to examining the efficiency of modeling within the bank supervision system. In the modern banking environment, maintaining financial stability, identifying systemic risks at an early stage, and ensuring the scientific justification of prudential decisions are among the key priorities of banking supervision. In this context, modeling serves as an essential analytical tool that enables the assessment of risk dynamics in the banking sector and supports proactive supervisory measures. The research provides a theoretical analysis of the main applications of modeling in bank supervision, including stress testing, macroprudential monitoring mechanisms, and risk-based supervision approaches. Furthermore, the study identifies key criteria for evaluating the effectiveness of supervisory modeling, such as forecasting capability, early warning function, integration into the decision-making process, adaptability to changing economic conditions, and transparency or explainability of results. The findings indicate that expanding the use of modeling tools in Azerbaijan’s bank supervision framework may significantly contribute to strengthening financial stability, enhancing the flexibility of supervisory mechanisms, and improving preventive risk management practices. Overall, modeling should be considered not only a technical instrument but also a strategic component of effective and modern banking supervision.
Keywords: bank supervision, modeling, financial stability, risk-based supervision, stress testing